Working papers by Bert Scholtens
We undertook a survey of US investors to examine whether social preferences can explain three mea... more We undertook a survey of US investors to examine whether social preferences can explain three measures of engagement in socially responsible investment (SRI): interest in SRI; history of SRI investment; and the proportion currently invested in SRI. We find that investors with stronger social preferences are more interested in SRI than are those with weaker social preferences. Further, investors with stronger social preferences are more likely to have invested in SRI. We do not, however, obtain any association between social preferences and the share of total portfolio invested in SRI. These results are consistent with a 'warm glow' interpretation of investor motivations to hold SRI.
Papers by Bert Scholtens
Research Papers in Economics, 2015
The purpose of this paper is to analyze whether and how the financial industry might have an impa... more The purpose of this paper is to analyze whether and how the financial industry might have an impact on the development of renewable energy. In order to answer this question, the influence of several indicators of financial sector development will be estimated. To this extent, we rely on an unbalanced panel of 198 countries over the period 1980-2008. Our dataset includes financial industry indicators, measures of renewable energy development and several variables that control for other important factors related to renewable energy development, like economic, energy and policy indicators. We employ panel data techniques to investigate the impact of financial development on renewable energy development. The remainder of this paper is organized as follows: Section 2 gives a brief overview of the literature on renewable energy and provides a background for our analysis. Section 3 introduces the methodology and the data. The results are presented and discussed in section 4. Section 5 conc...
Introduction Far from being negligible in quantity, decentralized energy production delivers a co... more Introduction Far from being negligible in quantity, decentralized energy production delivers a considerable part of the renewable energy production in the Netherlands. Decentralized production takes place by individual households, companies as well as citizen groups. Grassroots initiatives have sprung up in the Netherlands in the last 5 years, in a recent inventory 313 formally instituted local energy cooperatives were found. Cooperatives’ aims are sustainability, strengthening local economy and promoting a democratic governance structure for energy production. The energy industry in the Netherlands has traditionally been dominated by large energy companies, and the Groningen gas field has resulted in a very high dependency on natural gas for both consumer and business households. The climate for grassroots initiatives has improved since the so-called Energy Covenant in 2013. This covenant pertains to an agreement between government, industry representatives, labor unions and nongov...
We undertook a survey of US investors to examine whether social preferences can explain three mea... more We undertook a survey of US investors to examine whether social preferences can explain three measures of engagement in socially responsible investment (SRI): interest in SRI; history of SRI investment; and the proportion currently invested in SRI. We find that investors with stronger social preferences are more interested in SRI than are those with weaker social preferences. Further, investors with stronger social preferences are more likely to have invested in SRI. We do not, however, obtain any association between social preferences and the share of total portfolio invested in SRI. These results are consistent with a ‘warm glow’ interpretation of investor motivations to hold SRI. WP No 17-002
Climate Policy, 2020
The fossil fuel divestment movement tries to increase awareness about the need for climate action... more The fossil fuel divestment movement tries to increase awareness about the need for climate action and heralds divestment from fossil fuel producers as a means to combat climate change. Financial investors are increasingly showing interest in the nonfinancial impact of companies they invest in, i.e. responsible investing. However, they also want to be assured of sufficient returns and limited risks to support the living costs of their ultimate beneficiaries. In this context, we investigate the impact of divestment and the transition of the energy system on investment performance. We rely on an international sample of almost seven thousand companies and study a period of forty years. Further, we investigate scenarios with very different pathways to the transition of the energy system. We find that the investment performance of portfolios that exclude fossil fuel production companies does not significantly differ in terms of risk and return from unrestricted portfolios. This finding holds even under market conditions that would benefit the fossil fuel industry. We conclude that divesting from fossil fuel production does not result in financial harm to investors, even when fossil fuels continue to play a dominant role in the energy mix for some time. Key policy insights. Financing the exploration and exploitation of fossil fuel resources is increasingly being regarded as controversial, leading to divestment from this industry.. Fossil fuel divestment does not seem to significantly harm financial investors and is not at odds with the fiduciary duty of institutional investors. This paves the way for more extensive initiatives to promote fossil fuel divestment.. A smooth energy transition will most likely erode the profitability of fossil fuel firms and their ability to invest. Therefore, governments cannot rely on the fossil fuel industry to finance the energy transition.
Maandblad Voor Accountancy en Bedrijfseconomie, 2008
Meer dan ooit staat energie in de belangstelling. Internationale politieke ontwikkelingen worden ... more Meer dan ooit staat energie in de belangstelling. Internationale politieke ontwikkelingen worden in belangrijke mate bepaald door toegang tot energievoorraden. Economische groei en regelgeving geven bijna overal aanleiding tot forse verschuivingen in belangen en leiden tot dynamische ontwikkelingen in de energiesector. Zeker stellen van het aanbod van energie, diversificatiemogelijkheden en prijsvolatiliteit zijn de belangrijkste aspecten van deze dynamiek. Nationaal staat energie ook prominent op de agenda. Onze overheidsfinanciën leunen zwaar op de (afnemende) gasvoorraad. Op tal van terreinen zijn Nederlandse bedrijven actief, zoals met onderzoek naar nieuwe bronnen en de exploratie en exploitatie van bestaande energievoorraden. Daarnaast speelt een rol dat het gebruik van fossiele energiebronnen leidt tot een klimaatverandering, waarvan we de consequenties niet overzien. Deze ontwikkelingen vragen om nieuwe kennis, nieuwe inzichten, nieuwe technologieën en nieuwe vaardigheden. I...
