Many governments offer support for entrepreneurs in a bid to boost entrepreneurship and startup success. However, as Annamaria Conti shows, both policymakers and entrepreneurs need to thoroughly assess the impact of that support to ensure that it is having the desired effect.
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.
In the aftermath of the 2008 financial crisis it became clear that regulators had allowed many financial services firms to become “too big to fail”. Yet this system-critical firm problem is not confined to financial services. In their paper “Can electricity companies be too big to fail?” Ann van Ackere, Erik R. Larsen and Sebastian Osorio explain how a similar challenge faces the electricity sector, and offer some suggestions to help regulators prevent the lights from going out.