Discover the Spring 2023 edition of the EDHEC Research Insights supplement to Investment & Pensions Europe (IPE)

Investment & Pensions Europe (IPE), the leading European publication for institutional investors and those running pension funds publishes articles and special issues, as well as supplements, largely distributed both physically and online to thousands of investors, professionals and researchers. The first issue of the EDHEC Research Insights supplement to IPE includes an introduction from Emmanuel Métais, Dean of the EDHEC Business School, and six ground-breaking papers, four of them were penned by EDHEC-Risk Climate, one by EDHECinfra and one by Scientific Portfolio.

In the Fall of 2022, EDHEC-Risk Institute became EDHEC-Risk Climate Impact Institute. This evolution marks EDHEC Business School’s commitment to sustainability issues, in accordance with its 2020-2025 strategic plan, by exploring the relationships between climate change and finance. EDHECinfra is the leading provider of index data, benchmarks and analytics in the unlisted infrastracture universe. Scientific Portfolio is an early-stage technology initiative designed to help institutional investors integrate financial and non-financial information to analyse and design equity portfolios in a cost-efficient manner.

This first issue of the EDHEC Climate and Finance Research Insights supplement to IPE proposes the following six articles.

“What integrated assessment models can tell us about asset prices”

By EDHEC-Risk Climate Scientific Director & EDHEC Professor Riccardo Rebonato.

This article describes how the oft-criticised models linking the economy and the planet's climate can be upgraded to include the latest advances of science. Professor Rebonato presents original simulation work showing that targeting 1.5-2°C of warming can be justified as an optimal goal from an economic standpoint.

• Go to Riccardo Rebonato’s webpage
• Learn more about EDHEC-Risk Climate and the programme directed by Professor Rebonato: “Impact of Climate Change on Asset Prices and Investment Management”
• Read his latest EDHEC Vox / The Conversation piece: “To halt global warming, forget net-zero: aim for net-negative”

“Look up! A market measure of the long-term transition risks in equity portfolios”

By Scientific Portfolio Head of Research Benoit Vaucher, ESG Director Vincent Bouchet, and Director Benjamin Herzog.

The authors describe how they developed a factor that captures both the sectoral and intra-sectoral dimensions of transition risks. They find that, while their factor is forward looking, it efficiently identifies funds considered as 'green' or 'brown'.

• Go to the researchers’ webpages: Benoit Vaucher, Vincent Bouchet and Benjamin Herzog

“Is there a ‘green’ risk factor in infrastructure investment?”

By EDHEC-Risk Climate Affiliate Member & EDHEC Associate Professor of Finance Noël Amenc and EDHECinfra Director Frédéric Blanc-Brude.

The researchers analyse the outperformance of low-carbon energy infrastructure investments over the past decade and find that it is largely explained by excess demand. After controlling for risk factors, they find no persistent 'green' risk factor, but instead a 'green price premium' that investors have been willing to pay.

• Go to Noël Amenc’s webpage or to Frédéric Blanc-Brude’s webpage
• Learn more about EDHEC-Risk Climate or EDHECinfra
• Read their latest EDHEC Vox / The Conversation piece: “Investments in green energy infrastructure: an (over)performance that will last?”

“Chasing the environmental factor”

By EDHEC-Risk Climate Research Engineer Emanuele Chini (up to December 2022).

The author uses advanced econometric methods to explore the relationship between stock returns and proxies for environmental footprint. He identifies a latent environmental factor with significant explanatory power in the energy sector and find that emissions-related metrics are the main drivers of stocks' exposure to this factor.

• Learn more about EDHEC-Risk Climate

“The impact of climate change news on green-minus-brown portfolios”

By EDHEC-Risk Climate Research Director & EDHEC Professor Dominic O’Kane, and Senior Research Engineer Jean-Michel Maeso.

This paper, written with the support of Amundi, uses a variety of language models to construct climate news indices. The researchers find that returns of high carbon intensity portfolios show a strongly statistically significant negative association with a climate-news index constructed from the aggregation of sources.

• Go to Dominic O’Kane’s webpage or Jean-Michel Maeso’s webpage
• Learn more about Amundi “Measuring and Managing Climate Risks in Investment Portfolios” research chair at EDHEC-Risk Climate

“Climate scenarios for financial risk analysis”

By EDHEC-Risk Climate Research Programme Director & EDHEC Professor of Climate Finance Irene Monasterolo.

The author introduces and discusses the characteristics of long-term climate scenarios, such as those developed by the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), and looks at their operationalisation for climate-financial risk assessment, their current limitations and their potential for further development.

• Go to Irene Monsaterolo’s webpage
• Learn more about EDHEC-Risk Climate and the programme directed by Professor Monasterolo: “Impact of Finance on Climate Change Mitigation and Adaptation”
• Read her latest Le Monde piece (in French) : “No financial intervention, whether public or private, can address climate change without credible economic and energy policies”