Monash signs international research agreement to investigate impact of ‘sustainable finance’ on markets

Sustainable Finance

Monash University has signed a major research agreement with international environmental, social and governance (ESG) group Vigeo Eiris in an effort to better understand the intricacies of ESG factors on financial markets.

France-based Viego Eiris translates company ESG efforts into ratings for investors and other stakeholders.

Under the three-year research agreement, Professor Gregoire Loeper from the Monash School of Mathematics will have access to Vigeo Eiris data to investigate the impact of ESG metrics on financial risk management. He is particularly interested in how the transition to a low carbon economy will affect financial markets, which he calls the ‘decarbonisation risk factor’.

Professor Loeper is the Director of the Monash Centre for Quantitative Finance and Investment Strategies, and the  Director of the University’s Master of Financial Mathematics program.

The research project into the ‘decarbonisation risk factor’ also makes use of other existing collaborations with ClimateWorks Australia, and the French bank BNP Paribas.

“In recent years we have seen the emergence of numerous ESG/SRI indices, where portfolio exposure is tilted towards stocks that perform well according to ESG metrics,” said Professor Loeper.

“Moreover, the transition of the global economy to a less carbon intensive energy production  will also generate large fluxes of investment across macro-economic sectors, that will impact the cross section of stock returns,” he said.

“We expect to see a price impact on these capital reallocations and our research will investigate the existence of risk factors associated with this price impact.”

The research agreement establishes a partnership between Monash and Vigeo Eiris to enable them to contribute to scientific research in themes of shared interest. It is expected that the research will lead to academic publications in finance journals, and that it will also have a strong impact in the funds managers community.

The research group is led by Professor Loeper and Dr Thanh Huynh, a Lecturer in the Department of Banking and Finance at Monash.

Vigeo Eiris helps by making data available from the ratings of companies it has carried out, regarding different geographical zones, sectors, investments universes or specific topics agreed upon by both research parties.

“This agreement meets our commitment to support scientific research by providing full access to our exclusive ESG database. We value the innovative perspectives that Professor Loeper and his team are getting ready to explore”, said Fouad Benseddik, Head of Methods and Institutional Affairs at Vigeo Eiris.

ClimateWorks Australia will contribute by making available a framework for assessing companies' climate transition risks and opportunities and by providing climate scenario data.

“Scenario analysis can be used to test the resilience of a company’s business plan” said Anna Skarbek, Chief Executive Officer of ClimateWorks Australia.

“I am very excited by this research because it will bring climate scenarios into financial market analysis and help build understanding of the financial risks and opportunities associated with the transition to a low emissions future” she said.

BNP Paribas, already a partner of the Centre for Quantitative Finance and Investment Strategies is also following this research closely:

“We are excited about this new field of research,” said Etienne Grisey, Head of Equity Derivatives Structuring, APAC, Global Markets, BNP Paribas.

“Bringing quantitative techniques to sustainable finance will enable the development of better investment solutions.

On the investment side, BNP Paribas has been helping many investors in the process of integrating ESG or SDG prisms in their portfolios.

There is a pressing need to build dynamic scenarios in order to account for climate change and energy transition related risks. That is the primary objective of this endeavor.”

For further information, or to arrange an interview with Professor Gregoire Loeper, please contact:

Silvia Dropulich Marketing, Media and Communications Manager, Science

T: +61 3 9902 4513 M: +61 (0) 0435138743