Completed NRP 73 research project: Sustainable finance

​The team of Jean-Charles Rochet from the University of Geneva analysed different questions:

• Is a Social Stock Exchange viable in Switzerland? Even though there is a large market for both social businesses and impact investors at global markets, existing initiatives to create social stock markets have been challenging. To succeed a Swiss Social Stock Exchange will have to establish strategic partnerships and concentrate on building a solid network of social enterprises and investors as well as impact verification and measurement. 
• Do responsible investors invest responsibly? An analysis of the investments of signatories of the Principles for Responsible Investment (PRI) showed that only PRI signatories outside the U.S. invest responsibly. PRI signatories in the US seem to not invest responsibly. 
• What is the sustainability footprint of institutional investors? Institutional investors with better sustainability at equity portfolio level show higher risk-adjusted portfolio performance. 
• Do ESG rating disagreements impact stock returns? The research showed that environmental, social and governance (ESG) rating dispersion increases stock returns, for both the total and environmental pillars. Portfolios sorted by ESG rating dispersion generate long-short portfolios with monthly returns of about 21 basis points (t-stat 2.2).
• Will the COVID-19 pandemic stop the progress of micro-finance? Temporary income losses and business interruptions for producers and investors due to COVID-19 will make them less likely to invest in risky ventures. However, this is only temporary and will not stop the progress of micro-finance.
• Why do firms issue green bonds? More and more companies issue green bonds. They are used as a signal for the capacity of companies to implement decarbonisation. They are complementary to other certification processes for consumers and investors and are used to distinguish them from “business as usual” companies. Green bonds are not cheaper than ordinary bonds, but have a positive impact on a company’s value.