Investor preferences for ESG, sustainable and green investments have decreased or reversed in recent years. Focusing on the secondary market for corporate green bonds, we explore the question whether the green bond premium ('greenium') has disappeared. Using a global sample of corporate green bonds matched with conventional bonds from 2020 to 2024, we provide evidence that the greenium has not only disappeared but reversed from 2023 onwards, with green bonds in 2024 trading at yields of 6.4 bps above those of matched conventional bonds. Moreover, we document that, after 2022, investors are no longer willing to pay a greenium for green bonds from firms with higher ESG ratings, but demand a discount instead. In addition, the largest greeniums prior to 2023 are concentrated among firms with the greatest emission intensity, consistent with investors financing firms with the strongest potential for decarbonization. Subsequently, however, this preference has been overshadowed by a market-wide pricing reversal, with positive green bond premiums observed for both less and more emission-intensive firms. Taken together, the results indicate a sharply declined investor preference for green bonds, which coincides with the broader 'ESG backlash' that has recently been observed across capital markets.

This study examines the risk of extreme price changes in Chinese carbon markets due to extreme severe meteorological events. We first quantify tail risk from emission rights prices using Conditional Autoregressive Value-at-Risk and then employ event studies to examine changes in tail risk before and after the occurrence of severe weather. We find that (i) the carbon markets in Beijing, Shenzhen, and Tianjin exhibit a higher degree of tail risk, largely attributable to their lower liquidity and slow progress on market reforms; (ii) the effect of extreme weather events on carbon markets emerges with a some lag; and (iii) severe heatwaves exert the most pronounced influence on carbon market tail risk among the five types of severe weather, while severe hazy weather has the smallest impact.

Investor preferences for ESG, sustainable and green investments have decreased or reversed in recent years. Focusing on the secondary market for corporate green bonds, we explore the question whether the green bond premium ('greenium') has disappeared. Using a global sample of corporate green bonds matched with conventional bonds from 2020 to 2024, we provide evidence that the greenium has not only disappeared but reversed from 2023 onwards, with green bonds in 2024 trading at yields of 6.4 bps above those of matched conventional bonds. Moreover, we document that, after 2022, investors are no longer willing to pay a greenium for green bonds from firms with higher ESG ratings, but demand a discount instead. In addition, the largest greeniums prior to 2023 are concentrated among firms with the greatest emission intensity, consistent with investors financing firms with the strongest potential for decarbonization. Subsequently, however, this preference has been overshadowed by a market-wide pricing reversal, with positive green bond premiums observed for both less and more emission-intensive firms. Taken together, the results indicate a sharply declined investor preference for green bonds, which coincides with the broader 'ESG backlash' that has recently been observed across capital markets.

This paper investigates the impact of ESG score on the risk spillover effect between China's carbon market and stock markets, especially the exact transmission mechanisms for such effects to function. Employing the least absolute shrinkage and selection operator-vector autoregressive-Diebold-Yilmaz spillover (LASSO-VAR-DY) method, we assess the degree and direction of return spillovers between these markets. The empirical findings reveal that industries with lower ESG scores have a slightly higher net spillover effect on the carbon market compared to those with higher ESG scores, with the carbon market being the net receiver of return spillovers. Additionally, we identify investor attention as a complete mediator in the relationship between ESG ratings and the net spillover from industries to the carbon market. Portfolios constructed with the carbon market and industries exhibiting lower spillover effects demonstrate lower risk and higher returns.

This paper presents macro-, meso-, and firm-level measures of biodiversity risk specific to the Chinese capital market, and investigates how biodiversity risk relates to individual stock returns. Our measures indicate that biodiversity risk in China varies over time and across industries, and that aggregate attention to biodiversity issues has risen sharply over the past two decades. We then provide new evidence that corporate biodiversity risk exposure negatively relates to stock returns in the cross-section, significantly more so when aggregate attention to biodiversity issues rises and when industry-level biodiversity risk increases. Furthermore, we obtain some evidence that weekly returns on a portfolio long (short) on stocks with low (high) biodiversity risk positively covary with contemporaneous shocks to aggregate biodiversity attention, although negatively with lagged shocks to attention. In addition, institutional ownership is lower when firms appear more vulnerable to biodiversity risk, even more so in years of rising attention to biodiversity.

Motivated by concerns that mutual funds' stated integration of environmental, social and governance (ESG) criteria in investing is cosmetic, we study the widespread phenomenon that mutual funds change their name to include ESG terms. Using a unique global sample of ESG-related name changes by 740 retail and 317 institutional share classes between July 2016 and September 2022, we investigate investors' response and fund managers' behaviour in terms of fund flows, portfolio-level ESG metrics and fees. Using difference-in-differences analyses and accounting for heterogeneous treatment effects, we provide mixed evidence on whether funds increase flows by renaming, although effects appear significant for funds domiciled in Europe. We subsequently document that fund managers do appear to improve the ESG performance, reduce exposure to controversial businesses, decrease the carbon intensity, and lower the overall ESG risks of their portfolios after ESG renaming. Renaming has no material impact on funds' expenses. The results alleviate concerns that funds use ESG-oriented name changes cosmetically and imply that they are renaming with purpose.

