Research of Energy Consumption on ESG Investment with Satellite Data

Maggie Cheung Kan Ying, PhD
Satellite Data, Energy Consumption, ESG Investing, Market Indices, Government Energy Policy, BETTA, EPA, ESG, CAPM, Alpha, Portfolio Return, Satellite Imagery.

Abstract :

The Impact of Energy Consumption on the Equity Market: Implications for ESG investment: The study of energy consumption becomes more and more important considering the global warming crisis and the increased interest in Environmental, Social, and Governance (ESG)investing. Much of the previous research analyzes energy consumption from a macro perspective studying its influence on economic and financial development. In this paper we focus on the relationship between energy consumption and the stock market. More specifically, we investigate the effect of per capita energy consumption in the UK on different commodity indices in the time span 1995 to 2019. Results show that per capita UK energy consumption growth has a significant impact on the return of the energy equity, as measured by the S&P Energy Index. On the other hand, this effect is not found for the return on equity indexes, including the CAC40, Ibovespa, and TSX indices. As such, we find evidence for ESG investing from this significant relationship between UK per capita energy growth rate and S&P Energy Index. Furthermore, we show that government energy policies selected by countries d oimpact the investment market.

Environmental Degradation and Equity Return Alpha with Satellite Imagery Data: The academic and commercial exploitation of Satellite Imagery or Geo-Spatial data has been popular since the National Aeronautics and Space Administration (NASA) Earth Observatory started to provide them to the public in 1999. While most of the applications are focused in the areas of geology or energy estimation, the potential of using satellite data in the financial industry is less well understood. We use both published data on CO2 emission and satellite energy consumption data to examine the relationship between environmental degradationand stock return, specifically to investigate if a reduction in the former increase alpha. Most of the current literature on the ESG investing employs only published statistical data. In this paper we find evidence to support that reductionin environmental degradation increases alpha results if found from both datatypes. This motivates to investigate further whether satellite data may substitute published data, rendering an ESG alpha analysis, for instance, much more feasible for ministates or developing countries where published data are often missing.



Publication date of the thesis

Thesis committee

Supervisor: Christophe Croux, EDHEC Business School 

External reviewer: Chendi Zhang; University of Exeter Business School

Other committee member: Enrique Schroth, EDHEC Business School