Financial Sustainability and Climate Change
The need to strengthen financial markets, make them more resilient to challenges resulting from climate change and able to support green transformation requires in-depth research. Thus, we study the impact of sustainable investing strategies (including their performance and risk) and effectiveness of carbon pricing mechanisms (e.g., carbon taxes and cap-and-trade systems) in reducing carbon emissions and their implications for financial markets, the role of standardized climate-related financial disclosures (e.g., the Task Force on Climate-related Financial Disclosures, Paris Agreement), financing challenges and opportunities in transitioning to renewable energy sources and a low-carbon economy, as well as how sustainable business practices and models impact a firm’s financial performance and valuation, and how these translate onto long-term shareholder value.
Examples of our engagement and contribution to practice and policy/regulatory debates
Ania Zalewska’s report Adaptive Regulation, market risk and cost of capital has contributed to the National Infrastructure Commission recommendation document Strategic Investment and Public Confidence. Her expert opinion was used by the UK Civil Aviation Authority in setting regulatory requirements for NATS (En Route) for the 2020-2024 regulatory period. The Competition & Markets Authority used the same report by Zalewska in the successful appeal of four water companies (Anglian Water Services Limited, Bristol Water plc, Northumbrian Water Limited and Yorkshire Water Services Limited) against their regulator (OFWAT).
Mat Hughes’ examination into investment decisions under uncertainty, explaining corporate venture capital as a real option, helps investors and corporate managers understand the factors behind follow-on financing decisions. His work on green growth and economic growth helps debunk arguments that green growth comes at a cost to economic growth when sustainable technology transfer and sustainable innovation promote green growth, which in turn positively impacts economic growth.
Ruoying Zhou is currently examining whether research and development (R&D) can address the sustainability challenge.