We propose a new investor sentiment index by estimating the differences between moments from realized stock returns and option-implied moments. Validating the Relative Investor Sentiment index, we show that the index is correlated with other proxies, exhibits known patterns of stock market reactions to sentiment shocks, is stronger for hard-to-arbitrage assets, and is complementary to alternative sentiment measures on a monthly and daily horizon. Using our monthly index, we show that momentum strategies perform significantly better during high sentiment periods and even worse in low sentiment periods.

This paper employs a novel sustainability rating from Robeco to examine the response of investors to firms’ SDG performance. We explore the underlying mechanism from the perspective of corporate reputation and financial performance. Our finding suggests that better SDG performance leads to a net outflow of funds, especially from individual investors. Such implication may be due to the existence of greenwashing behaviors by management, as firms’ sustainability performance in the society dimension significantly improves its reputation, but not its financial performance. Furthermore, the negative impact of SDG performance on individual investors’ fund flows becomes markedly pronounced in state-owned, heavily polluting, Northwest region enterprises and after the introduction of the “dual carbon” targets.

This research adopts an event study approach to investigate the impact of the European Union (EU)-China Comprehensive Agreement on Investment (CAI) negotiations on firm value. We emphasise two typical events during the process, i.e. the preliminary agreement and the suspension of the CAI, which result in completely distinct patterns of policy uncertainty for the EU and China. Using data from Chinese listed firms, we find that the Chinese stock market reacts positively to the preliminary agreement of the CAI but negatively to its suspension. A firm with global supply chains has better stock returns when exposed to the first event but no significant heterogeneity under the second event. We also find that these effects vary depending on the overseas experience of the CEO, firm ownership type, and whether the firm is in a high-tech industry.

This paper presents a literature review with the aim of facilitating investment funds to understand the practical question of whether investing responsibly can make a fund's portfolios more sustainable without compromising their return/risk profiles. The study contains most of the leading ESG research from the past two decades. We conclude from this research that the relationship between ESG and return/risk profile is predominantly neutral or even positive. Many scholars have found evidence on the performance of stocks, bonds, and real estate. The findings apply to Environmental, Social, and Governance criteria separately and in different regions. We contribute to the body of knowledge accessible to ESG-asset-seeking funds by complementing the impact investment theory and by linking ESG investment to portfolio-level characteristics and investor preferences. Looking into the future, we identify recent trends and developments in this niche field of ESG at the end of the paper.

We examine how lead-lag relationships between China's carbon market and energy markets change during extreme climate events. We show that extreme climate events strengthen the lead- lag relationship between markets, especially during extreme cold and heat periods during which energy demand spikes.

This paper evaluates how Chinese stocks respond to the onboarding of China-focused ESG scores on the Bloomberg Professional Terminal in the short term. By utilizing the event study approach, we find that the top 10% of ESG-rated stocks react significantly positively to the onboarding event, whereas the bottom 10% of ESG-rated stocks experience significant and negative cumulative average abnormal returns. Moreover, this effect is asymmetric in that the negative returns have a greater and more prominent magnitude than the positive returns. By comparing the cross-sectional data results before and after the rating event, we propose several channels through which these effects may function. The findings of this study also have economic and policy implications for investors and policy-makers.

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This research investigates the dynamic interplay between information diffusion on social media platforms and the co-movement of excess stock returns through a comprehensive methodology encompassing the multilayer complex network analysis, panel vector autoregression (PVAR) modeling, and the thermal optimal path (TOP) approach. Utilizing weekly data spanning from January 1, 2016, to December 31, 2021, our research finds a significant interrelationship between information diffusion and excess co-movement, notably shaped by exogenous shocks, such as the COVID-19 outbreak. We investigate the microcosmic mechanism, revealing that variations in excess co-movement significantly impact the information interaction behaviors of individual investors within sub-forums, subsequently influencing their trading activities across related stocks. Moreover, stocks characterized by a heightened strength of information diffusion exhibit swifter responsiveness to new information and demonstrate superior performance in hedging strategies involving the IC500 stock index futures. These findings hold potential to aid regulators and investors in comprehending risk transmission within the stock market and refining portfolio management. A heightened understanding of the role played by information interaction among individual investors via social media in the co-movement of excess stock returns empowers informed decision-making and risk mitigation.

