On 21 September 2023, the Department of Finance & Economics of Liechtenstein Business School held its 7th workshop on Sustainable Finance. The workshop was hosted at Universität Liechtenstein and aimed to bridge a gap between academics and professionals on issues surrounding sustainable finance. It focused on the latest advancements and research outcomes in sustainable finance, especially in asset and investment management. International researchers in this field were invited to submit their empirical and theoretical academic papers on the subject.
In the course of this Workshop, our Doctoral Researcher in Finance, Tobi Oladiran, has received “VP Bank Best Paper Award 2023” for his joint paper (with Roman Kraussl – Bayes Business School (formerly Cass) and Fellow at Hoover Institution, Stanford University and Denitsa Stefanova – University of Luxembourg) on “ESG as Protection against Downside Risk” and was awarded a prize of CHF 2,000.
In this paper, Oladiran, Kraussl and Stefanova examine whether ESG regulatory uncertainty is priced in the market. Furthermore, they investigate the relationship between the company’s sustainability rating and the cost of hedging against downside risk. Their findings show that not only does the overall ESG assessment matter for hedging costs, but also the disparity along the firm’s environmental, social and governance components.
In the paper, researchers arrive to the following conclusions:
- An increase in ESG regulatory uncertainty results in higher hedging costs for investors.
- Firms should take all dimensions of ESG (or sustainability) seriously, as investors are concerned about firms that have high disparities across the ESG dimensions.
- Investing based on sustainability could potentially offer some protection against downside risk.
Congratulations to the whole team on winning the Best Paper Award!
Read the full paper here