Promotie O.D.A. Zerbib

This thesis studies the effects of investors’ pro-environmental preferences on asset pricing and impact investing. The first chapter shows how sustainable investing, through the joint practice of Environmental, Social and Governance (ESG) integration and exclusionary screening, affects asset returns. The effect of these two practices translates into two taste premia and two exclusion premia that induce cross-effects between excluded and non-excluded assets. By using the holdings of 453 green funds investing in U.S. stocks between 2007 and 2019 to proxy for sustainable investors' tastes, I estimate the model applied to green investing and sin stock exclusion. The annual taste effect ranges from -1.12% to +0.14% for the different industries and the average exclusion effect is 1.43%. In the second chapter, I use green bonds as an instrument to identify the effect of non-pecuniary motives, specifically pro-environmental preferences, on bond market prices. I perform a matching method, followed by a two-step regression procedure, to estimate the yield differential between a green bond and a counterfactual conventional bond from July 2013 to December 2017. The results suggest a small negative premium: the yield of a green bond is lower than that of a conventional bond. On average, the premium is -2 basis points for the entire sample and for euro and USD bonds separately. I show that this negative premium is more pronounced for financial and low-rated bonds. The results emphasize the low impact of investors' pro-environmental preferences on bond prices, which does not represent, at this stage, a disincentive for investors to support the expansion of the green bond market. Finally, the third chapter shows how green investing spurs companies to reduce their greenhouse gas emissions by raising their cost of capital. Companies' emissions decrease when the proportion of green investors and their environmental stringency increase. However, heightened uncertainty regarding future environmental impacts alleviates the pressure on the cost of capital for the most carbon-intensive companies and pushes them to increase their emissions. I provide empirical evidence supporting the theoretical results by focusing on U.S. stocks and using green fund holdings to proxy for green investors' beliefs. When the fraction of assets managed by green investors doubles, companies’ carbon intensity drops by 5% per year.

Olivier David Armand Zerbib (Marseille, France, 1983) graduated from the Ecole Nationale de la Statistique et de l’Administration Economique (ENSAE – Institut Polytechnique de Paris) and obtained a master’s degree from the Paris School of Economics (Master APE) in 2007. He worked during ten years in the investment industry and started his PhD in 2016 at Tilburg University and Université Lyon 1 – ISFA under the joint supervision of prof. dr. J.J.A.G. Driessen and prof. dr. C.-Y. Robert. During his doctoral studies, Olivier David Armand Zerbib visited HEC Lausanne – Swiss Finance Institute in 2017 and the London School of Economics and Political Science in 2019.

• Locatie: Cobbenhagen building, Portrettenzaal 
• Promotores: prof. dr. J.J.A.G. Driessen, prof. dr. C.Y. Robert