Summary We constructed a discriminant function that includes an ESG factor. It has a higher explanatory power in discriminating between industrial companies’ good and poor credit qualities than similar models that don’t include an ESG factor. While empirical credit quality research has focused on “classic” credit ratios in the past, we find that adding at least one ESG factor improves …
Green Bonds: The Time Is Now
Green bonds, once characterized as novelty investments, are now an integral part of institutional investors’ core fixed-income portfolios and represent the entire investment chain, ranging from corporate to municipal bonds and sovereign bonds.
Green Bonds: The Shape of Green Fixed-Income Investing to Come
Fixed-income securities that use their proceeds toward the financing of ESG-aligned projects have proven particularly attractive among investors. Their volume has been increasing exponentially since their inception by the European Investment Bank (EIB) in 2007 and following their expansion by the International Finance Corporation (IFC) in 2010.
For this special issue, we looked for articles that explore the extent to which sustainability-linked and ESG-aligned fixed-income securities can support the mainstreaming of responsible investment principles across the financial sector.
Defining Climate-Aligned Investment: An Analysis of Sustainable Finance Taxonomy Development
The global transition toward a low-carbon and climate-resilient economy requires common, science-based frameworks against which governments, the private sector, and individuals can determine whether activities contribute meaningfully to that transition. Developing a standardized language for determining what activities contribute to climate change mitigation and adaptation is a primary focus of international policymaking efforts to meet the Paris Agreement targets.
Achieving Common Ground in the Development of Sustainable Finance Standards
The definition and taxonomy of projects; the use and management of raised funds and proceeds; evaluation and certification; and information disclosure are the four key pillars that constitute the standard framework of green and climate bonds.
Millennials and Sustainable Investing
A. Stanley Meiburg Guest Editor Millennials, defined as those born between 1981 and 1996, are entering the years when investing will become a subject of greater and more widespread interest. While as a group, many will still be focusing on securing careers, paying off student debt with companies like CreditAssociates, raising children, and buying homes. However, some will find themselves …
ESG Risk Factors and Tail-Risk Mitigation
Zsolt Simon, MSc; PhD candidate Risk and Performance Analyst at Bank J. Safra Sarasin, Switzerland Chiara Legnazzi, PhD Risk and Performance Analyst at Bank J. Safra Sarasin, Switzerland Disclaimer: This article is research in progress representing the opinions of the authors only as per the date of writing and may be changed at any time without notice. Neither the …
Corporate Social Responsibility and Firm Outcomes: Some Intuition on Interpreting Statistical Models
A Comment on “ESG Risk Factors and Tail-Risk Mitigation” E. Mark Curtis, PhD Assistant Professor, Department of Economics, Wake Forest University In recent years there has been a push from investors, activists and consumers to obtain more information on the sustainability practices of the companies in which they invest and from whom they purchase goods and services. As such, a …
Reflecting on My Journey from Student to Practitioner
Environmental Alpha Against a Backdrop of Industry Change Katherine Burstein McGinn, CFA When a professor first introduced me to the concept of sustainable investing, the academic literature in which I immersed myself mostly explored the positive and negative impacts of exclusionary screening. That was 2007. At the time, there was already evidence that of the three categories of typical exclusionary …
Looking Back
Cary Krosinsky Editor Looking back on Angelo Calvello’s Environmental Alpha, one is struck by the prescient points that still resonate in a modern context, even though the field is rapidly evolving as we speak. For example, the opening sections on climate change predicted almost exactly what has occurred since the book’s publication in 2010, hence giving further …
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