More

    Chasing Time and Forming Minds

    Share post:

    Stockholm (NordSIP) – Late last year, the Swedish House of Finance revealed the recipients of the Hans Dalborg Award 2022 for excellence in research in financial economics. Two outstanding academics, both active at the Stockholm School of Economics (SSE), were commended for their promising work in sustainable finance. NordSIP has previously covered the research of one of the winners, Emma Sjöström. More recently, we reached out to the other of the duo, Jan Starmans, to hear about the exciting new scientific project he is involved in and his essential work of guiding his young students at SSE through the field of sustainable finance.

    “It is a great honour to receive the Hans Dalborg award, and I see it as a further encouragement to focus on the topic of sustainable finance in the future,” says Starmans. He recalls that what initially motivated him to start working in this field was the need to understand the extent to which sustainable finance can play a role in addressing the enormous challenge of climate change.

    - Partner Message -

    The time dimension of impact

    Starmans shares some of the highlights from his most recent research project. In collaboration with Deeksha Gupta from Carnegie Mellon University and Alexandr Kopytov from the University of Hong Kong, the scientist is currently exploring the timeliness of socially responsible investors’ impact. “While a growing literature on socially responsible investing addresses the question of whether and how socially responsible investors can generate impact, the literature has so far not addressed the question of how quickly socially responsible investors can cause firms to improve,” he says. “The question of timely impact is particularly important in light of climate change, as scientists argue that unless greenhouse gas emissions are reduced quickly, the world faces potentially catastrophic consequences,” adds Starmans.

    One key insight from their analysis is that socially responsible investors can, in fact, cause a delay in the reduction of negative firm externalities. Therefore, the researchers proceed to explore whether it is possible to design investment strategies to correct firms’ incentives to delay reform. “We show that investment mandates through which socially responsible investors commit to paying a premium for firms with low production externalities (‘green’ firms) can eliminate delay and incentivise firms to reform in a timely manner,” explains Starmans. “Overall, our analysis indicates that the dimension of time is crucial to understand the ability of socially responsible investors to generate impact, with potentially important implications,” he adds.

    The rewards of teaching

    Apart from being recognised for his innovative research, Starmans is a successful and popular teacher at SSE. Last year, the assistant professor received an award for outstanding pedagogical achievements for his course Sustainable Finance in the Master program. He seems quite humble about it, though, pointing out that he has only taught the course once and has a lot more to learn about teaching it effectively. “My experience so far shows that careful preparation and a deep interest in the topic are important,” he says.

    The Sustainable Finance course is a mixture of theory, practical cases, and meetings with practitioners. Starmans uses real-world cases to illustrate how firms and their investors address ESG considerations and invites industry guests who work with solving similar problems daily. “We seek to provide students with the tools to assess and respond to the resulting challenges for firms and investors,” says Starmans. “The broader aim, however, is to critically reflect on the role of business and finance in society,” he adds.

    “Many students at SSE care deeply about sustainability, and they are very critical at the same time,” says the assistant professor. “Climate change is, of course, at the top of their list, but it is interesting to see the diversity in their views on different sustainability issues. Since the field is still developing, I think it is vital to have business leaders who take a critical approach and ask the right questions. This is going to be crucial for the development of the industry going forward. The discussions with my students have made me more optimistic,” concludes Starmans.

     

    - Partner Message -

    Nordsip Insights

    From the Author

    Related articles