MINI-LITERATURES

This page presents groups of papers on sub-topics in sustainable finance.  Papers in these groups are often from different academic disciplines, and - given the intermittent attention academics have brought to the field - some of the "conversations" span decades.  The lists below represent my first try at naming some of these sub-topics, and identifying key studies in each area.  I have tried to keep the lists reasonably short, focused on well-regarded papers, and incorporated the work of early researchers where possible.

Note: The press often reports inaccurately or incompletely on papers in this field. Don’t take such reports at face value. This thoughtful piece by Alex Edmans of London Business School is worth a read. - link

Active Ownership / Shareholder Engagement

  • Nesbitt (1994), "Long-Term Rewards from Shareholder Activism: A Study of the CalPERS Effect." - link

  • Barber (1996), “Monitoring the Monitor: Evaluating CalPERS' Shareholder Activism” - link

  • Dimson et al (2015), “Active Ownership” - link

  • Flammer (2013), “Does Corporate Social Responsibility Lead to Superior Financial Performance? A Regression Discontinuity Approach” - link

  • Junkin (2013), “Update to The ‘CalPERS Effect’ on Targeted Company Share Prices” - link

  • Barko, Cremers, and Renneboog (2017), “Shareholder Engagement on Environmental, Social, and Governance Performance” - link

  • Dimson, Karakaş, and Li (2018), “Coordinated Engagements” - link

  • Naaraayanan, Sachdeva, and Sharma (2020), “The Real Effects of Environmental Activist Investing” - link

  • Flammer, Toffel, and Viswanathan (2021), “Shareholder Activism and Firms' Voluntary Disclosure of Climate Change Risks” - link

  • Becht, Pajuste, and Toniolo (2023), “Voice Through Divestment” - link

  • Cao et al (2023), “Foreign Institutional Ownership and Corporate Carbon Emissions” - link

 

Employees / Human Capital

  • Abowd (1989), "The Effect of Wage Bargains on the Stock Market Value of the Firm." - link

  • Huselid (1995), "The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance - link

  • Graves and Waddock (2000), "Beyond Built-to-Last... Stakeholder Relations in 'Built to Last' Companies." - link

  • Gorton and Schmid (2000), "Class Struggle Inside the Firm: A Study of German Codetermination." - link

  • Kurtz and Luck (2002), “An Attribution Analysis of the 100 Best Companies to Work for in America.” - link

  • Edmans (2007 / 2010), “Does the Stock Market Fully Value Intangibles?” - link

  • Derwall and Verwijmeren (2007), "Employee Well-Being, Firm Leverage, and Bankruptcy Risk." - link

  • Flammer (2013), “Does Corporate Social Responsibility Lead to Superior Financial Performance? A Regression Discontinuity Approach” - link

    • This is often thought of as an engagement study, but most of the engagements reviewed pertained to human capital. -lk

  • Edmans et al (2017), “Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around the World” - link

  • Liang, Renneboog, and Vansteenkiste (2017), “Cross-Border Acquisitions and Employee-Engagement” - link

  • Edmans (2020), Grow the Pie - link

  • Ji, Rozenbaum, and Welch (2017/2022), “Corporate Culture and Financial Reporting Risk: Looking Through the Glassdoor” - link

 

Environment / Climate

  • Myers and Nakamura (1980), “Energy and Pollution Effects on Productivity: A Putty-Clay Approach.” - link

  • Russo and Fouts (1997), "A Resource-Based Perspective on Corporate Environmental Performance and Profitability." - link

  • Dowell, Hart, and Yeung (2000), "Do Corporate Environmental Standards Create or Destroy Market Value?" - link

  • Derwall, Guenster, Bauer, and Koedijk (2005), "The Eco-Efficiency Premium Puzzle." - link

  • Guenster, Derwall, Bauer, and Koedijk (2005 / 2010), “The Economic Value of Corporate Eco-Efficiency.” - link

  • Kim and Statman (2011), “Do Corporations Invest Enough in Environmental Responsibility?” - link

  • Krueger (2015), “Climate Change and Firm Valuation: Evidence from a Quasi-Natural Experiment” - link

  • Daniel, Litterman, and Wagner (2015), “Applying Asset Pricing Theory to Calibrate the Price of Climate Risk” - link

    • See also Litterman’s 2017 speech, “Pricing of Climate Risk and the Effect on Portfolio Construction” - link

  • Engel et al (2019), “Hedging Climate Change News” - link

  • Naaraayanan, Sachdeva, and Sharma (2020), “The Real Effects of Environmental Activist Investing” - link

  • Pastor, Stambaugh, and Taylor (2022), “Dissecting Green Returns” - link 

  • Giglio et al (2023), “Biodiversity Risk” - link

  • Gormsen, Huber, and Oh (2024), “Climate Capitalists” - link

ESG Ratings

  • Berg, Kölbel, and Rigobon (2019), “Aggregate Confusion: The Divergence of ESG Ratings” - link

  • Berg, Fabisiki, and Sautner (2021), “Is History Repeating Itself? The (Un)Predictable Past of ESG Ratings.” - link

  • Li, Lou, and Zhang (2024), “Do Commercial Ties Influence ESG Ratings? Evidence from Moody’s and S&P” - link

Fixed Income

  • D'Antonio, Johnson, and Hutton (1997), "Expanding Socially Screened Portfolios: An Attribution Analysis of Bond Performance." - link

  • Derwall and Koedijk (2006), "Socially Responsible Fixed-Income Funds." - link

  • Goss (2007), “Corporate Social Responsibility and Financial Distress” - link

  • Goss and Roberts (2007), “The Cost of Virtue: Corporate Social Responsibility and the Cost of Debt Financing” - link

