Capitalism Revisited | Responsible Investment

16 September 2022
•
Milan

This was a a hybrid event hosted at Bocconi University on 16 September 2022

Part Two

Capitalism Revisited

A two day event on Responsible Capitalism

Responsible Investment

2022 ECGI Annual Meeting, Celebrating 20 Years

Hosted by Bocconi University, with the support of

Friday, 16 September 2022

08:30 – 18:30 CEST

Location

Bocconi University, Via Guglielmo Roentgen, 1, Milan

Programme | Download the Programme

About the Event

This event was co-organised by Assonime (The Association of Italian Public Companies), Bocconi University, the European Corporate Governance Institute (ECGI) and the European Corporate Governance Research Foundation (ECGRF). It brought together senior academics and thought-leaders in business to discuss a range of current topics. It was part of the multi-year ECGI project on Responsible Capitalism that was launched earlier in 2022.

The event featured four academic presentations on responsible investing from leading scholars in economics, finance, law, and other disciplines. The studies explored topics such as the motivations of responsible investors, the real impact of responsible investing strategies on firms’ ESG policies, ESG disclosure, and investors’ engagement, among others.

It also featured a panel focused on “ESG engagement in concentrated ownership companies”, which included both listed state-owned enterprises and family firms. The panel explored whether and how investors can influence the ESG conduct of these firms and what the specific challenges are for them to do so. The panel included experts from both academia and practice. The afternoon featured the ECGI General Assembly Meeting, the award of the two Working Paper Prizes and the distinguished 2022 Wallenberg Lecture, followed by a dinner.

Main Sponsors

Information

Address:

Bocconi University, Via Guglielmo Roentgen, 1, Milan, Italy

Contact:

Elaine McPartlan

ECGI

elaine.mcpartlan@ecgi.org

Friday, 16 September 2022 | 08:30 CEST

08:30

Registration

09:00

Welcome Address

Speakers:

Caroline Flammer

Marco Ventoruzzo

Session 1 | Chaired by

Moderator:

Giovanni Strampelli

09:15

Do ESG Mutual Funds Deliver on Their Promises?

Speakers:

Quinn Curtis

Jill Fisch

Discussant:

Guido Ferrarini

Do ESG Mutual Funds Deliver on Their Promises?

Time:

09:15h

Paper authors: Quinn Curtis, Jill E. Fisch, Adriana Robertson

Corporations have received growing criticism for their role in climate change, perpetuating racial and gender inequality, and other pressing social issues. In response to these concerns, shareholders are increasingly focusing on environmental, social, and corporate governance (ESG) criteria in selecting investments, and asset managers are responding by offering a growing number of ESG mutual funds. The flow of assets into ESG is one of the most dramatic trends in asset management. But are these funds giving investors what they promise? This question has attracted the attention of regulators, with the Department of Labor and the Securities and Exchange Commission (SEC) both taking steps to rein in ESG funds. The change in administration has created an opportunity to rethink these steps, but the rapid growth and evolution of the market means regulators are acting without a clear picture of ESG investing. We fill this gap by offering the most complete empirical overview of ESG mutual funds to date. Combining comprehensive data on mutual funds with proprietary data from the several of the most significant ESG ratings firms, we provide a unique picture of the current ESG environment with an eye to informing regulatory policy. We evaluate a number of criticisms of ESG funds made by academics and policymakers and find them lacking. We find that ESG funds offer their investors increased ESG exposure. They also vote their shares differently from non-ESG funds and are more supportive of ESG principles. Our analysis shows that they do so without increasing costs or reducing returns. We conclude that ESG funds generally offer investors a differentiated and competitive investment product that is consistent with their labeling. In short, we see no reason to single out ESG funds for special regulation.

Speakers

Quinn Curtis

Jill Fisch

Research Member

Discussants

Guido Ferrarini

Fellow Research Member

Conference Documents

Paper: Do ESG Mutual Funds Deliver on Their Promises?.pdf

1664185078.pdf

1664185101.pdf

09:55

The EU Taxonomy and the Syndicated Loan Market

Speakers:

Xiaoyan Zhou

Discussant:

Jean-Stéphane Mésonnier

The EU Taxonomy and the Syndicated Loan Market

Time:

09:55h

Paper authors: Zacharias Sautner, Jing Yu, Rui Zhong, Xiaoyan Zhou

We provide first empirical evidence on the financial market effects of the EU Taxonomy for Sustainable Activities. Using international data from the syndicated loan market, we demonstrate that – in the past – firms with larger Taxonomy-aligned revenue shares paid lower interest rates. Business revenue is Taxonomy-aligned if it originates from “transitional activities” that substantially contribute to climate change mitigation. 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 climate risk exposure and more stringent environmental policies, and when lending institutions have green preferences. Our results indicate that financial markets already price in some of the intended effects of the EU Taxonomy.

Speakers

Xiaoyan Zhou

Discussants

Jean-Stéphane Mésonnier

Conference Documents

Paper: The EU Taxonomy and the Syndicated Loan Market.pdf

Presentation: Xiaoyan Zhou.pdf

10:35

Coffee Break

Session 2 | Chaired by

Moderator:

Caroline Flammer

11:00

Net-Zero Carbon Portfolio Alignment

Speakers:

Patrick Bolton

Discussant:

Olivier David Zerbib

Net-Zero Carbon Portfolio Alignment

Time:

11:00h

Paper authors: Patrick Bolton, Marcin T. Kacperczyk, Frédéric Samama

We outline a simple and robust methodology to align portfolios with a science-based, carbon budget consistent with maintaining a temperature rise below 1.5o C with 83% probability. We show how to keep the tracking error at a negligible level. This approach works for both passive and active managers. It also establishes an exit roadmap for carbon-intensive corporates, thereby generating a form of competition to decarbonize within each sector. We also discuss four sources of risks: uncertainty around a rapidly shrinking carbon budget, time impacts on decarbonization rates, implementation risk due to market-wide selling pressure, and uncertainty about taxes on polluting companies.

Speakers

Patrick Bolton

Fellow Research Member

Discussants

Olivier David Zerbib

Conference Documents

Paper: Net-Zero Carbon Portfolio Alignment.pdf

Presentation: Patrick Bolton.pdf

11:40

Decarbonizing Institutional Investor Portfolios

Speakers:

Philipp Krueger

Discussant:

Hannes Wagner

Decarbonizing Institutional Investor Portfolios

Time:

11:40h

Paper authors: Vaska Atta-Darkua, Simon Glossner, Philipp Krueger, Pedro Matos

Combining global data on institutional investors’ equity holdings and firm-level carbon emissions, we study how climate-conscious institutions reduced the carbon emissions of their equity portfolios between 2005 and 2019. We hypothesize that institutions could either decarbonize via tilting their holdings towards lower emitting firms or via engaging their portfolio firms to curb emissions. Our analysis suggests that tilting is the predominant strategy used by climate-conscious institutions but also uncover some early evidence of longer-term engagement with the top emitting firms following the 2015 Paris Agreement. We also find limited evidence of other portfolio measures of energy transition in terms of green patents and firm revenues. Overall, our analysis raises some doubts about the effectiveness of investor-led initiatives in reducing corporate carbon emissions and taking necessary action on climate change.