Maandblad Voor Accountancy en Bedrijfseconomie, 2004
In dit onderzoek analyseren we de invloed van wettelijke restricties op de investeringsgroei van ... more In dit onderzoek analyseren we de invloed van wettelijke restricties op de investeringsgroei van individuele bedrijven. Met behulp van een unieke database, gebaseerd op interviews met een grote groep bedrijven uit verschillende landen, gaan we na in welke mate investeringen worden beperkt door wetgeving. Ook onderzoeken we of het investeringsgedrag van grote en kleine bedrijven op dezelfde wijze wordt beïnvloed. Onze resultaten ondersteunen de hypothese dat de groei van de investeringen wordt beperkt door wetten die door ondernemingen als negatief worden ervaren. Tevens blijkt dat met name kleine bedrijven last ondervinden van wettelijke restricties. Grote bedrijven lijken beter in staat restricties te omzeilen. Een belangrijke les voor het Nederlandse bedrijfsleven is dat wettelijke restricties het internationale zakendoen niet hoeven te blokkeren.
SSRN Electronic Journal, 2018
We investigate the evolution of US bank capitalization and examine its role in the crosssection o... more We investigate the evolution of US bank capitalization and examine its role in the crosssection of bank stock returns. We use the book capital ratio (BCR), the market capital ratio (MCR) and the stressed capital ratio (SCR) as three proxies for bank capitalization and find that the MCR and the SCR have similar dynamics, while the BCR develops very differently. Our Fama-MacBeth cross-sectional regressions suggest a negative and significant relationship between bank capitalization and bank stock returns between 1994-2007, especially when bank capitalization is measured by the MCR or the SCR. We apply Fama-French factor models to estimate the risk-adjusted returns of our capital ratio-sorted decile portfolios and their sensitivities to systematic risk factors. We find that the BCR proxies for bank portfolio exposures to the market and value factors, while the MCR and the SCR contain some information on exposures to the market and size factors.
SSRN Electronic Journal, 2018
The transition from high- to lower-carbon production systems increasingly creates regulatory and ... more The transition from high- to lower-carbon production systems increasingly creates regulatory and market risks for high-emitting firms. We test to what extent financial investors demand a premium to compensate for such risks and thus might raise firms’ cost of equity capital (CoE). Using data for 1,897 firms spanning 50 countries over the years 2008–2016, we find a distinct and robust positive impact of carbon intensity (carbon emissions per unit of output) on CoE: On average, a standard deviation higher (sector-adjusted) carbon intensity is associated with a CoE premium of 6 (9) basis points or 1.7% (2.6%). This effect is primarily explained by systematic risk factors: high-emitting assets are significantly more sensitive to economy-wide fluctuations than low-emitting ones. The CoE impact of carbon intensity is more pronounced in high-emitting sectors, EU countries, and firms subject to carbon pricing regulation. Our results suggest that carbon emission reduction might serve as a valuable risk mitigation strategy.
Ecological Economics, 2018
Fossil fuel divestment campaigns urge investors to sell their stakes in companies that supply coa... more Fossil fuel divestment campaigns urge investors to sell their stakes in companies that supply coal, oil, or gas. However, avoiding investments in such companies might impose a financial cost on the investor because of foregone potentially profitable investments and reduced opportunities for portfolio diversification. We compare financial performance of investment portfolios with and without fossil fuel companies over the period 1927-2016. Contrary to theoretical expectations, we find that fossil fuel divestment does not seem to impair portfolio performance. These findings can be explained by the fact that, so far, fossil fuel company stocks do not outperform other stocks on a risk-adjusted basis and provide relatively limited diversification benefits. A more pronounced performance impact of divestment can be observed over short time frames and when applied to less diversified market indices.
Environmental Impact Assessment Review, 2017
We investigate how the decision support system 'Modular Evaluation Method Subsurface Activities' ... more We investigate how the decision support system 'Modular Evaluation Method Subsurface Activities' (MEMSA) can help facilitate an informed decision-making process for permit applications of subsurface activities. To this end, we analyze the extent the MEMSA approach allows for a dialogue between stakeholders in a transparent manner. We use the exploration permit for the underground gas storage facility at the Pieterburen salt dome (Netherlands) as a case study. The results suggest that the MEMSA approach is flexible enough to adjust to changing conditions. Furthermore, MEMSA provides a novel way for identifying structural problems and possible solutions in permit decision-making processes for subsurface activities, on the basis of the sensitivity analysis of intermediate rankings. We suggest that the planned size of an activity should already be specified in the exploration phase, because this would allow for a more efficient use of the subsurface as a whole. We conclude that the host community should be involved to a greater extent and in an early phase of the permit decision-making process, for example, already during the initial analysis of the project area of a subsurface activity. We suggest that strategic national policy goals are to be re-evaluated on a regular basis, in the form of a strategic vision for the subsurface, to account for timing discrepancies between the realization of activities and policy deadlines, because this discrepancy can have a large impact on the necessity and therefore acceptance of a subsurface activity.
