Sustainable Architecture for Finance in Europe (SAFE)
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SAFE Update October 2021
(2021)
We analyze the ESG rating criteria used by prominent agencies and show that there is a lack of a commonality in the definition of ESG (i) characteristics, (ii) attributes and (iii) standards in defining E, S and G components. We provide evidence that heterogeneity in rating criteria can lead agencies to have opposite opinions on the same evaluated companies and that agreement across those providers is substantially low. Those alternative definitions of ESG also affect sustainable investments leading to the identification of different investment universes and consequently to the creation of different benchmarks. This implies that in the asset management industry it is extremely difficult to measure the ability of a fund manager if financial performances are strongly conditioned by the chosen ESG benchmark. Finally, we find that the disagreement in the scores provided by the rating agencies disperses the effect of preferences of ESG investors on asset prices, to the point that even when there is agreement, it has no impact on financial performances.
The main purpose of Points is to give an insight into SAFE's two principal fields of activity – conducting research in finance and providing policy advice – and to introduce you to the people behind these two pillars of the institute. For both pillars, it is essential to point out the problems and phenomena the researchers at SAFE deal with and to have a point and state it clearly.
As such, Points also serves to keep readers informed about new perspectives as they open up in the development of SAFE. Initially, the magazine will be published once a year free of charge and advertising and is intended as a complementary product to SAFE's digital newsletter, which is currently published six times a year.
SAFE Update December 2021
(2021)
SAFE Update February 2022
(2022)
SAFE Update
(2021)
The digital newsletter format SAFE Update started in June 2021, is published six times a year, and offers selected news from SAFE along four recurrent sections:
* Focus on a specific topic
* Research Highlight
* #SAFEtheDATE, a combined outlook and review of events, and
* Handpicked, a recommendation worth reading, listening or watching from one of SAFE's Department Directors.
SAFE Update is free of charge and advertising and is designed for researchers in economics, law, and political science, as well as for readers who are interested in the areas in which financial research is applied.
This policy note summarizes our assessment of financial sanctions against Russia. We see an increase in sanctions severity starting from (1) the widely discussed SWIFT exclusions, followed by (2) blocking of correspondent banking relationships with Russian banks, including the Central Bank, alongside secondary sanctions, and (3) a full blacklisting of the ‘real’ export-import flows underlying the financial transactions. We assess option (1) as being less impactful than often believed yet sending a strong signal of EU unity; option (2) as an effective way to isolate the Russian banking system, particularly if secondary sanctions are in place, to avoid workarounds. Option (3) represents possibly the most effective way to apply economic and financial pressure, interrupting trade relationships.