This study employs the thermal optimal path method to establish a framework for dynamic nonlinear connections between Chinese carbon and foreign exchange markets. Subsequently, it examines the effects of extreme weather events on the lead–lag role played by carbon. The empirical results indicate that China's carbon market typically lags behind its currency exchange market. Compared to the Hubei carbon market, the Guangdong carbon market experiences synchronized price movements between carbon and foreign exchange due to high pricing efficiency. Furthermore, shocks from extreme weather events can attract public attention to the carbon market and cause the typical lead–lag structure to reverse, whereupon the carbon market leads the foreign exchange market under such shocks, especially during heat waves. Our findings have implications for investors aiming for positive cumulative returns on hedging portfolios and policymakers wishing to bolster the financial market's ability to withstand exogenous shocks.

Timely monitoring GDP-at-risk and tracing economic downside risk sources can help establish effective risk warning and prevention systems. This study constructs a probability distribution for China’s economic growth with skewness determined by a multidimensional predictor information set of macro fundamentals. Such a treatment allows us to identify changing drivers of economic downside risks during monitoring GDP-at-risk’s dynamic evolutionary path. We also employ a time-varying parameter vector autoregression model with random volatility to explore the heterogeneous impacts of different macroeconomic policy instruments on economic slowdowns. Our results provide empirical support for macroeconomic management and policy formulation in emerging markets. We reach three conclusions. First, the dynamics of GDP-at-risk exhibit significant event-driven characteristics, and economic downside risk increases significantly under the influence of extreme events. Moreover, the probability distribution of economic growth is asymmetric--as the downside risk of the economy increases, its upside potential increases disproportionately. Second, the time-varying risk trace of GDP-at-risk shows that the contribution of financial conditions and local government debt to economic downside risk declines. The importance of the risk-driving role of housing price growth gradually increases, suggesting that China’s property prices can provide more valuable early warning information about future growth risk, allowing time for precise preventive measures. Nevertheless, interest rates and inflation as risk divers have consistently minimal impacts. Third, the heterogeneity impulse response function of GDP-at-risk suggests that quantity-based monetary policy and fiscal policy can manage economic downside risks in the short run. In contrast, price-based monetary policy can curb economic overheating and reduce downside risks in the medium to long term. Therefore, the effect of price-based monetary policy is more sustainable in China.

The stability of carbon market development is pivotal for reducing climate risk, maintaining the "double-carbon" route, and ultimately achieving a low-carbon economy target. The most likely factors that jeopardize such a stable trend are extreme contagious events. Therefore, we employ a copula-CoVaR model to evaluate tail risk spillovers among four Chinese regional carbon markets. The empirical results show a prominent bidirectional contagion structure among the Hubei, Shanghai, and Guangdong markets. The Shenzhen carbon market displays slight risk spillover to Guangdong and a one-way risk acceptance effect on other markets. Overall, Hubei and Shenzhen are risk spillover markets, while Shanghai and Guangdong are risk absorption markets. Moreover, we discover no distinctions between the conditional and unconditional values at risk in a regional setup. These findings have regulatory implications that may help effectively mitigate carbon tail risk.

We conceptualize that CEOs who endure traumatic experiences stemming from man-made disasters practice less corporate social responsibility. We exploit a natural experiment-the Great Chinese Famine-to empirically test this hypothesis. We find that (i) firms with CEOs who experienced the Great Chinese Famine score lower in corporate social responsibility ratings than a comparison group; (ii) this relationship is mainly driven by prosocial practices tied to employee relations, environmental protection, supplier relations, and community contributions; and (iii) this negative relationship is more pronounced in firms whose CEOs were younger when they experienced the famine, (iv) the positive relationship between CSR scores and firm value is more pronounced in firms with CEO without famine experiences. These results are robust in the face of several sources of endogeneity. Our study contributes to ongoing research regarding how top executives' early experiences affect their managerial decisions. It also enriches work surrounding corporate social responsibility and the plausibly exogenous determinants of prosocial preferences.

When companies select and use compensation peers to determine chief executive officer (CEO) compensation, they create unintended peer effects on corporate innovation due to the similarities between these companies and their compensation peers in terms of product markets, CEO characteristics, and compensation schemes. After controlling for industry and geography peer groups, the findings confirm that the average innovation activity of compensation peers is a significant and distinct predictor of corporate innovation. Further analysis showed that (1) the peer effect is stronger in firms and compensation peers that pay their CEOs using long-term compensation, in firms with stronger labor market competition and board monitoring, and in peer companies that experience higher innovation competition and are closer to the median peer company in the peer group; (2) the obtained results are likely not attributable to the knowledge spillover mechanism and are more consistent with the peer pressure mechanism; and (3) the Securities and Exchange Commission's 2006 executive compensation disclosure rules may have generated peer effects.