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The purpose of this paper is to investigate the functionality and effectiveness of the Carbon Risk Real Estate Monitor (CRREM tool). The aim of the project, supported by the European Union’s Horizon 2020 research and innovation program, was to develop a broadly accepted tool that provides investors and other stakeholders with a sound basis for the assessment of stranding risks.

The tool calculates the annual carbon emissions (baseline emissions) of a given asset or portfolio and assesses the stranding risks, by making use of science-based decarbonisation pathways. To account for ongoing climate change, the tool considers the effects of grid decarbonisation, as well as the development of heating and cooling-degree days.

The paper provides property-specific carbon emission pathways, as well as valuable insight into state-of-the-art carbon risk assessment and management measures and thereby paves the way towards a low-carbon building stock. Further selected risk indicators at the asset (e.g. costs of greenhouse gas emissions) and aggregated levels (e.g. Carbon Value at Risk) are considered.

The approach described in this paper can serve as a model for the realisation of an enhanced tool with respect to other countries, leading to a globally applicable instrument for assessing stranding risks in the commercial real estate sector.

The real estate industry is endangered by the downside risks of climate change, leading to potential monetary losses and write-downs. Accordingly, this approach enables stakeholders to assess the exposure of their assets to stranding risks, based on energy and emission data.

The CRREM tool reduces investor uncertainty and offers a viable basis for investment decision-making with regard to stranding risks and retrofit planning.

The approach pioneers a way to provide investors with a profound stranding risk assessment based on science-based decarbonisation pathways.

This paper aims to examine the impact of executive compensation on firm risk-taking behavior, measured by the volatility of stock price returns. Specifically, this analysis explores three hypotheses. First, the impact of short-term and long-term executive compensation packages on firm risk is analyzed to assess whether the packages incentivize risk-taking behavior. Second, the authors test how these compensation and risk relationships were impacted by the financial crisis. Third, they expand the analysis to see if the relationship varies across different industries.

The econometric approach used to examine the executive compensation and firm risk relationship takes the form of two different panel model specifications. The first model is a pooled model using the panel data of executive compensation, the firm-level control variables and volatility of stock market returns. The second model highlights the differences in the relationship between executive compensation and riskiness of firm behavior across industries.

The authors find a significant and robust relationship, showing that during the post-financial crisis period firms tended to use long-term compensation shares to reduce firm risk. They also find that the relationship between various compensation components and firm risk varies across industries. Specifically, the bonus share of compensation negatively impacted firm risk in the financial services industry, while it positively impacted risk in the transportation, communication, gas, electric and services sectors. Additionally, long-term compensation share exhibits an inverse relationship with firm risk in the financial services, manufacturing and trade industries.

The conclusions of this paper suggest that there is indeed a relationship between executive compensation and firm risk across industries. There was a notable change in the relationship however between firm risk and long-term compensation following the financial crisis, where firms used long-term compensation to reduce firm riskiness. In other words, the financial crisis changed the nature of this relationship across S&P 1500 firms. The last key finding is that there exist differences in risk and compensation relationships across industries, and these differences across industries are highlighted across both bonus share and long-term incentive share variables. This is the first study to explore this relationship across industries.

This paper aims to provide investors’ views on financing costs and barriers to entry into the electricity generation sector, with a focus on investors’ views on potential impacts on cost of capital from adopting nodal pricing and financial transmission rights (FTRs). The implications for policymakers and policy reforms are also discussed in detail.

Survey-based data collection of investors and developers in electricity generation, consisting of multiple choice questions from a closed list of discrete choices, binary-choice questions, and questions with free-text/open-ended answers.

Across survey respondents, weighted-average cost of capital (WACCs) were broadly unchanged over 2019, with increases for undiversified/non-integrated participants offset by decreases for horizontally integrated participants. Cost of equity has risen, whereas cost of debt has fallen. Nodal pricing-cum-FTRs were estimated to increase WACCs by 150–200 basis points p.a. (15–20%), reflecting concerns around the firmness of FTRs and ability to automatically access intraregional settlement residues.

These findings have energy policy implications, namely, the need to consider the interaction between economic theory and real-world financing models when designing and implementing fundamental energy sector reforms.

The need to consider implementation and transitional issues (e.g. grandfathering of existing rights, focusing on reducing the largest barriers to entry) is associated with implementing nodal pricing.

Unique set of survey questions and insights that have not previously been addressed in an Australian context; what-if analysis not previously done in an Australian context

The purpose of this study is to examine whether chief executive officer (CEOs) are paid for the systematic and/or unsystematic risks and whether there is any optimum risk premium level in the executive pay.

Firm and year fixed effect panel data regression was used to estimate the relationship between total CEO compensation and systematic (market) and unsystematic (firm) risks.

There is no nexus between CEO pay and unsystematic (diversifiable) risk; however, the association between CEO compensation and systematic (undiversifiable) risk is positively significant in line with agency theory. Moreover, it is revealed that this positive relationship has an optimum point (curvilinear).

This paper contributes to the controversial argument in the literature by investigating the situation in the Swiss market. Switzerland is an exemplary country because of its direct democracy (consensus) structure for executive pay. This study is limited by the fact that only total CEO compensation is analyzed.

As a practical implication, it is shown that after the optimal point, the higher compensation does not motivate the CEOs to take higher risks and does not provide the organizations with any additional benefit.

The finding of this study supports agency theory’s risk premium assumption and provides additional evidence to the contradictory results in the literature with a new country setting that has paramount importance in executive compensation phenomena. It is a comparative finding with prior literature also outlines the future research area in the risk and compensation literature.

