Found 44 article(s) for author 'Sustainability'

New Firms for a New Era

New Firms for a New Era. Dani Rodrik, February 12, 2020, Opinion, “In recent years, large corporations have become increasingly aware that they must be sensitive not only to the financial bottom line, but also to the social and environmental effects of their activities. But societies should not allow firms’ owners and their agents to drive the discussion about reforming corporate governance.Link

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Tackling Climate Change Requires Organizational Purpose

Tackling Climate Change Requires Organizational Purpose. Rebecca Henderson, George Serafeim, 2020, Paper, “Unchecked climate change presents a profound threat to economic growth and political stability but despite widespread public concern about the issue, global emissions of greenhouse gases (GHGs) have not declined. Indeed current “business as usual” predictions imply that average global temperatures will rise by more than 4⁰C by 2100, with potentially catastrophic results. In this paper, we argue that while putting in place an effective regime for pricing GHG emissions is more essential than ever, it is unlikely to be sufficient. It is in this context that we hypothesize that increasing the fraction of commercial firms who are “authentically purpose-driven” might have a very significant effect on the problem of climate change.Link

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Portfolio Choice with Sustainable Spending: A Model of Reaching for Yield

Portfolio Choice with Sustainable Spending: A Model of Reaching for Yield. John Y. Campbell, January 2020, Paper, “We show that reaching for yield a tendency to take more risk when the real interest rate declines while the risk premium remains constant results from imposing a sustainable spending constraint on an otherwise standard infinitely lived investor with power utility. This is true for two alternative versions of the constraint which make wealth and consumption follow martingales in levels or in logs, respectively. Reaching for yield intensifies when the interest rate is initially low, helping to explain the salience of the topic in the current low-rate environment. The sustainable spending constraint also affects the response of risktaking to a change in the risk premium, which can even be negative when the riskless interest rate is sufficiently low.” Link

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Why is Corporate Virtue in the Eye of The Beholder? The Case of ESG Ratings

Why is Corporate Virtue in the Eye of The Beholder? The Case of ESG Ratings. George Serafeim, Anywhere Sikochi, November 2019, Paper, “Despite the rising use of environmental, social, and governance (ESG) ratings in financial markets, there is substantial disagreement across rating agencies regarding what rating to give to individual firms. As what drives this disagreement is unclear, we examine the extent to which a firm’s ESG disclosure and average ESG rating explain this disagreement. Contrary to conventional wisdom that greater disclosure helps reduce disagreement, our findings suggest that greater ESG disclosure leads to greater disagreement across ESG rating agencies. These findings hold using firm fixed effects, changes models, and using a difference-in-differences design with staggered mandatory ESG disclosure shocks. We also find that rating disagreement is greater when firms have high or low average ESG ratings, relative to firms with medium average ESG ratings. Overall, our findings highlight the difficulty that firms face in resolving ESG rating disagreement and the need for developing rules and norms for evaluating ESG information.Link

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Undisclosed Debt Sustainability

Undisclosed Debt Sustainability. Laura Alfaro, 2019, Paper, “Over the past decade, non–Paris Club creditors, notably China, have become an important source of financing for low- and middle-income countries. In contrast with typical sovereign debt, these lending arrangements are not public, and other creditors have no information about their magnitude. We transform the traditional sovereign debt and default model to quantitatively study incomplete information arrangements and find they greatly reduce traditional/Paris Club creditors’ debt sustainability. Disclosure of nontraditional debt would imply significant welfare gains for the recipient countries but would reduce its sustainability. We discuss the implications of nontraditional lending on standard assumptions of sovereign debt models.Link

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3 Ways Investors Can Pressure Companies to Take Sustainability Seriously

3 Ways Investors Can Pressure Companies to Take Sustainability Seriously. George Serafeim, June 23, 2019, Paper, “Climate change and other environmental, social, and governance (ESG) issues are not political or partisan topics, and not limited to niche investors. Measuring and analyzing ESG information is becoming an important activity for any investor who seeks to optimize risk and return —a growing body of evidence shows that companies with strong ESG policies produce better financial results. Academic research analyzing 2,000 U.S. companies from 1993 to 2014 shows higher profit margins and superior risk-adjusted returns for those that made significant ESG investments to improve their performance on industry-specific material ESG…Link

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Yes, Sustainability Can Be a Strategy

Yes, Sustainability Can Be a Strategy. George Serafeim, February 11, 2019, Opinion, “In recent years, a growing number of companies around the world have voluntarily adopted and implemented a broad range of sustainability practices. The accelerating rate of adoption of these practices has also provoked a debate about the nature of sustainability and its long-term implications for organizations. Is the adoption of sustainability practices a form of strategic differentiation that can lead to superior financial performance? Or, is it a strategic necessity that can ensure corporate survival but not necessarily outperformance?Link

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Pathways to Materiality: How Sustainability Issues Become Financially Material to Corporations and Their Investors

Pathways to Materiality: How Sustainability Issues Become Financially Material to Corporations and Their Investors. George Serafeim, 2019, Paper, “As sustainability issues, also labelled environmental, social and governance (ESG) issues, become financially material, companies, investors and regulators are designing strategies and policies to improve sustainability disclosure and performance. In this paper, we outline a framework of how sustainability issues become financially material arguing that materiality is not a “state of being” but a “process of becoming.” Our framework could assist companies and investors to make resource allocation decisions based on expectations about future materiality, social entrepreneurs and NGOs to develop their theories of social change, and policy makers to design disclosure regulations. Moreover, our framework generates predictions about the conditions under which sustainability issues become financially material that could be empirically tested in the future.Link

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The Trump Tax Cuts Boosted Growth and Jobs, but at What Cost?

The Trump Tax Cuts Boosted Growth and Jobs, but at What Cost? Jason Furman, December 18, 2018, Opinion, “It has been nearly a year since President Trump signed sweeping tax changes into law. The macroeconomic data already rule out some of the more extravagant claims about immediate jumps in wages and capital. But the more serious debate over the tax cuts’ long-run impact is still far from decided. Here’s what we do know..Link

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Transition towards higher penetration of renewables: an overview of interlinked technical, environmental and socio-economic challenges

Transition towards higher penetration of renewables: an overview of interlinked technical, environmental and socio-economic challenges. Michael McElroy, August 24, 2018, Paper, “Investment for renewables has been growing rapidly since the beginning of the new century, and the momentum is expected to sustain in order to mitigate the impact of anthropogenic climate change. Transition towards higher renewable penetration in the power industry will not only confront technical challenges, but also face socio-economic obstacles. The connected between environment and energy systems are also tightened under elevated penetration of renewables. This paper will provide an overview of some important challenges related to technical, environmental and socio-economic aspects at elevated renewable penetration. An integrated analytical framework for interlinked technical, environmental and socio-economic systems will be presented at the end.Link

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