Pricing climate-related risks of energy investments

In, Soh Young; Weyant, John P.; Manav, Berk

doi:10.1016/j.rser.2021.111881

Cited by 23 publications

(6 citation statements)

References 23 publications

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“…Additionally, it examines Aigbedo [2] perspectives on how revenue growth and factors such as business size and industry concentration influence environmental performance and value creation. The impact of cash flow and climate risks on infrastructure projects, as discussed by In et al [3], is analyzed alongside Barko et al [4] research on how investor activism influences ESG ratings. The studies of Chen and Xie [5] and Gil [6], which explore the heterogeneous effects of ESG information disclosure and how environmental and social risks affect financial returns, are also incorporated.…”

Section: Introductionmentioning

confidence: 99%

Drivers of Value Creation and the Effect of ESG Risk Rating on Investor Perceptions through Financial Metrics

Puente De La Vega Caceres

2024

Sustainability

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This study delves deeply into the multifaceted nature of investor value creation, focusing on financial health, growth, profitability, cash flow, and ESG (environmental, social, and governance) risk ratings. The research employs partial least squares structural equation modeling (PLS-SEM) to dissect the interactions among these variables in a sample of 482 S&P 500 firms. Data were obtained from the FINRA database (2023) and Sustainalytics ESG risk ratings (2023). The results indicate that solid financial health enhances investor value creation. While growth fosters profitability, its direct impact on value creation and cash flow appears limited. The study also uncovers that ESG risk ratings negatively moderate the relationship between cash flow and value creation. This finding suggests that higher ESG risks lead to increased operational and compliance costs, which can reduce working capital and operating cash flow. Additionally, although sustainability investments may initially incur higher costs, they generate long-term value in terms of investment cash flow. A high perception of ESG risk can also raise financing costs, negatively impacting financial cash flow. These findings offer significant contributions to both academic theory and practical applications, shedding light on the complex interplay between financial and sustainability indicators in driving value creation for investors.

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Section: Introductionmentioning

confidence: 99%

Drivers of Value Creation and the Effect of ESG Risk Rating on Investor Perceptions through Financial Metrics

Puente De La Vega Caceres

2024

Sustainability

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“…Changes in energy prices can have a relatively large impact on a country's political economy. China is rich in energy, so it is necessary to make a good risk assessment of energy investments [13][14][15][16]. The Copula model, proposed in the 20th century, is well suited for the pricing of financial investments and the comprehensive measurement of investment risk, in which the investment risk is assessed by the magnitude of the VaR (Value at Risk) value [17][18][19][20].…”

Section: Introductionmentioning

confidence: 99%

Risk measurement of China's foreign energy investment portfolio based on Copula-VaR

Liu,

Yang,

Leng

2023

3C TIC

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Energy is an important resource for the development of the country, and investment in energy can promote the development of the national economy. Many scholars are currently using Copula models to predict the risk of energy investments to improve investment efficiency. However, most studies are not systematic enough and focus on countries outside of China. We use the Copula-VaR method with the Archimedean Copula function and the Copula-VaR method with the introduction of tail correlation to calculate the energy futures risk. The risk of six different percentages of China's foreign energy portfolio for three futures on natural gas, oil, and coal between January 3, 2015 and December 30, 2021 is calculated and compared to the traditional method. The results show that the risk values calculated using the improved Copula-VaR model are 0.00836, 0.00922, 0.00217, 0.00635, 0.00612 and 0.00827 higher under the 0.98 confidence level than under the 0.96 confidence level. It has a high accuracy compared with the traditional method. The research in this paper provides an idea for the design of energy investment programs in China

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“…With green innovation and invei stor sei ntimei nt in sustainability rei porting, it is hopei d that it can improvei thei company's imagei (Cuomo eit al., 2020). Green innovation and green governance can help companies build a positive image in the eyes of investors so as to obtain industrial policy and the dynamic interaction between legal reform and its impact Climatei -rei latei d risks can influei ncei invei stors' pei rcei ptions of company pei rformancei and its impact on sharei pricei s (In et al, 2022). Howei vei r, not much rei sei arch has ei xaminei d thei rei lationship bei twei ei n climatei -rei latei d risks and Invei stor sei ntimei nt.…”

Section: Introductionmentioning

confidence: 99%

The Mediating Role of Green Innovation and Investor Sentiment in Climate Related Risks on Sustainability Reporting: Evidence from the Indonesian Context

Siregar,

Ismail,

Taqi

et al. 2023

J. of Law and Sust. Develop.

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Objective: The purpose of this research is that companies must consider the impact that occurs on transition risks or physical risks and then need to know opportunities in risk mitigation efforts, so that it is hoped that there will be a need for opportunities from risks related to climate change. impact on how investors react and the innovations that will be created. Methodology: Sample criteria are financial sector companies and companies that have completed sustainability reporting. This research collected 430 data from 740 companies that met the criteria. Data was collected from the 2021-2022 sustainability report. Results: The results of this analysis provide important insights into the role of green innovation and Investor Sentiment in the relationship between Climate Change Related Risks and sustainability reporting. Conclusion: These conclusions can help companies understand the factors that contribute to the relationship between Climate-related risks and sustainability reporting, as well as the potential impact of green innovation and investor sentiment. The implementation of sustainability reporting is expected to encourage companies to communicate sustainable practices, environmental performance, social impacts and corporate governance more transparently to stakeholders. This strategy will create a higher level of transparency in the company's operations and impact. There are several important implications for companies and practitioners when designing business strategies that focus on sustainability.

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Pricing climate-related risks of energy investments

Cited by 23 publications

References 23 publications

Drivers of Value Creation and the Effect of ESG Risk Rating on Investor Perceptions through Financial Metrics

Drivers of Value Creation and the Effect of ESG Risk Rating on Investor Perceptions through Financial Metrics

Risk measurement of China's foreign energy investment portfolio based on Copula-VaR

The Mediating Role of Green Innovation and Investor Sentiment in Climate Related Risks on Sustainability Reporting: Evidence from the Indonesian Context

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