Sustainable Finance, Impact and Governance

Behavioral green finance delves into the psychological factors that shape decision-making in climate financing and provides insight into the various aspects of human behaviour in the context of pro-environmental financial decisions.

• Professor of Finance Hong Zhang is examining the impact of green awareness in shaping investment decisions and investor welfare through the research project "The Surprising Green Performance of Retail Investors: A New (Behavioural Channel)".

Fiscal and monetary policies, and the development of an integrated and comprehensive approach towards greening of such policies such as through removal of fossil fuel subsidies; introduction of pollution taxes; investment in electric vehicles and greening of the grid; and green bonds, are crucial for sustainable development.

• Assistant Professor of Finance Li, Weikai is a co-principal investigator of the project "Climate Transformation Hub" which aims to contribute to Cluster 1 (Climate processes and extremes) and Cluster 5 (Climate and finance markets) of the multi-disciplinary Climate Transformation Programme led by The Earth Observatory Centre at Nanyang Technological Centre. Assistant Professor Li will focus on the examination of the business risks and new opportunities posed by the impacts of climate change, the narrowing of the protection gap and transition to a low-carbon economy.
• Assistant Professor of Accounting Grace Fan and her fellow researcher study the argument that stricter environmental policies can lead to innovations and sustainable business practices that reduce energy costs and operational efficiencies, improving firm value through the study "Going Green: The Effect of Environmental Regulations on Firms".

When assessing a company's impact on society and evaluating investments, many investors look at both a company's traditional financial metrics as well as its ESG rating. Companies measure and disclose environmental, social and governance (ESG) data based on such ratings that aim to enable investors to research and compare a company's exposure to ESG risks and how effectively it manages those risks.

• Lee Kong Chian Chair Professor of Accounting Cheng, Qiang and Associate Professor of Accounting Lou, Yun are investigating the negative consequences of ESG reporting divergence in the absence of mandatory ESG reporting requirements and the benefits of mandatory reporting for capital markets through the project "The Capital Market Consequences of ESG Reporting Divergence".
• Professor of Accounting Zhang, Liandong and Associate Professor of Accounting Lou Yun investigate the bias in ESG ratings arising from conflicts of interest from commercial ties through the study "Do Commercial Ties Influence ESG Ratings? Evidence from Moody’s and S&P".
• Associate Professors of Accounting Holly Yang and Cho, Young Jun, and Assistant Professor Kim, Jungbae are exploring whether mandating Scope 3 emissions disclosures can be used to reduce an organisation's carbon emissions through their study "Corporate Disclosures for Green Supply Chains: Evidence from Scope 3 Emissions Disclosure".
• Explore research on Impact-Weighted Accounts Framework to integrate the various existing ESG frameworks and ratings into a more coherent and overarching one, led by Associate Professor of Finance Liang, Hao and researchers from the Harvard Business School, Rotterdam University and the Impact Institute in Amsterdam.

Financial literacy plays a pivotal role in empowering individuals, institutions and communities to adopt sustainable and ethical financial practices, and take an active role in addressing climate change challenges through green financing decisions. High levels of financial literacy also contributes significantly to poverty reduction and financial well-being in the long run.

• Assistant Professor of Finance Aurobindo Ghosh is leading the Financial Inclusion, Wellness and Resilience (FInWR) research project, a multi-year cross section and longitudinal study that aims to build an understanding of the factors influencing financial wellness amongst young adults in Singapore and to ascertain their capacity to withstand financial challenges. The FInWR project is a component of the SMU Financial Literacy, Inclusion and Technology (FinLIT) Programme delivered by the Sim Kee Boon Institute for Financial Economics.

Impact investments direct capital toward projects that generate both financial returns and positive social or environmental outcomes. Research into impact investing is critial to generate insights into how investments can address global challenges like poverty, climate change, and inequality, while also evaluating the effectiveness and scalability of such investments. By understanding the impact, risks, and potential of impact investing, stakeholders can make informed decisions that contribute to sustainable development and drive meaningful change.

• Associate Professor of Finance Liang, Hao is leading a project to develop a framework for measuring, valuing and reporting environmental and social impact in impact investing that leverages the Impact-Weighted Accounts Framework (IWAF). The study will also demonstrate how the IWAF can be applied to Asian organisations through pilot studies with companies and financial institutions in Singapore and China, and build an impact finance database that aligns with other similar initiatives in North America and Europe for future academic research.