Rómulo Alves

As freshwater levels decline and economic expansion and population growth place increasing pressure on global freshwater resources, many regions face growing water stress, exposing firms to potential operational disruptions. However, do investors care? This study examines the relation between global stock returns and corporate water use and stress from 2013 to 2024. We construct a novel monthly firm-level water stress measure by combining corporate water use with granular water supply data from NASA satellites. We find a statistically significant positive relation between corporate water use and global stock returns, and show that investors perceive water use as a systematic risk, demanding an annual premium of 2.15% for investing in firms with high water use. Also, indirect and total water use have a higher water use premium than direct water use. These results seem to suggest that investors particularly value water use within supply chains. Furthermore, we provide initial evidence of a potential water stress risk premium for firms in high-water-use industries.

We provide the most comprehensive analysis to date of the relation between ESG ratings and stock returns, using 16,000+ stocks in 48 countries and seven different ESG rating providers. We find very little evidence that ESG ratings are related to global stock returns between 2001 and 2020. This finding obtains across different regions, time periods, ESG (sub)ratings, ESG momentum, ESG downgrades and upgrades, and best-in-class strategies. We further find little empirical support for prominent hypotheses from the literature on the role of ESG uncertainty and of country-level ESG social norms, ESG disclosure standards, and ESG regulations in shaping the relation between ESG and global stock returns. Overall, our results suggest that ESG investing did not systematically affect investment performance during the past two decades.

ICPM Research Award 2024, Honorable Mention

Mentioned in Financial Times

Industrial metals futures returns predict revisions in producers' expectations about future economic conditions as well as future production growth in many countries. This effect is stronger for countries more exposed to the global economy, is not distorted by commodity supply shocks, continues to hold after commodity markets became financialized, and is reflected in stock markets worldwide. Energy and agriculture futures returns also contain relevant information, but mainly for those countries which depend on the export or import of these commodities. Therefore, only industrial metals act as barometers of the strength of the global economy and the economic magnitude of this effect is heterogeneous across countries.

Best Paper Award in Financial Derivatives at the 27th Finance Forum (Madrid, 2019)

I show that corporate social responsibility (CSR) spreads across firms through directors' social networks. This phenomenon is driven by firms for which CSR is more likely to create value, those strategically positioned in the social network to acquire valuable information, and firms where the incentives of managers and shareholders are aligned. The effects are weaker in firms with more concentrated institutional ownership, where investors can influence CSR directly. Overall, my results suggest that boards influence CSR by leveraging their social networks as an informational resource. I find no evidence supporting alternative explanations such as social norms or agency problems.

Best Paper Award at Erasmus PhD Seminar Series (Rotterdam, 2020)

Rotterdam School of Management, Erasmus University Rotterdam, Netherlands

PhD in Finance

London Business School, United Kingdom

Visiting Scholar

Tinbergen Institute, Netherlands

MPhil in Economics

Rotterdam School of Management, Erasmus University Rotterdam, Netherlands

MSc in Finance and Investments

Nova School of Business and Economics, Portugal

BSc in Management