Rómulo Alves

Among commodity futures sectors, only industrial metals returns predict future industrial production growth and revisions in producers’ expectations about future economic conditions across a wide range of countries. This predictive power is stronger in countries more exposed to the global economy, is driven by demand shocks, persists after controlling for trade dependence, continues to hold after the financialization of commodity markets, and is reflected in international stock returns. In contrast, energy and agriculture futures also contain relevant information, but mainly for countries that depend on these commodities through trade. Our findings provide global evidence in support of the informational role of commodity markets and identify industrial metals as a reliable barometer of future global economic activity.

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

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

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 analyze the information content of secondary-party opinion (SPO) ambition assessments in the sustainability-linked bond (SLB) market. Issuers of highly ambitious SLBs exhibit larger subsequent reductions in emissions intensity, are more likely to miss sustainability targets, and earn higher announcement returns around the SPO disclosure date. In contrast, issuers of very low ambition SLBs experience negative returns and largely self-select out of the SLB market. These findings suggest SPO ambition assessments provide a credible signal of firms’ commitments to sustainability. However, ambition does not predict reductions in absolute emissions, does not influence SLB pricing, and even among highly ambitious SLBs, announcement returns are largely insensitive to issuers’ emissions levels and whether targets are science-based, pointing to a potential disconnect between the SLB market and societal decarbonization objectives.

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