Interdisciplinary publications on Sustainable Finance
As an interdisciplinary network, the Center of Competence for Sustainable Finance started in its third year of operations with our biannual scientific workshop, a central institution of collaboration for our members. The meeting was held on Wednesday, 2 February 2022, and included many contributions beyond the focus of sustainable finance as an economic discipline. For example, Andreas Hösli’s analysis of the complex juridic understanding of responsibility in the face of climate change in the litigation of Milieudefensie et al. v. Shell — a case heard by the district court of The Hague in the Netherlands in 2021 — showcases the interdisciplinary focus of the Center of Competence. Cengiz Akandil held an innovative presentation about detecting industrial development in the Arctic via nighttime lights.
I am happy to announce that the University of Zurich and the Center for Sustainable Finance and Private Wealth will host the GRASFI — Global Research Alliance for Sustainable Finance and Investment — Annual Conference in September 2022, supported by the Center of Competence for Sustainable Finance.
We have gathered these contributions for you in this spring newsletter. I welcome you to explore them in-depth and wish you all a good start in the new year.
With kind regards,
Professor Marc Chesney
Chair of the Center of Competence for Sustainable Finance
IPCC Sixth Assessment Report: Climate Change 2022 — Impacts, Adaptation and Vulnerability – Christian Huggel and Veruska Muccione are part of a large team of authors of the IPCC Working Group II. The Working Group II contribution assesses the impacts of climate change, looking at ecosystems, biodiversity, and human communities at global and regional levels. It also reviews vulnerabilities and the capacities and limits of the natural world and human societies to adapt to climate change.
Are earnings conference calls a useful source of information about corporate climate actions? – Using textual analysis of tens of thousands of earnings conference calls, a new analysis by CCSF member Alexander Wagner and co-authors in Sweden and Switzerland reveals that climate talk on these calls has indeed increased strongly in recent years. Importantly, more climate talk this year predicts a reduction in CO2 emissions in the year after the call, particularly in firms with high overall environmental and governance ratings. Conversely, investors react particularly negatively to climate talk when it comes from a firm with low levels of ESG performance or following poor earnings performance. Overall, investors and other stakeholders interested in corporate climate action should be paying attention to earnings conference calls as a source of useful information about companies’ broader stance on climate-related issues.
Climate Change Risk and the Cost of Mortgage Credit – In his first paper on climate finance, Steven Ongena with coauthors Shusen Qi, Duc Nguyen and Vathunyoo Sila show that lenders charge higher interest rates for mortgages on properties exposed to a greater risk of sea level rise (SLR). This SLR premium is not evident in short-term loans and is not related to borrowers’ short-term realized default or creditworthiness. Further, the SLR premium is smaller when the consequences of climate change are less salient and in areas with more climate change deniers. Overall, their results suggest that mortgage lenders view the risk of SLR as a long-term risk, and that attention and beliefs are potential barriers through which SLR risk is priced in residential mortgage markets. The paper will be published in the Review of Finance, Special Issue on Sustainable Finance. Until then, it is accessible via SSRN.
Over with carbon? Investors’ reaction to the Paris Agreement – The Paris Agreement (PA) marked a milestone as the first international agreement on climate change mitigation involving the financial sector. In a recent working paper, Lucia Alessi, Stefano Battiston, and Virmantas Kvedaras analyse a confidential European Central Bank database of securities holdings to show how the PA — and the subsequent withdrawal by the United States — has influenced the exposure to carbon-intensive assets by investors. Their results highlight that the redirection of global financial flows towards climate action requires clear and unanimous signals from the worldwide community of policymakers.
Milieudefensie et al. v. Shell: A Tipping Point in Climate Change Litigation against Corporations? – The District Court of The Hague’s decision in the matter of Milieudefensie et al. v. Shell, issued in May 2021, is an unprecedented ruling, holding a fossil-fuel company accountable for its contribution to climate change. In a paper published in the journal Climate Law, Andreas Hösli argues that the decision provides ample opportunity to discuss climate change litigation against corporations and the legal responsibility of such actors in the climate context more broadly.
Who pays for sustainability? An analysis of sustainability-linked bonds –Sustainability-linked debt is one of the hottest asset classes in sustainable finance, and one that might really have impact. In these debt contracts, firms get a better interest rate as soon as they reach a pre-specified sustainability goal. This new working paper by Julian Kölbel and Adrien-Paul Lambillon is the first academic study of sustainability-linked bonds (SLBs). It shows that the interest rate is linked to the issuer achieving a pre-specified sustainability target.
GRASFI — Call for papers – The fifth Annual GRASFI Conference will be held in Zurich on 5–7 September 2022. The Global Research Alliance for Sustainable Finance and Investment — GRASFI — was founded in 2017 — with the University of Zurich as a Founding Member — to promote multidisciplinary academic research on sustainable finance and investment. The conference seeks high-quality papers on themes such as data, reporting, regulation and policy or finance, society, and the natural environment. The deadline for submission is 5 March 2022.