Smart women: Picture show female teacher and students

Smart women: Researchblogposting #105

Ecological research

Renewables damp prices: Chasing the Sun and Catching the Wind: Energy Transition and Electricity Prices in Europe by Serhan Cevik and Keitaro Ninomiya as of November 22nd, 2022 (#1): “We find that renewable energy is associated with a significant reduction in wholesale electricity prices in Europe, with an average impact of 0.6 percent for each 1 percentage points increase in renewable share. We also find evidence for a nonlinear effect—that is, higher the share of renewables, the greater its effect on electricity prices. … while quantile estimation results are mixed with regards to the impact of renewables on the volatility of electricity prices, we obtain evidence that renewable energy has a negative effect on volatility at the highest quantiles“ (abstract).

IMF climate action: The Role of the IMF in Addressing Climate Change Risks by Marco Committeri et al as of Nov. 17th, 2022 (#13): „The paper concludes that the IMF has significantly increased its engagement in climate change matters in recent years but should further intensify its efforts in ways that are fully consistent with its mandate” (abstract).

Brown stays brown: The CO2 Question: Technical Progress and the Climate Crisis by Patrick Bolton, Marcin Kacperczyk, and Moritz Wiedemann as of Oct. 24th, 2022 (#341): “We have attempted the first global firm-level analysis of the determinants of green innovation activity and its impact on future corporate carbon emissions. … although many companies have increased their green innovation activity around the world the effects in terms of lower future direct or indirect corporate carbon emissions have not been significant … within each sector the browner a company’s activities in terms of the level of its carbon emissions the less likely the company is to engage in green innovation” (p. 25).

Carbon capture literature: A comprehensive framework for feasibility of CCUS deployment: A meta-review of 2 literature on factors impacting CCUS deployment by Kasper Storrs and Ivar Lyhne as of Nov. 7th, 2022 (#5): “The paper provides an overview of a comprehensive range of feasibility factors identified in 22 review papers in recent literature on CCUS” (p. 17, CCUS: Carbon capture, utilization and storage).

Purpose noise? Corporate Purpose: Theoretical and Empirical Foundations/Confusions by Holger Spamann and Jacob Fischer as of Nov.21st, 2022 (#148): “Does it matter if corporate leaders pursue a broader, social corporate purpose rather than a narrow, shareholder-centric one, and can legal and governance levers influence their choice? … Empirically … even structural measures like employee co-determination hardly have detectable effects, let alone mere exhortations such as those in (unenforceable) nuances of (misunderstood) fiduciary duties. Many arguments for or against (particular) corporate purpose(s) are fallacies, red herrings, or, for empirics, cherry-picking.” (abstract).

Responsible investment research: Smart Women

Net-zero bullshit? Who is Financing Fossil Fuel Expansion in Africa? by Urgewald as of November 15th, 2022: “Since its launch in April 2021, 121 banks have joined the “Net-Zero Banking Alliance” (NZBA), which now represents about 40% of global banking assets. … members of the NZBA account for 71.6% of the US$ 98.5 billion that commercial banks channeled to fossil fuel developers in Africa since 2019. On the investor side, the situation is similar. 15 of the top 23 institutional investors backing fossil fuel expansion in Africa in 2022, are either members of the “Net Zero Asset Managers Initiative”, the “Net Zero Asset Owners Alliance” or the “Net Zero Insurance Alliance” … Fossil fuels are the root of the climate crisis and Africa is harder hit by this crisis than any other continent. Yet financial flows, especially from Europe and the US, are shaping a fossil future for Africa” (p. 44). My comment: Better focus on best-in-universe than best-in-class and separate E, S and G scores instead of labels, memberships or aggregated ESG scores, see my approach ESG plus SDG-Alignment mit guter Performance: FutureVest ESG SDG – Responsible Investment Research Blog (

Green bond issuer benefits: Green Bonds‘ Reputation Effect and Its Impact on the Financing Costs of the Real Estate Sector by Aleksandar Petreski, Dorothea Schäfer and Andreas Stephan as of Oct. 17th, 2022 (#41): “The econometric results of the DiD (Söhnholz: Difference-in-Difference) approach using 73 Swedish real estate firms confirm that repeated green bond issuance reduces the firm’s cost of capital. This even holds for the cost of equity. We conjecture from this finding that credible prescription for green bonds and green projects reduces the firm’s idiosyncratic risk and, thereby, increases their attractiveness for large institutional investors. … We find that all aspects of the ESG composite score—environmental, social, and governance pillars—are positively affected by having a long track record of green bond issuance, while only the governance pillar of ESG is positively affected by having a long track record of non-green issuance” (p. 15).

