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- PublicationHandbook of Climate Transition Benchmarks, Paris-Aligned Benchmark and Benchmarks’ ESG DisclosureThis Handbook is a response to frequently asked questions, which the TEG benchmarks subgroup members encountered when presenting the EU Climate Transition Benchmark (EU CTB), the EU Paris Aligned Benchmark (EU PAB), and the benchmarks’ disclosure guidance on environmental, social or governance (ESG) issues.10 The Handbook commences by (i) clarifying the 7% Reduction Trajectory and (ii) matters of terminology. It continues by explaining (iii) the anti-greenwashing measures, (iv) data sources and estimation techniques as well as (v) related classification. Finally, (vi) ESG disclosure matters are discussed and (vii) further aspects are highlighted. Detailed appendices provide computation and sector mapping guidance.
- PublicationAnalyzing the Performance of ESG Factors in a Mixed Asset setting(CFA Institute Research Foundation, 2018-10-02)Analyzing ESG factor impacts is commonplace for equity portfolios but much less common in fixed income. This article describes the results of research done using financial data science analysis, which integrates environmental, social, and governance (ESG) issues into a mixed asset universe in which equity and fixed-income securities are examined in one analytical setting. I differentiate “mixed assets” from “multi-asset,” because the latter builds asset class portfolios and then integrates them during the asset allocation process, whereas the former analyzes securities or various asset classes in one (mixed) analytical setting. In other words, multi-asset approaches usually involve at least three steps: a security selection process in the first asset class, another security selection process in the second asset class, and an asset allocation process between asset classes. Mixed assets, in contrast, combine security selection and asset allocation in one step, which implies that they require more statistical expertise to design but are more resource efficient to implement once developed.
- PublicationTEG Final Report on Climate Benchmarks and Benchmarks’ ESG DisclosureThe agreement reached by the European co-legislators on the regulation amending Regulation (EU) 2016/2011, as part of the Commission's Action Plan on Financing Sustainable Growth, resulted in two essential measures regarding investment benchmarks. The first is the creation of two types of climate benchmarks, i.e. the 'EU Climate Transition Benchmark (EU CTB) and EU Paris-aligned Benchmark (EU PAB)’. The second measure is the definition of Environmental, Social and Governance (ESG) disclosure requirements that shall be applicable to all investment benchmarks. The main objectives of the new climate benchmarks are to (i) allow a significant level of comparability of climate benchmarks methodologies while leaving benchmarks’ administrators with an important level of flexibility in designing their methodologies; (ii) provide investors with an appropriate tool that is aligned with their investment strategy; (iii) increase transparency on investors’ impact, specifically with regard to climate change and the energy transition; and (iv) disincentivize greenwashing.
- PublicationCompetition and Innovation in the Financial Sector: Evidence from the Rise of FinTech Start-upsWe provide new evidence on the effects of competition on incumbents' innovative behavior by examining the rise of FinTech start-ups over the period 2000-2016. We employ machine learning techniques to classify a large global sample of patent applications into five FinTech categories. We exploit the variation in the share of FinTech patent applications by non-financial startups to incumbent financial firms to measure competitive pressures from outside the financial industry. We show that higher competitive pressures from non-financial start-ups increases the probability that financial incumbents innovate. Moreover, competition from start-ups results in a higher number of FinTech patent applications by financial incumbents as compared to non-financial firms, especially when the innovations of FinTech start-ups are more important, as proxied by future patent citations count.