Hec center for impact finance research
Hec center for impact finance research Hec center for impact finance researchThe Center's mission is to be a knowledge hub on how Finance can impact firms’ and investors’ behaviors and thus help solve the economic, technological, climatic, and social challenges of today and tomorrow.
However, these new challenges bring forth novel questions and uncertainties that can only be addressed through rigorous, scientifically grounded, independent research.
The Center actively promotes the production and dissemination of scientific research focused on three key, broad questions:
-
Does firms’ non-financial performance, such as their environmental and social performance, matter for their financial performance?
-
Can financial intermediaries and financial innovation help facilitate the transition toward a more just and sustainable economy?
-
How can non-financial performance be measured?
THE CENTER’S FACULTY MEMBERS
The Center's Research
Published papers
The Risk and Return of Impact Investing Funds - With Kelly Posenau and Tianshu Lyu - Journal of Financial Economics, Volume 161, November 2024
Conferences and Seminars
April 2024-Lovo Stefano-French inter-business School Workshop in Finance-Montpellier Business School-Carbon information, pricing and bans. Evidence from a field experiment-Presentation
May 2024-Lovo Stefano-Sustainable Finance Conference-Neoma-Sustainable Finance and Sustainable Consumption-Keynote speaker
January 2024-Lovo Stefano-Economics seminar CRESE-Université Franche-Comté-Carbon information, pricing and bans. Evidence from a field experiment-Presentation
November 2024-Lovo Stefano-Finance Department Seminar-HKUST-Carbon information, pricing and bans. Evidence from a field experiment-Presentation
November 2024-Lovo Stefano-Economics Department Seminar-Tokyo University-Carbon information, pricing and bans. Evidence from a field experiment-Presentation
December 2023-Lovo Stefano-Sustainable finance conference-Toulouse School of Economics-Carbon information, pricing and bans. Evidence from a field experiment-Presentation
June 2023-Lovo Stefano-Finance Department Seminar-Luiss University-Social responsible Investing: how to optimize impact-Presentation
May 2023-Lovo Stefano-Finance Department Seminar-Toulouse School of Economics-Social responsible Investing: how to optimize impact
December 2023-Schmidt Daniel -HEC-HKUST Sustainable Finance Workshop-HEC Paris / HKUST-Becoming virtuous? Mutual funds' reactions to ESG scandals-Presentation
January 2024-Schmidt Daniel -15th Annual Hedge Fund Research Conference-Dauphine-Becoming virtuous? Mutual funds' reactions to ESG scandals-Presentation
April 2024-Schmidt Daniel -SGF Conference 2024-Zurich-Becoming virtuous? Mutual funds' reactions to ESG scandals-Presentation
January 2023-Derrien François-Finance Department Seminar-Universita Cattolica del Sacro Cuore, Milano-Do Employees Care about ESG? Evidence from Employee Share Plans-Presentation
October 2023-Derrien François-Finance Department Seminar-BI Oslo-Do Employees Care about ESG? Evidence from Employee Share Plans-Presentation
November 2023-Derrien François-Finance Department Seminar-University of Bristol-ESG News, Future Cash Flows, and Firm Value-Presentation
May 2024-Derrien François-Finance Department Seminar-Bayes Business School, London-ESG News, Future Cash Flows, and Firm Value-Presentation
May 2023-Derrien François-Risk Forum-Paris-Do Employees Care about ESG? Evidence from Employee Share Plans-Presentation
June 2023-Derrien François-CCF Conference-NHH, Bergen-ESG News, Future Cash Flows, and Firm Value-Presentation
June 2024-Derrien François-INSEAD Finance Symposium-INSEAD, Fontainebleau-ESG News, Future Cash Flows, and Firm Value-Presentation
May 2024-Lovo Stefano-8th NTHU-UNSW Symposium on Sustainable Finance and Economics-NTHU-UNSW -Carbon information, pricing and bans. Evidence from a field experiment-Presentatio
June 2024-Lovo Stefano-3rd Summer Workshop in Sustainable Finance-Sciences Po Paris-Carbon information, pricing and bans. Evidence from a field experiment-Presentation
July 2024-Hill Brian-EAERE 2024 (European Association of Environmental & Resource Economics Conf)-Leuven-Prices vs Quantities under Severe Uncertainty-Presentation
December 2023-Jeffers Jessica-HEC-HKUST Sustainable Finance Workshop-HEC Paris / HKUST-Impact Investor Heterogeneity-Presentation
June 2023-Jeffers Jessica-6th Private Equity Conference Lausanne-Université de Lausanne-Impact Investing-Keynote speaker
February 2024-Jeffers Jessica-Finance Department Seminar-Université de Rennes-Impact Investing-Presentation
Center’s ongoing research papers
To the extent that firms don't internalise the negative externalities of their CO2 emissions, government intervention is needed to curb global warming. We study the equilibrium interaction between firms, which can invest in green technologies, and government, which can impose\emission caps but has limited commitment power. Two types of equilibria can arise: If firms anticipate caps, they invest in green technologies. These investments have positive spillover effects, lowering the aggregate cost of emission reductions for all firms, thus making the government willing to cap emissions. If firms anticipate no caps, they don't invest in green technologies, and the government finds it too costly to cap emissions. A large fund, engaging with firms' management to foster investment in green technologies, can tilt equilibrium towards emission caps.
By Bruno Biais and Augustin Landier
Work in progess By Philipp Koenig, Vincent Maurin, and David Pothier
Work in progress By Bruno Biais, Johan Hombert, Daniel Schmidt
We provide the first analysis of the risk exposure and risk-adjusted performance of impact investing funds, private market funds with dual financial and social goals. We introduce a dataset of impact fund cash flows and exploit distortions in VC performance measures to characterize risk profiles. Impact funds have a lower market β than comparable private market strategies. Accounting for β, impact funds underperform the public market, though not necessarily more so than comparable strategies. We consider alternative pricing models, accounting for sustainability and emerging markets risk. We show investors’ wealth portfolios and taste change the perceived financial merit of impact investing.
