Using environmental, social, and governance (ESG) scores of firms belonging to the MSCI World universe, we measure the impact of score-based exclusion on both passive investment and smart beta strategies. We find that exclusion leads to improved scores of otherwise standard portfolios without deterioration of their risk-adjusted performance. Smart beta strategies exhibit a similar pattern, often in a more pronounced way. Moreover, our results demonstrate that exclusion also implies regional and sectoral tilts as well as (possibly undesirable) risk exposures of the portfolios.
Corporate governance rules are designed to ensure that firms are well run – that management decisions do not unjustly deprive certain stakeholder groups of value, for example. A major challenge for policymakers, however, as regular reports of poorly run companies in the media show, is devising effective governance provisions. Now though, using a novel approach, academics Boris Nikolov, Erwan Morellec, and Norman Schürhoff have devised a framework which can be used to gauge the actual impact on a firm’s value of some common governance problems and the relative impact on different stakeholder groups.
Many executives spend significant sums improving their personal performance. However, new research by Elizabeth Demers and her co-authors, suggests that there is one relatively simple, effective and low cost way of upping your game as an executive. They show that, for a combination of reasons, cognitive function, mood and the ability to communicate tend to decline throughout the day. For executives with packed diaries and little time to replenish reserves, it is best to get critical tasks scheduled for the morning.
Making accurate predictions about population trends is difficult. However a good grasp of demographic trends is also essential both for policymakers and many companies. Changes in Iife expectancy is a relatively blunt tool for measuring the impact of interventions, such as a new drug, or safety law, on different causes of death. Séverine Arnold and her co-authors offer a more sophisticated approach which enables interventions to be measured in terms of their relative impact on the age distribution of future populations, including old age dependency ratios.
Diane Pierret and Roberto Steri share a keen research interest in the regulatory environment for banking as is evident from their recent co-authored paper Stressed Banks. In this Q&A, they talk about the paper, the post-crash regulatory environment for banking, and some potentially serious implications of the proposed Financial CHOICE Act in America, both for risk taking in US banking and the stability of the global financial system.
As longevity increases ensuring that people have sufficient finances in later life has become a greater challenge for governments, whether that funding provision involves the public or private sector, or a mix of both. Joël Wagner’s research focuses largely on the topics of risk management and insurance including recent work on long term investment products like life insurance savings contracts.
Research shows that policies designed to encourage people into work have an impact beyond the individual, at a market level. These market effects may produce unanticipated, unintended and even undesired consequences.
Business as usual is the normal state affairs, and the world that managers and policymakers operate within most of the time. Occasionally, however, that world is shaken by unforeseen extreme events, from stock market crashes to earthquakes.
How secure are Europe’s financial institutions? What are the chances of another crisis? Eric Jondeau and Michael Rockinger create a model for assessing the ability of European financial institutions, industry sectors, and countries, to withstand market shocks.