Historically investors have focused mostly on their financial performance. Basic economic theory states that risk-averse investors maximize their utility, which is modeled as a function of risk aversion, risk and return. We find these concepts too limited and are now witnessing a changing paradigm. We and many of our clients recognize that investors have a social responsibility. As investors we allocate capital to investments, we deem attractive, but utility is not only a function of financial risks and returns. Sustainability is increasingly becoming an integrated part in investors’ decision-making.
Our sister company RobecoSAM measures sustainability risks and performance. We therefore have access to a unique dataset on how companies consider environmental, social and governance (ESG) factors and the United Nations’ Sustainable Development Goals (SDG). The academic debate on whether these factors have predictive power for future stock performance has not been settled yet.
For this research topic you are free to decide on your own research direction. As a start we have already identified a few interesting hypotheses to test. First, you can consider the entire pool of information contained in the available datasets, as compared to aggregate scores that are usually assessed. Second, whereas most studies focus on forecasting returns, we believe risk is just as important, and perhaps easier to predict using e.g. corporate governance data. A third area of research is to evaluate the ESG performance of companies; do companies with stricter policies show evidence of e.g. less controversies, or reductions in their carbon footprint over time?
The project will challenge you to work effectively with large datasets, as well as to consider the theory linked to your findings. This internship topic is suitable for any student with a quantitative background. Knowledge of financial markets is not required, although some affinity with sustainability or investing is appreciated.
 Giese, Ossen and Bacon (2016), ESG as a Performance Factor for Smart Beta Indexes, https://jii.pm-research.com/content/7/3/7
 Khan, Serafeim, Yoon (2015), Corporate Sustainability: First Evidence on Materiality, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2575912
 Pedersen et al. 2019, Responsible Investing: The ESG-Efficient Frontier, working paper https://ssrn.com/abstract=3466417
 RobecoSAM Impact Framework – bridging impact investing to mainstream investors, https://www.robecosam.com/en/insights/2019/robecosam-impact-framework-bridging-impact-investing-to-mainstream-investors.html