By Jessica Jeffers, Kelly Posenau and Tianshu Lyu.
We investigate the expected consequences of negative ESG news on firms' future profits. After learning about negative ESG news, analysts significantly downgrade their forecasts at short and longer horizons. Negative ESG news affect forecasts more strongly at longer horizons than other types of negative corporate news. The negative revisions of earnings forecasts following negative ESG news reflect expectations of lower future sales (rather than higher future costs). Quantitatively, forecast revisions can explain most of the negative impacts of ESG news on firm value. Analysts are correct to revise forecasts downward following negative ESG news.
By François Derrien, Philipp Krueger, Augustin Landier and Tianhao Yao.
We study how mutual funds respond to ESG scandals of portfolio companies. We find that, after experiencing an ESG scandal in their portfolio, active mutual fund managers (but not passive ones) are more likely to vote in favor of ESG proposals compared to other funds voting on the same proposal, and are more likely to reduce their stakes (and hence their voting power) in high-ESG risk stocks compared to other funds holding the same stock at the same time. Both results are pronounced (a) when the stake in the scandal stock is large, (b) when the scandal is less expected, and (c) when the scandal is accompanied by more negative stock returns. Our results suggest that scandal-shocked funds manage ESG risks in their portfolios, but fail to have much impact as exit undermines their engagement efforts precisely for those firms that have the biggest need for reform.
By Bastian von Beschwitz, Fatima Zahra Filali Adib, and Daniel Schmidt.
We characterize investors’ moral preferences in a parsimonious experimental setting, where we auction stocks with various ethical features. We find strong evidence that investors seek to align their investments with their social values (“value alignment”), and find no evidence of behavior driven by the social impact of investment decisions (“impact-seeking preferences”). First, the willingness to pay for a stock is a linear function of corporate externalities, and is symmetric for positive or negative externalities. Second, whether charity transfers are contingent or independent on investors buying the auctioned stock does not affect their WTP. Our results are thus compatible with a utility model where non-pecuniary benefits of firms’ externalities only accrue through stock ownership, not through the actual impact of investment decisions. Finally, non-pecuniary preferences are linear and additive: willingness to pay for social externalities is proportional to the expected sum of charity transfers made by firms (even if some of these donations are negative).
By Jean-Francois Bonnefon, Augustin Landier, Parinitha Sastry and David Thesmar.
Work in progress By Yurii Handziuk and Stefano Lovo
Work in progress By Michael Brown, Shawn Cole, Jessica Jeffers, Katherine Klein
In credit markets, screening algorithms aim to discriminate between good-type and bad-type borrowers. However, when doing so, they can also discriminate between individuals sharing a protected attribute (e.g. gender, age, racial origin) and the rest of the population. This can be unintentional and originate from the training dataset or from the model itself. We show how to formally test the algorithmic fairness of scoring models and how to identify the variables responsible for any lack of fairness. We then use these variables to optimize the fairness-performance trade-off. Our framework provides guidance on how algorithmic fairness can be monitored by lenders, controlled by their regulators, improved for the benefit of protected groups, while still maintaining a high level of forecasting accuracy.
By C. Hurlin, C. Pérignon and S. Saurin.
By Stefano Lovo and Jacques Olivier
Courses
Economics Of Financial Regulation
Entrepreneurial Finance & Venture Capital
Environmental Policies And Their Impact On Business Decisions
Interpretability And Algorithmic Fairness
Strategy For Impact Certificate
Sustainable And Impact Finance
Sustainable Finance and Climate Finance
Sustainable Finance
The Economics Of The Climate Change
Sustainable & Responsible Investing
Behavioral and sustainable Finance
Partners
Events
HEC-HKUST Sustainable Finance Workshop
The HEC-HKUST Workshop on Impact and Sustainable Finance brings together researchers from Europe and Asia to share their latest research and ideas in this emerging field. The workshop take place on Dec 4-5, 2023, in both Paris and Hong Kong, featuring presentations from HEC Paris, HKUST, and other researchers across Europe and Asia. The aim of the workshop is to create a platform for collaboration and knowledge-sharing between the two continents, while minimizing the need for travel and promoting sustainable practices.
HEC-HKUST Sustainable Finance Webinar
Biweekly online seminar series on sustainable finance and a joint physical workshop
The seminar and the workshop acts as an internal platform to expose researchers in this growing field to new ideas and findings and is targeted at active researchers in this field across Europe and Asia
Can a self-proclaimed Socially Responsible Fund (SRF) whose objective is to maximize assets under management improve social welfare? We study this question in a general equilibrium two-sector model incorporating financial intermediation, negative externalities due to firms’ emissions, and investors' social preferences, which are of two kinds: (a) private benefits from investing in low-emission footprint equities (``value alignment''), and (b) utility from causing improvement in social welfare (``impact''). We analyze the equilibrium size and strategies of the SRF. When investors with value-alignment preferences are in large proportion in the population we show that the SRF invests in the low-emission sector, while requiring invested companies to use low-emission suppliers. This ``Scope 3 strategy'' attracts both types of investors and indirectly induces lower emissions by acting on the supply-chain. In some other scenarios, the SRF adopts a dual-fund strategy that separates the two types of investors: One fund, focussed on the clean sector, caters to investors with value-alignment preferences, while another, which invests in the higher-emission sector, appeals to impact investors by imposing reduced direct emissions to invested companies.
By Augustin Landier and Stefano Lovo
Learn more