Research

13 pages, 310 KiB

Open AccessArticle

Mitigating Contagion Risk by ESG Investing

by Roy Cerqueti, Rocco Ciciretti, Ambrogio Dalò and Marco Nicolosi

Sustainability 2022, 14(7), 3805; https://0-doi-org.brum.beds.ac.uk/10.3390/su14073805 - 23 Mar 2022

Cited by 5 | Viewed by 2394

We study whether ESG investing may mitigate the risk of contagion among equity mutual funds. More precisely, we measure the impact of fire-sale spillover, propagating throughout the financial system, on funds ranked on ESG aspects. We compare the relative loss of capitalization experienced [...] Read more.

We study whether ESG investing may mitigate the risk of contagion among equity mutual funds. More precisely, we measure the impact of fire-sale spillover, propagating throughout the financial system, on funds ranked on ESG aspects. We compare the relative loss of capitalization experienced by high- and low-ranked funds. Contagion, which is indirect since funds are not exposed to counterparty risk, is modeled using a network structure. In cases of deleveraging from funds, fire-sale spillover propagates throughout the network because of common asset holdings among funds. We find that funds’ vulnerability to contagion decreases when the level of ESG compliance increases. Moreover, the average relative loss is lower for the high-ranked funds than for the low-ranked ones. The small-size funds mainly drive the result. Our findings indicate that contagion is less effective for high-ranked funds. From a macroeconomic perspective, ESG investing represents a new opportunity for diversification that makes the system more resilient to contagion. Full article

(This article belongs to the Special Issue Sustainable and Responsible Investing)

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16 pages, 646 KiB

Open AccessArticle

How Does the Sustainable Investment Climate Affect Firm Geographic Diversification in China? Managerial Discretion as a Mediator

by Huirui Zhang and Sanbao Zhang

Sustainability 2022, 14(5), 2764; https://0-doi-org.brum.beds.ac.uk/10.3390/su14052764 - 26 Feb 2022

Cited by 1 | Viewed by 1351

Abstract

Although existing research has explored the main effects of the sustainable investment climate, including political and legal environments, on the performance of firms’ geographic diversification, most studies neglect the role of strategic leadership, especially the CEO. The concept of managerial discretion provides a [...] Read more.

Although existing research has explored the main effects of the sustainable investment climate, including political and legal environments, on the performance of firms’ geographic diversification, most studies neglect the role of strategic leadership, especially the CEO. The concept of managerial discretion provides a theoretical lens to fill this void. Using a large database from the Investment Climate Survey conducted by The World Bank, which covers 12,400 firms from 120 cities among China’s 30 provinces, we empirically prove that the investment climate, including governmental, legal, and financial environments, significantly influence the degree of CEO managerial discretion. Moreover, CEO managerial discretion is positively associated with firm geographic diversification and mediates the relationship between the investment climate and firm geographic diversification. Specifically, the greater the CEO managerial discretion, the lower degree of firm investment within the city and the province in which it is headquartered and the higher level of the firm’s internationalization. Implications for firms’ geographic diversification and constructing a sustainable investment climate for emerging markets are finally given. Full article

(This article belongs to the Special Issue Sustainable and Responsible Investing)

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15 pages, 892 KiB

Open AccessArticle

Social Capital and Loan Cost: The Role of Interpersonal Trust

by Leonardo Becchetti, Stefano Manfredonia and Fabio Pisani

Sustainability 2022, 14(3), 1238; https://0-doi-org.brum.beds.ac.uk/10.3390/su14031238 - 22 Jan 2022

Cited by 2 | Viewed by 1438

Abstract

We argue that social dilemmas structured as investment trust games are a dominant feature in social and economic life due to asymmetric information, incomplete contracts and non-overlapping competencies that are typical characteristics of business relationships. We therefore consider that borrowers living in geographical [...] Read more.