  • Bauer and Hann (2010), “Corporate Environmental Management and Credit Risk” - link

  • DiBartolomeo (2010), “Equity Risk, Credit Risk, Default Correlation and Corporate Sustainability” - link

  • Chava (2011), “Environmental Externalities and Cost of Capital” - link

  • Goss and Roberts (2011), “The Impact of Corporate Social Responsibility On the Cost of Bank Loans” - link

  • Flammer (2018), “Corporate Green Bonds.” - link

  • Barth, Hübel, and Scholz (2019), “ESG and corporate credit spreads.” - link

  • Larcker and Watts (2019), “Where’s the Greenium?” - link

 

Governance and Incentives

  • Gompers, Ishii, and Metrick (2001), “Corporate Governance and Equity Prices” - link

  • Lee and Ng (2002), “Corruption and International Valuation: Does Virtue Pay?” - link

  • Barber (2006), “Monitoring the Monitor: Evaluating CalPERS' Shareholder Activism” - link

  • Bebchuk, Cohen, and Wang (2013), “Learning and the Disappearing Association Between Governance and Returns.” - link

  • Jo, Song, and Tsang (2013), “Corporate Social Responsibility and Stakeholder Governance Around the World” - link

  • Ferrell, Liang, and Renneboog (2014), “Socially Responsible Firms” - link

  • Flammer and Bansal (2016), “Does a Long-Term Orientation Create Value? Evidence from a Regression Discontinuity” - link

  • Flammer et al (2017), “Corporate Governance and the Rise of Integrating Corporate Social Responsibility Criteria in Executive Compensation” - link

  • Bauer, Derwall, and Pankratz (2018), “Insider Ownership, Governance Mechanisms, and Corporate Bond Pricing Around the World” - link

  • Leippold, Sautner, and Yu (2024), “Corporate Climate Lobbying” - link

Manager Compliance with PRI (‘Greenwashing’)

  • Gibson et al (2020), “Responsible Institutional Investing Around the World” - link

  • Kim and Yoon (2020), “Analyzing Active Managers' Commitment to ESG: Evidence from United Nations Principles for Responsible Investment." - link

  • Liang, Sun, and Teo (2020), “Greenwashing.” - link

 

Performance - Indexes

  • Luck and Pilotte (1993), "Domini Social Index Performance” - link

  • Kurtz and diBartolomeo (1996), “Socially Screened Portfolios: An Attribution Analysis of Relative Performance” - link

  • Statman (2005) - "Socially responsible indexes: Composition, performance, and tracking errors." - link

  • Kurtz and DiBartolomeo (2011), “The Long-Term Performance of a Social Investment Universe” - link

  • Trunow and Lindner (2015), Perspectives on ESG Integration in Equity Investing: An opportunity to enhance long-term, risk-adjusted investment performance. - link

 

Performance – Mutual Funds

  • Hamilton, Jo, and Statman (1993), "Doing Well While Doing Good? The Investment Performance of Socially Responsible Mutual Funds." - link

  • Bauer, Koedijk, and Otten (2002), “International Evidence on Ethical Mutual Fund Performance and Investment Style” - link

  • Gil-Bazo, Pablo Ruiz-Verdu, and Santos (2008), “The Performance of Socially Responsible Mutual Funds: The Role of Fees And Management Companies” - link

  • Nofsinger and Varma (2013), “Socially responsible funds and market crises” - link

  • Brière, Peillex, and Ureche-Rangau (2017), “Do Social Responsibility Screens Matter When Assessing Mutual Fund Performance?” - link

  • Fiordelisi et al (2020), “An ESG Ratings Free Assessment of Socially Responsible Investment Strategies” - link

 

Performance - Sin Stocks

Comment: According to his protege Mark Holowesko (link), John Templeton avoided tobacco and some other sin stocks. Templeton’s track record - one of the best in history - is rarely mentioned in discussions of responsible investment, but perhaps should be. - lk

  • Hong and Kacperczyk (2006), "The Price of Sin: The Effects on Social Norms on Markets." - link

  • Fabozzi and Oliphant (2008), "Sin Stock Returns." - link

  • Statman and Glushkov (2008), “The wages of social responsibility” - link

  • Kim and Venkatachalam (2011), "Are Sin Stocks Paying the Price for Accounting Sins?” - link

  • Luo and Balvers (2015 / 2017), "Social Screens and Systematic Investor Boycott Risk." - link 

Portfolio Risk

  • Moskowitz (1972), “Choosing Responsible Stocks” - link

  • Alexander and Buchholtz (1978), "Corporate Social Responsibility and Stock Market Performance." - link

  • Rudd (1979), “Divestment of South African Equities: How Risky?” - link

  • Grossman and Sharpe (1986), “Financial Implications of South Africa Divestment” - link

  • Angel and Rivoli (1997), “Does Ethical Investing Impose a Cost Upon the Firm? A Theoretical Examination” -link

  • Guerard (1997), “Is There a Cost to Being Socially Responsible in Investing?” - link

  • Teoh, Welch, and Wazzan (1997), “The Effect of Socially Activist Investment Policies on the Financial Markets: Evidence from the South African Boycott” - link

  • Markowitz (2012), “Can You Do Well While Doing Good?” - link

  • Nofsinger and Varma (2013), “Socially responsible funds and market crises.” - link

  • Kim et al (2014) – “Corporate social responsibility and stock price crash risk.” - link

  • Lins, Servaes, and Tamayo (2017) - Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis” - link

  • See also Robert Litterman’s 2017 speech, “Pricing of Climate Risk and the Effect on Portfolio Construction” - link