4. Financial performance implications of ESG

Question 1

What are meta studies? Also benefits and drawbacks?

Answer 1

A meta-study, also known as a meta-analysis, is a research method that involves systematically reviewing and analyzing the results of multiple independent studies on a particular topic. Instead of conducting new experiments or observations, a meta-analysis synthesizes data from existing studies to provide a more comprehensive understanding of the research question.

benefits and drawbacks?

Question 2

Portfolio (investor) vs non-portfolio studies (firm level) 4.8 Firm vs investor studies

Answer 2

4.8

Question 3

What is noise in the studies? (knowledge gap)

Answer 3

In the context of scientific research, “noise” refers to random variability or irrelevant factors that can affect the measurements or observations in a study. Noise introduces a level of unpredictability or inconsistency in the data that is unrelated to the variables of interest. It can obscure true relationships between variables, making it challenging to discern meaningful patterns or effects.

Question 4

Atz at al paper main ideas?

Answer 4

?

Question 5

Causality versus correlation? 4.22
What is reverse causality as well?

Answer 5

?

Question 6

What is treatment group? What is control group? 4.23

Answer 6

?

Question 7

Quasi-experiment? 4.23

Answer 7

A quasi-experiment is a research design that shares similarities with both experimental and non-experimental research methods. Quasi-experimental studies are conducted when it is not feasible or ethical to conduct a true experiment, typically due to the inability to randomly assign participants to experimental and control groups. In a true experiment, random assignment helps control for confounding variables and allows researchers to establish a cause-and-effect relationship.

Find more relevant info

Question 8

Shareholder proposals? 4.24

Answer 8

Proposals submitted by shareholders for a vote at the company’s annual meeting. Typically, such proposals are opposed by the corporation’s management, hence the insistence for a vote.

Question 9

Close-call shareholder resolutions? 4.24

Answer 9

“Close-call” resolutions are resolutions that pass or fail by a small margin of votes at the annual meetings. (E.g., fail with 49 % of the vote pass 51% of the vote)

Question 10

Slide 29 regarding close call results? He was explaining for a while

Answer 10

Right hand side almost pasted, left just fail

Question 11

Slide 31 understand

Question 12

Main takeaway of Flammer paper?

Question 13

Systematic vs idiosyncratic risk?

Answer 13

Its simple, but revise knowledge

Question 14

MSCI BARRA? from .39 also what is MSCI ESG?

Question 15

Graph in 41 understand

Answer 15

1. Green stock are less risky/volatile (q5) dotted lines.
2. during financial crisis

Question 16

univariate analysis? knowledge gap?

Answer 16

?

Question 17

48 slide

Question 18

firm fundamentals? .49

Answer 18

return on assets, cash flow, etc…

Question 20

There types of investors? .50 U?A?M?

Answer 20

1. Type-U (ESG-unaware) investors are unaware of ESG scores and simply seek to maximize their unconditional mean-variance utility
2. Type-A (ESG-aware) investors also have mean-variance preferences, but they use assets’ ESG scores to update their views on risk and expected return
   3Type-M (ESG-motivated) investors use ESG information and also
   have preferences for holding portfolios high high ESG scores
   Type-M investors seek a portfolio with an optimal trade-off between a high expected return, low risk, and high average ESG score.

Question 21

Capital market line vs SML? kind of interesting

Question 22

ESG efficient frontier? 4.52 idea?! ke talked a lot on this slide
why does tangency portfolio has highest msg score?

Answer 22

??

also M-will pick on the right hand side of portfolio. A will tangency portfolio spot. U-unaware investors would pick (expected return,volatility) based on risk and return use less information, thus would choose tangency portfolio ignoring ESG information spot

Question 23

revise what does Sharpe ratio imply

Question 24

The relation between expected returns and ESG can take three shapes?

Answer 24

1. Upward sloping: When many type-U investors and when high ESG predicts
   high future profits→high-ESG stocks deliver high expected returns
2. Flat: When many type-A investors, these investors bid up the prices of high- ESG stocks to reflect their expected profits→no relation between ESG and expected returns
3. Downward sloping: When many type-M investors→high-ESG stocks deliver low expected returns, because ESG-motivated investors are willing to accept a lower return for a higher ESG portfolio

Question 25

can Green assets can have higher realized returns? .60

Answer 25

PST model: Green assets can have higher realized returns, specifically when agents’ demands shift unexpectedly in the green direction
1. Investors’ demand for green assets can increase, directly driving up prices of green assets
2. Consumers’ demand for green products can strengthen, driving up green firms’ profits and thus also their stock prices