We argue that social dilemmas structured as investment trust games are a dominant feature in social and economic life due to asymmetric information, incomplete contracts and non-overlapping competencies that are typical characteristics of business relationships. We therefore consider that borrowers living in geographical areas with higher interpersonal trust are more likely to overcome the coordination failures typical of this kind of social dilemmas, thereby creating higher economic value and reducing the risk of their economic activity. Our empirical findings support this hypothesis, showing that lenders charge significantly lower loan costs on borrowers living in areas characterized by higher interpersonal trust. Full article

(This article belongs to the Special Issue Sustainable and Responsible Investing)

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18 pages, 1605 KiB

Open AccessArticle

Sustainable Finance and COVID-19: The Reaction of ESG Funds to the 2020 Crisis

by Fabio Pisani and Giorgia Russo

Sustainability 2021, 13(23), 13253; https://0-doi-org.brum.beds.ac.uk/10.3390/su132313253 - 30 Nov 2021

Cited by 19 | Viewed by 4926

Abstract

We investigated the financial performance of a sample of sustainable investment funds in terms of returns, volatility, and contagion risk during the financial crisis caused by the COVID-19 pandemic. In order to conduct a more reliable analysis, we considered a homogenous sample composed [...] Read more.

We investigated the financial performance of a sample of sustainable investment funds in terms of returns, volatility, and contagion risk during the financial crisis caused by the COVID-19 pandemic. In order to conduct a more reliable analysis, we considered a homogenous sample composed of 30 funds declaring the same benchmark (the MSCI Europe index). The Morningstar Sustainability ESG rating was used to determine the level of sustainability of each fund. Both the GARCH models and the event study suggest that funds with a higher ESG rating were able to outperform other funds during the COVID-19 period. These funds had a greater level of resilience and exhibited a lower level of risk contagion during the pandemic. These instruments appear to assume the role of risk protection and should be considered a means of both promoting sustainable growth and minimizing portfolio risk. Full article

(This article belongs to the Special Issue Sustainable and Responsible Investing)

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25 pages, 2897 KiB

Open AccessArticle

Current State and Development of Green Bonds Market in the Latin America and the Caribbean

by Juan Camilo Mejía-Escobar, Juan David González-Ruiz and Giovanni Franco-Sepúlveda

Sustainability 2021, 13(19), 10872; https://0-doi-org.brum.beds.ac.uk/10.3390/su131910872 - 30 Sep 2021

Cited by 16 | Viewed by 3980

Abstract

The green bonds market has had a growth in recent years within its different sectors and regions. Specifically, up to 2020, the Latin America and the Caribbean (LAC) region has issued USD 26 billion. Some authors have studied the factors influencing financing through [...] Read more.

The green bonds market has had a growth in recent years within its different sectors and regions. Specifically, up to 2020, the Latin America and the Caribbean (LAC) region has issued USD 26 billion. Some authors have studied the factors influencing financing through green bonds. However, a research gap is identified in the analysis of the regions that contribute to the issuance of this type of bond, specifically for LAC. This is the first study to examine the variables such as issue amount, number and type of issuers, currency, and maturity data in the region using a dataset of issuing performed between 2014–2020. We find the typical sizes of the issues, the search for a premium in the issue, the perception of complexity, the issuance of guides, and tax incentives as the main factors affecting this market. Finally, the study presents the potential for further research. Full article

(This article belongs to the Special Issue Sustainable and Responsible Investing)

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17 pages, 2106 KiB

Open AccessArticle

Mapping and Clustering Analysis on Environmental, Social and Governance Field a Bibliometric Analysis Using Scopus

by Shang Gao, Fanchen Meng, Zhouyang Gu, Zhiyuan Liu and Muhammad Farrukh

Sustainability 2021, 13(13), 7304; https://0-doi-org.brum.beds.ac.uk/10.3390/su13137304 - 29 Jun 2021

Cited by 56 | Viewed by 6892

Abstract

Academic interest in ESG has grown significantly in recent years. Nevertheless, bibliometric and visualization research on this topic is still insufficient. This study aims to conduct publication metrics on the literature connected with ESG and attempt to give a research agenda for future [...] Read more.

