Research

Research Interest

Much of our research is concerned with the “business case for sustainability”, i.e. how and when ecological and social sustainability can be aligned with economic interests. In a recent project, we investigated the status quo regarding this question in the academic literature. Scholars and investors have published more than 2000 empirical studies and several review studies on the relationship between environmental, social and governance (ESG) criteria and corporate financial performance (CFP). This project extracted all provided primary and secondary data of the previous academic review studies.

The results show that the business case for ESG investing is empirically very well-founded. Roughly 90% of studies find a nonnegative ESG–CFP relation/ratio. More importantly, the large majority of studies report positive findings. Furthermore, we highlight that the positive ESG impact on CFP appears stable over time. Based on these research outcomes, we have come to an important conclusion for investors and financial markets as a whole: based on extant/existing literature, the business case for being a good firm is undeniable. 

In order to further foster sustainable finance, we consider so-called impact investments as a key lever. In a nutshell, this type of investment puts the social and/or environmental impact first and considers financial performance afterwards. In other words, the impact on the real world is at the heart of this investment style/strategy. In this context, the recently published T100 report of tonic comes to remarkable conclusions: 100% impact portfolios are presently achievable; they can be constructed in any geography, including both developing and developed countries and communities. Furthermore, 100% impact portfolios can be constructed across all asset classes. These findings motivate us to better understand the market for impact investments. Thus, our research investigates corresponding investor behavior and expectations and at the same time lays out the foundations for impact assessments

Research Focus

Our research is situated as a response to two challenges

  • The International Energy Agency (IEA) estimates that over the period from 2014 to 2035 cumulative investments of $53 trillion in energy supply and energy efficiency are required. Thus, investors have to redirect capital flow toward players that positively contribute to a climate-resilient economy. 
  • Second, various business sectors are currently consuming greater levels of fossil fuels and generating higher amounts of GHG emissions than ever before in history. Thus, investors face substantial financial risks in terms of stranded assets.

At the core of our research we

  • Investigate the link between environmental, social and governance (ESG) performance and corporate financial performance (CFP) by looking at different mechanisms, contingencies and moderating factors.
  • Attempt to illustrate which elements of corporate strategy are central for a positive ESG-CFP relationship.
  • Analyze firm’s sustainability and financial reports to obtain relevant information. 
  • Investigate how specific financial market behavior may facilitate or hinder the integration of ESG criteria within investment decisions and corporate strategies.

Collaborations and Funds

The scientific members of the research group are founding members of the Science-Platform Sustainable Finance. This project comprise of several universities and institutes and is funded by Mercator Stiftung. Research on sustainable finance opens up possibilities for a close collaboration with partners from the financial industry. We are part of an EU funded Climate-KIC innovation project led by South Pole Group and CDP Europe. The project team aims at developing the world’s first climate impact rating for investment funds. Working together with key financial industry and NGO stakeholders, we develop an easy-to-use tool supporting climate conscious decision-making. Furthermore, Prof. Busch is member of the Scientific Board of the Association for Environmental Management and Sustainability in Financial Institutions (VfU). In addition, our projects receive funding from the Federal Ministry of Education and Research (BMBF).