Sustainable Finance: ESG performance and disclosure in the capital market context

From a traditional finance perspective, the purpose of financial markets is to efficiently allocate capital in order to create and ideally maximize shareholder value. This way, companies can obtain the necessary capital to grow and generate profits while investors receive an appropriate return for the productive use of their capital. Why then should companies care about sustainability and about the social and environmental consequences of their business decisions? 

The economic system is becoming increasingly interconnected and not only comprises shareholders but a whole range of stakeholders such as banks, customers, employees, the government and even the environment. Focussing more broadly on all stakeholders involved, beyond just shareholders, can impact not only social outcomes but also financial outcomes.

Clarissa Hauptmann’s research examines the effects of corporate sustainability on capital market outcomes, in particular with a focus on bank loans and the equity market. Her dissertation contains three fascinating studies briefly outlined as follows.

In an innovative study, Clarissa Hauptmann shows that companies with strong sustainability performance have better loan conditions and can benefit financially from lower loan prices. However, she documents that this difference in loan prices only prevails when the lending bank has a strong sustainability rating: a company that borrows from a bank that has bad sustainability performance will not experience differences in the loan prices it pays. However, when a company borrows from a bank with strong sustainability performance, the company will benefit from strong sustainability performance in terms of cheaper loans. The latest version of this study can be found at:

Another study that Clarissa Hauptmann conducted with George Serafeim and Jody Grewal from Harvard Business School shows that the disclosure of relevant sustainability information drives investment decisions and reveals how newly developed sustainability accounting standards are useful in determining information relevance. They show that disclosing such information particularly affects the information content of stock prices when the company is more exposed to sustainability issues, when there is more institutional and SRI fund ownership, and analysts covering the company have a lower portfolio complexity. The latest version of this study is available at:

In a study together with Stefanie Kleimeier and Stefan Straetmans from Maastricht University, Clarissa Hauptmann focuses particularly on the topic of gender diversity in top management positions and shows that companies with female CEOs and CFOs have better loan conditions on average. To understand this finding further, the study investigates the role of culture and finds that the financial advantage of having a female executive is strongly driven by cultural attitudes towards women. While in countries that perceive women and men to be equally skilled executives, female-run companies benefit financially from cheaper loans, this relation reverses in countries that are sceptical towards the abilities of female leaders.

The findings of these studies have significant practical implications for corporations, investors, financial institutions, and governments.

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