Academic interest in ESG has grown significantly in recent years. Nevertheless, bibliometric and visualization research on this topic is still insufficient. This study aims to conduct publication metrics on the literature connected with ESG and attempt to give a research agenda for future research. In this study, we used data from the Scopus database. Various bibliometric techniques, such as bibliographic coupling and co-occurrence analysis, were combined with assorted themes to present an overview. To the best of our knowledge, there is no study that analyses the bibliographic data on ESG fields; this study is a unique contribution to the literature. This study also provides an overview of the trends and trajectories with a visual and schematic frame for the research of this topic. This may help researchers understand the current trends and future research directions, and enable future authors to conduct their studies more effectively. Full article

(This article belongs to the Special Issue Sustainable and Responsible Investing)

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16 pages, 281 KiB

Open AccessArticle

Companies’ Sustainable Growth, Accounting Quality, and Investments Performances. The Case of the Romanian Capital Market

by Mihai Carp, Leontina Păvăloaia, Constantin Toma, Iuliana Eugenia Georgescu and Mihai-Bogdan Afrăsinei

Sustainability 2020, 12(22), 9748; https://0-doi-org.brum.beds.ac.uk/10.3390/su12229748 - 23 Nov 2020

Cited by 2 | Viewed by 2305

Abstract

The paper analyzes the influence of sustainable growth (SGR) as a reflection of the manner of strategic business organization, particularly in the quality of reported financial information (magnitude of discretionary accruals—DAC) as an expression of the ethical attitude adopted [...] Read more.

The paper analyzes the influence of sustainable growth (SGR) as a reflection of the manner of strategic business organization, particularly in the quality of reported financial information (magnitude of discretionary accruals—DAC) as an expression of the ethical attitude adopted by companies in the entity–investor relationship, on the investors’ decisions, substantiated in the performance level of the shares held. Using models consecrated in the literature, the results reflect a significant influence, both in the case of separate testing of the two factors (SGR and DAC), and in the case of the conjugated action thereof, on investment performance. The relations were also tested by introducing certain control variables into the analysis, such as: the intangible ratio, quick ratio, company size, as well as the SGR sensitivity function of the level of information quality. In the case of financial information quality, specific indicators from the two consecrated value relevance testing models by Ohlson (1995) and Easton and Harris (1991) were used as control variables. The obtained results are robust, preserving the sense and intensity of the influences. However, in the case of testing for the influence of information quality on share price, it was noticed an insignificant relation, associated with the situation in which, to execute some speculative transactions, investors particularly interpreted conjunctural factors. The study contributes to the development of the specialty literature by highlighting the role of internal growth and information quality as determinant factors in the investors’ analyses, while also offering a potentially practical tool for assessing the opportunity of making placements in the capital of companies. Full article

(This article belongs to the Special Issue Sustainable and Responsible Investing)

19 pages, 290 KiB

Open AccessArticle

Sensitivity Analysis as a Tool in Environmental Policy for Sustainability: The Case of Waste Recycling Projects in the Republic of Serbia

by Ksenija Denčić-Mihajlov, Mladen Krstić and Dejan Spasić

Sustainability 2020, 12(19), 7995; https://0-doi-org.brum.beds.ac.uk/10.3390/su12197995 - 27 Sep 2020

Cited by 8 | Viewed by 3847

Abstract

Modern consumer society uses an increasing number of products to meet its needs, which become waste after use, thus posing a serious problem that threatens sustainable development. Investment in waste recycling, due to a high level of non-financial benefits, is considered sustainable, especially [...] Read more.

Modern consumer society uses an increasing number of products to meet its needs, which become waste after use, thus posing a serious problem that threatens sustainable development. Investment in waste recycling, due to a high level of non-financial benefits, is considered sustainable, especially in the End-of-life Vehicles (ELV) and Waste Electrical and Electronic Equipment (WEEE) recycling areas. The research objective of this paper is to test the sensitivity of the model for sustainable management of recycling projects by applying a cost-benefit analysis (CBA) to investment projects of car and refrigerator recycling in the Republic of Serbia. By testing the key risk factors of the above investment projects within the sensitivity analysis, the main aim is to determine the critical value of these variables in terms of the financial and social acceptability of these investment alternatives. The results obtained indicate that state subsidies have the greatest influence on defining the model of sustainable investment, especially in the field of e-waste recycling. The impact of other factors, the price of secondary raw materials and the social cost of CO₂ emissions, is significantly smaller, but should certainly be taken into account when defining the optimal model of sustainable investment. Full article

(This article belongs to the Special Issue Sustainable and Responsible Investing)

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