International Journal of Green Energy, 2016
The support of financial markets for the transformation of the energy system to a low carbon soci... more The support of financial markets for the transformation of the energy system to a low carbon society seems critical for its success. But will they support this transformation on the basis of market incentives alone? This study analyses how equity indices that try to capture renewable energy investments perform compared to conventional benchmark indices. Especially financial market investors-such as pension funds, insurance companies, and mutual funds-use these to assess and guide their renewable energy investments. As such, we take the perspective of financial market participants, which mainly only indirectly invest in renewable energy. We also analyze whether renewable energy indices are to be regarded as an example of market environmentalism. We find that the renewable energy indices' risk-adjusted return is very poor and suggests renewables is not a financially attractive portfolio investment yet. We also argue that renewable energy equity indices can be regarded as an example of market environmentalism, especially with respect to commodification and frame-shifting.
Carbon Management, 2014
This paper investigates how carbon prices influence the financial market value of the individual ... more This paper investigates how carbon prices influence the financial market value of the individual firm after Phase I of the EU's Emission Trading Scheme (ETS). The dataset covers 136 firms in the industries that are responsible for the majority of the greenhouse gas emission, namely the oil and gas, power and heat, cement and lime, and iron and steel industry. The paper basically follows the method and approach applied in Oberndorfer [27]. The results show there is a positive and significant effect of carbon price changes on stock market returns in all four industries. Furthermore, there is evidence for an asymmetric influence in all sectors apart from the oil & gas industry. Volatility of the market value of firms appears not be influenced by the volatility of the EU ETS carbon prices. The results appear to be robust against different specifications for the estimation of the variance. However, they are sensitive to different time periods, i.e., distinguishing between 2008-2009 and 2010-2011. We conclude that despite several inefficiencies, the EU ETS has a significant impact on the value of firms that are responsible for most of the carbon emissions in the EU.
SSRN Electronic Journal, 2001
Socially responsible investing and management style of mutual funds in the euronext stock markets... more Socially responsible investing and management style of mutual funds in the euronext stock markets. s.n.
Journal of Business Ethics, 2015
We investigate how conventional asset managers account for environmental, social, and governance ... more We investigate how conventional asset managers account for environmental, social, and governance (ESG) factors in their investment process. We do so on the basis of an international survey among fund managers. We find that many conventional managers integrate responsible investing in their investment process. Furthermore, we find that ESG information in particular is being used for red flagging and to manage risk. We find that many conventional fund managers have already adopted features of responsible investing in the investment process. Furthermore, we argue and show that ESG investing is highly similar to fundamental investing. We also reveal that there is a substantial difference in the ways in which U.S. and European asset managers view ESG.
SSRN Electronic Journal, 2014
We investigate the relationship between corporate and country sustainability on the cost of bank ... more We investigate the relationship between corporate and country sustainability on the cost of bank loans. We look into 470 loan agreements signed between 2005 and 2012 with borrowers based on 28 different countries across the world and operating in all major industries. Our principal findings reveal that country sustainability related to both social and environmental frameworks has a statistically and economically impactful effect on direct financing of economic activity. An increase of one unit in country sustainability scores is associated with an average decrease in the costs of debt by 64 basis points. Our analysis shows that the environmental dimension of a country's institutional framework is approximately two times as impactful as the societal dimension when it comes to determining the cost of corporate loans. On the other hand, we find no conclusive evidence that firm-level sustainability influences the interest rates charged to borrowing firms by banks.
Transparency, Governance and Markets, 2006
... Friedman, M.(1977)" Nobel lecture: inflation and unemployment." Journal of Politica... more ... Friedman, M.(1977)" Nobel lecture: inflation and unemployment." Journal of Political Economy 85: 451 ... The logarithm of the period averages of trade as a percentage of GDP. ... Financial Development, Inflation Uncertainty and Growth Volatility 111 Economies are divided among ...
Journal of Business Ethics, 2012
In this study, we try to establish what determines the substantial differences in the Nordic coun... more In this study, we try to establish what determines the substantial differences in the Nordic countries' size and composition of socially responsible investing (SRI). We investigate if these differences between Denmark, Finland, Norway, and Sweden can be associated with key characteristics in economics, finance, culture, and institutions. We find that in particular economic openness, the size of the pension industry, and cultural values of masculinity (femininity) and uncertainty avoidance can be associated with the differences in SRI in the four countries. On basis of these findings, we lay foundations for an international theory of SRI.
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Working papers by Bert Scholtens
Papers by Bert Scholtens