This research investigated Australian property valuers' identification and consideration of physical climate change risks in valuation practice.

Thirty Australian valuer members of the Australian Property Institute from a variety of specialisations were interviewed. The semi-structured interviews explored climate change risks and the extent of risk investigation and consideration in valuation practice. The analysis utilised the Moser and Luers (2008) climate risk preparedness framework as a lens to evaluate current valuation practice in Australia.

The analysis reflects that while physical risks are easily identified and engaged with by valuers, correspondingly, there is a lack of understanding of and engagement with, climate change risks. This supports the need for better information sources and guidance to inform valuers of climate change risks and the development of specific mechanisms for the consideration of such risks to be included in valuation processes, practices and reports.

The research was limited by its sample size and qualitative approach. Therefore, the research is not a representative opinion of the Australian profession; however, the analysis provides the perspective of a range of valuers from across Australia with different valuation specialisations.

This research has established that valuers have the potential to be prepared to address climate change in their professional capacity, as described by Moser and Luers (2008). However, they are constrained by information communication, access and detail and subsequent market awareness of information on climate change risk exposure on properties. There is a need for further support, guidance, information and tools, as well as awareness-raising, to enable valuers to accurately identify and reflect all risks affecting a property in the process of valuation.

This research provides the first investigation into the consideration of climate change in valuation practice. Property stakeholders—owners, investors, financiers and occupiers—are escalating their climate change risk analysis and reporting for property portfolios and organisations. This research suggests that valuers also need to be aware of the changing dynamics of market reporting and decision-making related to climate change risks to ensure appropriate reflection in valuation practice.

The risk management of transitory risk for real assets has gained large interest especially in the past 10 years among researchers as well as market participants. In addition, the recent regulatory tightening in the EU urges financial market participants to disclose sustainability-related financial risk, without providing any methodological guidance. The purpose of the study is the identification and explanation of the methodological limitations in the field of transitory risk modeling and the logic step to advance toward a stochastic approach.

The study reviews the literature on deterministic risk modeling of transitory risk exposure for real estate highlighting the heavy methodological limitations. Based on this, the necessity to model transitory risk stochastically is described. In order to illustrate the stochastic risk modeling of transitory risk, the empirical study uses a Markov Switching Generalized Autoregressive Conditional Heteroskedasticity model to quantify the carbon price risk exposure of real assets.

The authors find academic as well as regulatory urgency to model sustainability risk stochastically from a conceptual point of view. The own empirical results show the superior goodness of fit of the multiregime Markov Switching Generalized Autoregressive Conditional Heteroskedasticity in comparison to their single regime peer. Lastly, carbon price risk simulations show the increasing exposure across time.

The practical implication is the motivation of the stochastic modeling of sustainability-related risk factors for real assets to improve the quality of applied risk management for institutional investment managers.

The present study extends the existing literature on sustainability risk for real estate essentially by connecting the transitory risk management of real estate and stochastic risk modeling.

Investigates the effects of technology standards on the changing nature of interdependence between competitors in a global industry. Drawing on the theory of organizational ecology, the effects of technology standards on the type of interplay among competitors are investigated as the underlying process affecting new firm entry. Empirical data from the global personal computer industry provide preliminary evidence that positive interdependence, or mutualism, characterizes the nature of competition before the establishment of a technology standard. Negative interdependence, or full competition, is found to prevail after a technology standard emerged. These findings suggest that the evolution of industries where compatibility and technological standards are critical can be analyzed in two different phases: the technological legitimation phase; and the market competition phase. A discussion of the underlying interdependencies in the two phases and their implications is also provided.

Sustainable investments (SI) represent a promising class of investments, combining financial returns with mitigating environmental challenges, achieving SDG goals and creating a positive business impact. An enhanced global focus on climate change developments in the backdrop of COP26 and COP27, raised the need for comprehensive literature mapping, to understand the emerging themes and future research arenas in this field.

The authors apply a quali–quantitative approach of bibliometric methods coupled with content analysis, to review 1,022 articles obtained from the Web of Science (WoS) database for 1991–2023.

The results identify the leading authors and their collaborations, impactful journals and pioneering articles in sustainable investment literature. The authors also indicate seven major themes of SI to be financial performance; fiduciary duty; CSR; construction of ESG-based portfolios; sustainability assessment tools and mechanisms; investor behavior; and impact investing. Further, content analysis of literature from 2020 to 2023 highlights emerging research issues to be SDG financing via green bonds and social impact bonds; investor impact creation via shareholder engagement and field building strategies; and governance related determinants of firm-level sustainable investments. Finally, the authors discuss the research gaps across these themes and identify future research questions.

This paper crystallizes research themes in sustainable investment literature using a vast coverage of globally conducted studies published in reputed journals till date. The findings of this study coupled with future research questions provide a well-grounded foundation for new researchers to further explore the emerging dimensions of this field.

This study aims to provide empirical evidence on the relationship between formal institutions and stock price crash risk from a global perspective.

This paper uses data of 35,468 firms globally over the years 1987–2019 and address the endogeneity issue by employing the Mundlak random effects estimator.

The authors find a significant negative impact of institution quality on stock price crash risk (i.e. better institutions reduce crash risk), after controlling for common determinants of crash risk such as leverage, return on asset, firm size, investment, etc. as well as macro factors such as GDP growth. This effect is robust to different measures of crash risk and sub-indicators of institutions quality. In addition, the authors also find this effect to be universally present in economies characterized by different levels of income.

To the best of the authors' knowledge, there's no known study that explores the potential causal relationship between institution quality and stock price crash risk. Therefore, the research topic in this study is original and can contribute significantly to the existing literature.