Cauthorn, T., Klein, C., Remme, L., & Zwergel, B. (2023). Portfolio benefits of taxonomy orientated and renewable European electric utilities. Journal of Asset Management, 24(7), 558-571.
This paper investigates carbon and energy mix risk in the equity prices of EU-Taxonomy orientated and renewable European electric utility companies. We calculate carbon intensity and energy mix factors to measure possible carbon and energy mix premia while investigating the performance of portfolios of EU-Taxonomy orientated and renewable European electric utilities. We use a unique dataset to extend the three-factor model presented by Fama and French (1993) and find evidence of a positive renewable energy mix premium for portfolios of EU-Taxonomy orientated firms and firms with a high level of renewable energy in the energy mix. A positive low-carbon premium is also found for these same portfolios. Lastly, based on the three-factor model, an EU-Taxonomy orientated portfolio outperforms both a non-orientated portfolio and a non-reporting portfolio while a renewable energy portfolio outperforms a conventional energy portfolio. Our results are important for regulators, investors and European electric utilities in assessing the impact environmental regulations have on a firm’s cost of capital.
Cauthorn, T., Dumrose, M., Eckert, J., Klein, C., & Zwergel, B. (2023). Rating changes revisited: New evidence on short-term ESG momentum. Finance Research Letters, 54, 103703.
Environmental, social and governance (ESG) ratings are mainstream in sustainable finance. This paper provides important evidence on the effects of ESG rating changes on companies’ stock performance. We contribute to the ESG rating change literature by replicating the calendar-time portfolio analysis for US stocks from Shanaev and Ghimire (2022), which found economically significant results. We find contradictory results, which are robust to the omnipresent rating heterogeneity problem. More precisely, we find that rating changes do not significantly affect stock performance in the short-term. Four methodological mistakes in the original study explain the differences in the results.
Do advisors respond to investors’ preferences? (with Julia Eckert, Anne Kellers, Christian Klein and Bernhard Zwergel)
We send trained mystery shoppers to 414 investment consultations to study households’ preference considerations in product distribution. Our findings show that investment advisors generally recommend products that match stated risk preferences, but only show limited consideration of stated sustainability preferences. We find a high reliance on a product portfolio from a single in-house asset manager decreases the percentage of suitable product recommendations, while a positive advisor attitude towards sustainable investments is associated with a higher percentage of suitable product recommendations. We also find that advisors alter preferences in legal documentation and do so even when monitored.
Roy Sorting: Climate and Status Quo Strategies (with Samuel Drempetic, Andreas G.F. Hoepner, Christian Klein and Adair Morse)
Inspired by Roy (1951), we analyze whether firms competitively sort into transition and status quo technologies, resulting in positive returns (i.e., the best fishers fish, while the best hunters hunt). We apply latent variable techniques on novel data of firm-edits of environmental and workforce fundamentals, focusing on industrial sectors. We find +18-83 basis-point equity price reactions to information that firms competitively sort. However, Roy sorting to transition and status quo opportunities is reduced by 7.7% and 13.6%, respectively, in high net carbon tax geographies, implying value relevance of Roy sorting unless facing net carbon tax rates above 187 euros/ton.
Rochell, J., Cauthorn, T., Höck, A., & Zwergel, B. (2020). Drivers of Socially Responsible Investments Across Europe. Credit and Capital Markets–Kredit und Kapital, 53(4), 493-512.
The European Union wants to foster the sustainable growth of the economy by using the financial markets as an intermediary. Thus, politicians need to know which factors account for differences in socially responsible investments (SRI) between countries to create an efficient framework, which supports SRI across Europe. This study aims to provide important insights about the drivers of SRI markets for politicians as well as academics. To the best of our knowledge, this is the first study that provides quantitative evidence on the framework established by Scholtens/Sievänen (2013) using a comparatively large data sample comprising 13 European countries during a period from 2005 to 2015. Our results can be summarized as follows: Firstly, we show that economic wealth and the size of the pension market of a country influence the size of the SRI market per capita. In particular, it seems that countries need a certain level of wealth and pension market size to start adopting basic sustainability strategies like negative screening. Secondly, we provide evidence that the differences in national SRI evolvement stem from the individual cultural characteristics of a nation. For example, masculinity, as seen by the revenue orientation of a country, prevents the emergence of more advanced SRI strategies, like engagement or integration. However, femininity, which relates to a more societal and environmental orientation, drives the emergence of more advanced SRI strategies. In this context, the recommendation to European policymakers is to opt for a minimum standard for the integration of more advanced SRI strategies, so that non-feminine countries also implement a deep-rooted sustainable investment behavior.
Arnold, J. L., Cauthorn, T., Eckert, J., Klein, C., & Rink, S. (2023). Let’s talk numbers: EU Taxonomy reporting by German companies.
Klein, C., Cauthorn, T., Eckert, J., Kellers, A., Zwergel, B., & Jürgens, I. (2024). Does MiFID II enable private investors to invest sustainably?
Consileon Frankfurt, EB – Sustainable Investment Management (EB-SIM), Universal Investment Group, University of Kassel (2025). Impact Investment Anlegerstudie
