A new research project conducted by Professor Laurent Frésard of USI Faculty of Economics has been approved by the Swiss National Science Foundation (SNSF) . The study "Sustainable Investing, Information, and Real Effects" focuses on sustainable investments, i.e., investments that take into account financial objectives and environmental, social, and governance effects. Sustainable investing is becoming increasingly popular and is therefore considered an important tool for promoting the transition to a more sustainable economy. The involvement of investors interested not only in financial returns would lead companies to pursue environmental and social goals as well as economic ones.
Professor Frésard, how important are sustainable investments?
One of the project’s goals is to quantify the effect sustainable investments have on practical business decisions. A significant amount of money has shifted to this type of investment, and it is still being determined whether and how this new corporate involvement affects the decisions made by companies.
The market is considered a place where information is exchanged and is used to analyse the effect of sustainable investments. Can you explain more about this approach?
One of the central roles of financial markets is to aggregate information from the trading of different investors. For this reason, asset prices contain information about the future (e.g., firms’ future cash flows). Many stakeholders rely on this information to make decisions. Other investors, central bankers, policymakers, and businesses use the information gathered from asset markets to make decisions.
What are the goals of the project?
The project wants to analyse if and how the recent rise of sustainable investments has changed the information content of stock prices. It also, as mentioned, seeks to understand whether these changes have actual consequences in the company’s decision-making process.