Important Links:
CV (March 2026): link
Google Scholar: https://scholar.google.com/citations?user=euJHoYcAAAAJ&hl=en
SSRN: https://ssrn.com/author=591910
Working Papers
Hale, G., Halling, M., Paulus, N., Pham, Han, Climate Fairness and Growth: Allocating the Remaining Carbon Budget, March 2026
Abstract: Limiting global warming to 1.5◦C requires that cumulative carbon dioxide emissions remain within a finite remaining carbon budget. How this budget is allocated across countries raises questions of fairness and development. This paper evaluates whether equity-based carbon allocations are compatible with sustained economic growth in emerging and developing economies. We compute country-level fair shares of the remaining carbon budget under the equal-cumulative-per-capita (ECPC) principle. Using data for 162 countries between 1950 and 2023, we then estimate the historical relationship between income and per-capita CO2 emissions across income groups and use these elasticities to simulate cumulative emissions until 2050. Our results show that ECPC implies strongly negative remaining carbon budgets for most advanced economies, while lower-income countries retain positive but constrained allocations. Under historically observed income–emissions elasticities, many developing countries would exceed their fair shares when converging toward advanced-economy income levels. At the aggregate level, unused allocations offset only about 17% of the combined carbon budget shortfall implied by countries exceeding their allocation and the negative fair shares arising from historical responsibilities. In a scenario in which we assume that the technology of advanced economies is transferred to all countries, which would lower emission intensities, we find that some countries such as India, Egypt or Indonesia would now be able to economically develop within their fair budgets. At the aggregate level, however, technology transfer would only increase the carbon budget coverage to approximately 38% and would not fully eliminate the gap. [Link to the paper coming soon]
Halling, M., Sinnig, J.. Zetzsche, D. A., Financial Inclusion: The ‘Fitness Program’ for Financial Systems, January 2026
Abstract: Drawing on data from 162 economies for the period of 2011 to 2024, which report data to the International Monetary Fund Financial Soundness Indicators and are covered by the latest World Bank Global FinDex as of July 2025, we study the impact of financial inclusion on financial systems. This dataset encompasses the largest number of countries considered in cross-country studies on financial inclusion, paired with a long time series of 15 years (2010-2024). Our key result is that an increase in financial inclusion is associated with both an increase in Total Gross Loans and an even more pronounced increase in Non-Performing Loans, i.e., financial inclusion increases credit risk. However, the increase in Non-Performing Loans is offset by appropriate provisions for loan losses and is also reflected in (a) increased capital measures, such as Regulatory Capital, Total Regulatory Capital, and Tier 1 Capital and (b) increased liquid assets relative to short-term liabilities. Thus, financial institutions respond to the rise in Non-Performing Loans on both the capital and liquidity sides and the overall effect of financial inclusion on financial stability is neutral. We complement this finding with several other empirical findings. For example, we document a significant decline in staff costs relative to Noninterest Expenses when financial inclusion increases, indicating larger, more digital, and thus more advanced financial institutions in the context of enhanced inclusion. As a result, financial inclusion drives the development of stronger, more profitable, and more capable financial systems. In this way, financial inclusion serves as a ‘fitness program’ for the financial system. [download]
Dangl, T., Halling, M., Salbrechter, S., The Price of Physical Climate Risk Estimated from Public News via Guided Topic Modeling, October 2025.
Abstract: We develop a novel guided topic-modeling algorithm using vector word embeddings from a self-trained Word2vec model, GTM_w2v, which is fast and flexible, while allowing for a user-controlled topic specification. It follows an unsupervised learning approach and, thus, does not require any labeled training dataset. We use GTM_w2v to estimate firm-specific exposures to physical climate risk from public news covering a 25-year period and determine these exposures in two different ways: first, directly from the news for the smaller sample of firms covered in the news, and second, from a beta-based approach relying on a self-constructed climate-risk factor for the universe of US stocks. Exploiting the comprehensive news history and the large cross-section of US stocks, we show the plausibility of the proposed climate-risk related measures and uncover a positive and statistically significant risk premium associated with physical climate risk, in contrast to existing studies using alternative empirical methodologies. This risk premium is economically meaningful, comparable to risk premium estimates of traditional risk factors and robust to traditional risk factors, to sector and industry fixed effects, to different estimation strategies and sample periods. Notably, the magnitude of this premium has increased substantially in recent years, possibly due to more frequent extreme weather events and a rise in investor awareness. [download]
Dangl, T., Halling, M., Yu, J., Zechner, J., Stochastic Social Preferences and Corporate Investment Decisions, New version coming soon.
Abstract: This paper develops a dynamic general equilibrium model with stochastic social preferences and endogenous corporate investment decisions. We find that firms’ investment decisions largely undo the effects of shifts in preferences on stock prices and risk premia. Only when most firms have already switched to a green technology do further preference changes have stronger effects on stock prices. Stochastic social preferences delay the move to a greener economy, especially when preference shocks correlate positively with aggregate cash flows. Risk aversion initially helps the transition, but later slows it down. Correlations between stock returns of firms in brown and green sectors increase (decrease) following an increase (decrease) in green investors’ social preferences. Small changes in social preferences can have large supply effects even when they only have negligible effects on the cost of capital wedge between green and brown firms. [download]
Halling, M., Yu, J., Zechner, J., The Dynamics of Corporate Debt Structure, May 2022.
Abstract: This paper shows that the average U.S. listed firm increases leverage and implements a more diversified debt structure during recessions by increasing the share of private debt. In the cross-section, borrowing strategies diverge: approximately 40% of firms decrease leverage and increase debt concentration by reducing the proportion of public debt, while the remaining 60% increase leverage and decrease debt concentration by augmenting public debt with private debt. Characteristics of these two samples of firms differ sharply. A model of corporate investment and financing choices, where private debt is more expensive but offers flexibility to restructure, can rationalize these dynamics. [download]
Halling, M., Yu, J., Zechner, J., Primary Corporate Bond Markets and Social Responsibility, December 2021.
Abstract: We document a robust, negative relation between corporate environmental and social (ES) performance and corporate bond issue spreads, even after controlling for ratings and other firm characteristics. Consistent with our theoretical model, this relation is due to bonds rated BBB or below, with spread-reductions of up to 98 basis points. These effects are predominantly related to product and employee scores. We do not find time trends for the ES-spread relation but document strong supply effects, as the share of issuers with good ES ratings has increased substantially. Finally, we provide evidence for a negative ES-credit-risk link. [download]
Contact Information:
Chair in Sustainable Finance and Professor in Finance
Department of Finance
Campus Kirchberg, Université du Luxembourg
6, rue Richard Coudenhove-Kalergi
L-1359 Luxembourg
Email: michael.halling@uni.lu