The impact of sustainability criteria on risk and return in the stock market

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Type and Duration

Preproposal PhD-Thesis, since September 2019

Coordinator

Chair in Business Administration, Banking and Financial Management

Main Research

Wealth Management

Field of Research

Banking and Finance

Description

Sustainability aspects such as Environmental, Social and Governance (ESG) criteria are recently often considered in the investment decisions of many financial institutions. The aim of this cumulative dissertation is to add value to the debate about the consideration of sustainability criteria in the investment process.

The first paper contributes to the academic literature on ESG risk materiality. We will establish an empirically derived ESG risk materiality map. For this purpose, we run a fixed-effects panel regression for the European and the U.S. sample of 158 sub-industries according to GICS in order to identify industry-specific material sustainability indicators.

The second paper considers sustainability criteria in value strategies as a third dimension next to the firm's fundamentals and to the market expectations of future firms' values. This shall demonstrate, whether investors are subject to expectation errors, when it comes to ESG-ratings. In addition, it will state how ESG KPIs supplement market expectations and firm's fundamentals in value strategies.
The third paper focuses on Corporate Social Responsibility factors. The impact of firm's CSR activities will be assessed on a countries overall level of public trust. It will explore, whether the effect of CSR works as a mechanism to retain trust and reduce the drawdown towards negative shocks during financial crisis.

Keywords

ESG risk materiality, Sustainable investing, Public trust