Green loan premium: The EU Taxonomy and the Syndicated Loan Market by Zacharias Sautner, Jing Yu, Rui Zhong, and Xiaoyan Zhou as of April 4th, 2022 (#245): “… we provide some first empirical evidence on the financial market effects of the EU Taxonomy. Using international data from the syndicated loan market, we demonstrate that, in the past, firms with larger revenue shares of Taxonomy-aligned transitional activities paid lower interest rates. Transitional activities have to make a substantial direct contribution to climate change mitigation. Economically, a one-standard-deviation increase in firm revenue from transitional activities is associated with six basis points lower loan spreads. Effects are more pronounced for firms in countries with greater regulatory and physical climate risk exposure, and when lending institutions have green preferences” (p. 25).

Social premium: Achievements and challenges in ESG markets by Michela Scatigna, Dora Xia, Anna Zabai, and Omar Zulaica as of March 3rd, 2022 (#70): “… We find evidence of a carbon risk premium: debt from entities with a higher carbon footprint trades at marginally higher yields, all else the same. We also document that investors are willing to pay a social premium – which we refer to as “socium” – when a firm issues a social rather than a conventional bond. The magnitudes of the carbon risk premium and socium are modest but non-negligible in some industrial sectors and market segments …“ (abstract).

Resilient ESG: Are ethical and green investment funds more resilient? by Laura-Dona Capotă, Margherita Giuzio, Sujit Kapadia, and Dilyara Salakhov as of November 15th, 2022 (#10): “… we show that both retail and institutional investors in ESG and E-funds (Söhnholz: Environmental) are less sensitive to past negative performance. This behaviour persists also in crisis periods and for corporate bond funds investing in less liquid assets …” (p. 29).

Bottom-up risk analysis: Asset-level climate physical risk assessment and cascading financial losses by Giacomo Bressan, Anja Duranovic, Irene Monasterolo and Stefano Battiston as of  Sept. 6th, 2022 (#1348): “Asset-level shocks are computed conditional to the geolocation of firms’ assets, such as productive plants, their exposure to both chronic and acute impacts (hurricanes), and across any chosen set of IPCC climate scenarios. We illustrate the methodology in an application to the equity portfolios of European investors that are exposed to listed firms owing productive plants located in Mexico. We show that using asset-level data, as opposed to aggregate firm data, can lead to over 53% increase in estimated portfolio losses. We also show that, at the asset level, the combination of acute impacts from hurricanes with chronic impacts can lead up to 15% increase in estimated portfolio losses“ (abstract). My comment: It would be interesting to know if/what ESG-data reveals these risks.

Fragile sustainability? Sustainability Preferences Under Stress: Evidence from COVID-19 by Robin Döttling and Sehoon Kim as of Sept. 2nd, 2022 (#2796): “We find that mutual funds with higher sustainability ratings prior to the crisis experience a sharper decline in fund flows in response to the COVID-19 shock …. our results are most consistent with retail SRI demand that is highly sensitive to income shocks. To the extent that retail SRI demand is driven by pro-social motives, our results suggest that such non-pecuniary benefits are perceived as costly and unsustainable for retail investors under extreme economic conditions …” (p. 29/30).

Traditional and alternative investment research: Smart women

Smarter Women (2): Gender Differences in Reward-Based Crowdfunding by Tse-Chun Lin and Vesa Pursiainen as of Oct. 11th, 2022 (#352): “… we explore the role of gender in crowdfunding performance … We show that female entrepreneurs’ significant outperformance in campaign success rates and pledged amounts received relative to campaign goals can be explained by the relative over-optimism of male entrepreneurs. This over-optimism manifests in male entrepreneurs overestimating the demand for their products and thus setting significantly higher campaign goal amounts than their female counterparts. … entrepreneurial experience and learning by doing can mitigate the effects of over-optimism. … an improvement of seven percentage points in the success rate of male entrepreneurs, equal to the gender difference that we estimate in our multivariate regressions, would have resulted in … a 14% increase in successful projects overall. … we also find that female outperformance is significantly less pronounced in states with low gender equality” (p. 19/20).