Marco Ceccarelli

VU Amsterdam - Department of Finance

I am a tenure-track Assistant Professor of Finance at the Vrije Universiteit (VU) Amsterdam. I obtained my Ph.D. in finance from the Swiss Finance Institute (SFI) at the University of Zurich. 

My research focuses on sustainable and climate finance, focusing on investments. Through empirical and experimental studies, I strive to understand better what role finance and financial institutions can play in society and how societal challenges affect economic actors like retail investors or mutual fund managers. 

Publications

Low Carbon Mutual Funds
Review of Finance (2024) with Stefano Ramelli and Alexander F. Wagner

Climate change poses new challenges for portfolio management. In our not-yet-low carbon world, investors face a trade-off between minimizing their exposure to climate risks and maximizing the benefits of portfolio diversification. This paper investigates how investors and financial intermediaries navigate this trade-off. After the release of Morningstar's novel carbon risk metrics in April 2018, mutual funds labeled as "low carbon'' experienced a significant increase in investor demand, especially those with high risk-adjusted returns. Fund managers actively reduced their exposure to firms with high carbon risk scores, especially stocks with returns that correlated more with the funds' portfolios and were thus less useful for diversification. These findings shed light on whether and how climate-related information can re-orient capital flows in a low carbon direction.

Working Papers

Climate Transition Beliefs
with Stefano Ramelli, (2024) 

We study an overlooked driver of "green" investments, subjective expectations about the trajectory of the energy transition (climate transition beliefs). In a survey of U.S. retail investors (N=1,007), we document considerable heterogeneity in climate transition beliefs at different horizons. Climate transition optimism positively correlates with expected green financial performance and preferences for green investments, especially for investors without strong pro-environmental attitudes. Two pre-registered information provision experiments (total N=4,004) provide causal evidence of climate transition beliefs' effects on return expectations and investment behavior. By influencing green investments, the prevailing beliefs around the energy transition can have important self-fulfilling tendencies. 

ESG Skill of Mutual Fund Managers
with Richard B. Evans, Simon Glossner,  Mikael Homanen, and Ellie Luu, (2024)

We propose a new measure of ESG-specific skill based on fund manager trades and ESG rating changes. We differentiate between proactive ESG managers, whose trades predict future changes in ESG ratings, reactive ESG managers, who change their portfolio allocation after a change in ESG ratings occurs, and non-ESG managers. The predictive ability of proactive managers is persistent in out-of-sample tests, consistent with manager skill. For identification, we rely on an exogenous methodology change of one ESG rating provider that redefined ESG ratings levels without releasing new information. Reactive managers significantly change their holdings in firms whose ESG ratings exogenously change, consistent with a lack of ESG skill. Proactive managers do not trade in the direction of the change, consistent with their trading no new ESG information. This ESG skill has economic implications: Investors in mutual funds with an explicit sustainability mandate reward proactive managers with 58bps higher average quarterly flows.

Which Institutional Investors Drive Corporate Sustainability?
with Simon Glossner, Mikael Homanen and Daniel A. Schmidt (2024)

Many institutional investors publicly commit to some form of responsible investment. This raises concerns about the credibility of such claims. We use participation in collaborative engagements to identify "Leaders", i.e., institutional investors that are truly committed to improving firms' sustainability outcomes. Despite owning only 2.2% of the average firm, Leaders alone explain the positive relationship between institutional ownership and firms’ environmental and social performance. In line with committed owners facilitating corporate change, engagement campaigns improve a targeted firm's sustainable performance only when Leaders have a high ownership stake in the firm.

Gender, performance, and promotion in the labor market for commercial bankers
with Christoph Herpfer and Steven Ongena, (2024) 

We explore the glass-ceiling phenomenon among senior bankers at the top of the income distribution. Despite female bankers outperforming, gender gaps persist due to uneven promotion rates. Local senior bankers and the labor market play crucial roles, with men exhibiting assortative matching with offices based on existing gender gaps, perpetuating them as superiors. Women are less mobile and derive fewer benefits from changing employers. Unlike for average employees, family leave laws provide limited assistance to women at the top. However, lawsuits and female leadership contribute to increased promotion rates. Lastly, lower female mobility leads to negative spillovers towards corporate borrowers.

Catering through transparency: Voluntary ESG disclosure by asset managers and fund flows
with Simon Glossner and Mikael Homanen, (2023)
Reject & Resubmit - Management Science

Voluntary Environmental, Social, and Governance (ESG) disclosure by institutional investors enables clients to allocate responsible capital to institutions with better ESG practices. Institutional investors disclose their ESG practices as part of their commitment to the Principles for Responsible Investment (PRI), the world’s largest responsible investment network. After joining the PRI, investors annually file an ESG report, which is assessed and scored by the PRI. Clients allocate more assets toward institutions that receive higher scores on their disclosure, especially when the disclosure is corroborated by third-party ESG fund ratings. Importantly, the disclosure does not appear to be cheap talk since it correlates with more sustainable equity portfolios and more engagements on ESG issues. However, both higher flows and better ESG practices occur only in countries where responsible institutional asset owners have a stronger presence.

Walk the line: Do investors reward firms that exploit regulatory grey areas? (2023) 

I show that certain institutional investors prefer holding firms that exploit more of the available regulatory wiggle room (WR). Exploited WR is captured by relatively aggressive tax planning, financial reporting, and earnings management. Highlighting the importance of trust, dedicated, long-term investors hold firms that exploit 34% of a standard deviation less WR than those held by quasi-indexers. Moreover, after experiencing financial adviser misconduct that breaches their trust, investors significantly reduce the exploited WR of their holdings. This is consistent with investors choosing firms according to their preferences for WR. Additionally, these preferences impact firms by shaping their behavior.

Coverage: Rothschild SRI Chronicles, No. 18.

Work in progress

Do female mutual fund managers work harder?
with Boone Bowles and Richard B. Evans

Do Investors Care about AI Externalities?
with Rex Wang Renjie

The Effects of ESG Rating Coverage
with Tobias Bauckloh, Paula Kirsch, and Maximilian A. Müller