Bankers, Markets & Investors

Editorial

Jean-François BOULIER — 2023-04-01

Sustainable Finance has become at the forefront of present thinking and practices in Europe. Research on ESG and its impacts, which was develop at the beginning of the century by some pioneers, is now mainstream. Finance professionals and their colleagues embrace the many aspects of this new approach and sometimes struggle with the implementation challenges and the regulations. The ambition of Bankers Markets and Investors is therefore to publish relevant and top quality research bringing new insights on this field that could help practitioners to address these challenges.

Investors’ valuation of corporate CO2 emissions: the impact of the COVID-19 crisis

Emmanuelle FROMONT — 2023-04-01

This study examines the impact of the COVID-19 crisis on the valuation of CO2 emissions by investors. Using the sample constituted by large French companies (SBF 120) having published their carbon emissions from 2016 to 2021, we show that investors are sensitive to firms’ carbon emissions and value them negatively over the period regardless the environmental sensitivity of the firm’s activity sector. We also demonstrate that under the pressure of the COVID-19 crisis, investors penalize more heavily high polluting firms while their valuation of low polluting firms does not seem to be impacted by the crisis. Therefore, our findings suggest that it is important for firms, especially high-emitting firms, to continue to reduce their carbon emissions in order to earn and
maintain investors’ confidence after the crisis. Our managerial contribution emphasizes the confirmation that the COVID-19 shock could be a good opportunity for both firm and investor to pursue their clean technologies development and investment to deal with climate change.

Determinants of coal exit strategy in the banking industry

Benoît JAMET — 2023-04-01

In recent years, an increasing number of major international banks have begun to announce their exit from the coal sector, in response to the trend initiated by public actors such as governments and related public sector financial institutions. This article examines the determinants of coal exit strategies of international banks. Using a sample of 111 banks from 31 countries and a PLSPM methodology, the results show that: 1) the announced strategies are particularly partial in nature and the financing allocated to coal firms is still high, 2) external variables (i.e., national and institutional contexts) significantly influence exit scores, notably coal dependence, progress in the energy transition and the environmental performance of the home countries, 3) with the exception of size, internal variables (e.g., exposure to the sector, risk and profitability) have no impact on coal exit scores. Banks therefore adopt a defensive strategy: the managerial decision echoes national energy and environmental policies, which underlines the crucial political and regulatory role of governments in influencing bank strategies.

Portfolio management with ESG news sentiment

Stéphane GOUTTE — 2023-04-01

In this paper, we introduce a novel news sentiment database and analyze its potential applications in the financial markets via several trading experiments. We analyze the predictability of the news sentiment (both general news and ESG-related news) on the return of European stocks and the potential of applying them as a proper trading strategy over seven years from 2015 to 2023. We find that sentiment indicators such as Tone, and Polarity show significant relationships to the return of the stock price. Those relationships can be exploited, even in the most naive way, to create trading strategies that can be profitable and outperform the market. Furthermore, among the indicators, those extracted from ESG-related news tend to show better performance. This sentiment database is available through a bespoke app at the website https://esg.cafe

Determinants of green bond issuance: agency or stakeholder motives matter?

Dejan GLAVAS — 2023-04-01

We investigate the underlying reasons for a firm to issue green bonds using agency and stakeholder theory as frameworks. We test
how different proxies for each theory explain the decision to issue a green bond. We also test whether these proxies are relevant to
green bond issuance amounts. We perform logit and fixed effects regressions using a dataset of green bond issuers and non-issuers
in 27 countries for the 2013 to 2017 period. Our findings suggest that the agency motive is a key determinant of the decision to issue
a green bond. However, agency issues seem to have only a partial impact on the size of the green bond issuances.

Are Z Generation young people potential investors in sustainable finance?

Nadege RIBAU-PELTRE — 2023-04-01

Given the amounts at stake to make the planet more sustainable in the coming years, at least at the European level, public investment will certainly not be sufficient to channel the necessary sums. It therefore seems essential to direct private financial flows into activities that are compatible with the general direction taken. We wanted to question the capacity of young French people of Z Generation, who are the investors of tomorrow, to take on the role of future sustainable investors. We highlighted three groups of individuals with different knowledge and attitudes towards traditional and sustainable investment. One
of these groups, representing more than half of the respondents, includes individuals with the most favorable attitude towards sustainable investment, but with little knowledge of investment and a rather negative attitude towards traditional investment. These results lead us to wonder about the origins of this attitude towards sustainable investment.

Employee stock ownership and voluntary carbon disclosure

Joseph ABDELNOUR — 2023-04-01

This paper investigates the relationship between Employee Stock Ownership (ESO) and voluntary carbon disclosures. Given that previous research has shown the beneficial effects of ESO on work attitudes and corporate performance, we link ESO and board representation with the attributes of voluntary climate-related disclosures. We use three proxies to capture these attributes: corporate decisions to respond to the Carbon Disclosure Project (CDP) annual
questionnaire; corporate decisions to make responses publicly available, and the quality of a firm’s disclosures on climate-changerelated risks and strategies to mitigate them. Our results show a positive association between ESO and decisions to both answer the CDP questionnaire, and make responses publicly available. In contrast, ESO does not seem to impact carbon disclosure quality. The findings contribute to the ongoing debate on the determinants
of voluntary climate change disclosures, highlighting the importance of ESO to enhance the transparency of voluntary disclosures of climate change business impacts.

Responsible finance and financial literacy

Frédéric LOBEZ — 2023-04-01

This article examines the financial education needed to achieve responsible finance. Responsibility here is considered in the broadest sense, i.e. towards company stakeholders, but also towards society and future generations. Given that finance is not only a social science and that it also includes a moral dimension, we first argue for a minimum financial education for all citizens, a condition for inclusive finance. We then outline some major changes that are intended to structure responsible financial education. The conclusions drawn concern academics and researchers working in finance
as well as managers of financial institutions.