Risk modelling of ESG (environmental, social, and governance), healthcare, and financial sectors

Climate change effects and their implications for the financial markets: Evidence from the United Kingdom

This study aims to examine how the climate affects the behaviour of the stock market. To achieve this, we have drawn on daily data from Jan 2005 to Jan 31, 2023 and several environmental factors (e.g., temperature, humidity, cloud cover and visibility) to account for extreme weather conditions using the 21-day moving average and its standard deviation. The empirical analysis has revealed three key findings regarding the impact of weather on the stock market's behaviour. First, various forms of extreme weather conditions consistently lead to influence stock behaviour. Second, results provide valuable insights into market behaviour and help investors to make more informed investment decisions. Third, the weather conditions have new information about the climate risk and investors should react to it swiftly in light of our findings. The saliency theory can help reconcile the theoretical conflicts between the real options and risk-shifting theories when it comes to investing in uncertain and extreme climate conditions.

ESG practices mitigating geopolitical risks: Implications for sustainable environmental management

As climate change and geopolitical conflicts intensify, understanding how geopolitical risks affect companies prioritizing Environmental, Social, and Governance (ESG) practices is crucial. This study investigates the dynamic relationship between global geopolitical risks and the performance of Environmental, Social, and Governance (ESG) and non-ESG companies, particularly their influence on green markets. Utilizing a robust methodological framework, including the dynamic time-varying parameters vector autoregression (TVP-VAR) model, and causal impact modeling, we analyze daily financial data from 2021 to 2024. The results reveal a substantial negative impact of geopolitical risks on non-ESG companies, contrasting with the resilience of ESG-committed counterparts. This suggests that ESG-committed companies demonstrate better resilience against geopolitical risks, emphasizing the protective role of ESG practices amid uncertainties. Additionally, the inclusion of ESG companies in green markets diminishes the severity of the negative impact of geopolitical risks, underlining the transformative role of ESG commitment in shaping investor behavior towards sustainable investments. Our findings offer insights for policymakers and investors navigating geopolitical risks and ESG performance, with a focus on environmental management, and provide guidance for effective risk mitigation and investment policies to enhance environmental sustainability.

Financial sanctions and environmental, social, and governance (ESG) performance: A comparative study of ownership responses in the Chinese context

This study conducts a comprehensive examination of the relationships between strategic investors, financial sanctions, and ESG performance in non-financial Chinese firms from 2011 to 2022. Using data from ASSET4 and the Global Sanction Database (GSDB), the study reveals that government and foreign investors significantly promote ESG performance, while family investors have a negative impact. Moreover, the findings show distinct responses among government, foreign, and family investors when confronted with financial sanctions. Specifically, both foreign and family investors demonstrate an increased engagement in CSR activities during these periods. Conversely, government investors are linked to a decrease in ESG performance amidst financial sanctions. The results make significant contributions to the fields of ownership literature, agency theory, and sanctions literature. Additionally, they provide practical implications for diverse stakeholders, including investors, managers, and policymakers.