New research is needed to identify the finance strategies that are either being piloted or proven to be successful to address climate change in cities and to understand how climate finance shapes the implementation of urban climate action. We will conduct a content analysis of municipal budgets and capital finance plans of up to ten selected cities in the United States that have explicitly incorporated justice into their climate action planning. This project will pilot a method to systematically assess and compare climate finance across US cities to examine how climate finance shapes the implementation of just urban transitions. Climate finance is any funding (direct payments), finance (debt), and other hybrid mechanisms used by city governments to pay for climate actions. This research asks:

• How are cities across the United States funding and financing climate action?
• How does urban climate finance impact the implementation of just urban transitions?

This project will provide key insights with direct policy impacts for urban decision-makers across the United States and generate knowledge on best practices to fund and finance climate action across cities of different sizes and the implications of these financial decisions on the implementation of just urban transitions.

There is a long-standing debate about whether firms should maximize profits or also target broader environmental, social, and governance (ESG) objectives. If ESG objectives are targeted, which ones are most important? A key question is: What are the preferences of the shareholders who own the firm? This project measured shareholder preferences about traditional ESG-related objectives as well as an understudied aspect of ESG: how shareholders want firms to act in imperfectly competitive markets. It also measured the extent to which shareholders have preferences for promoting consumer welfare in imperfectly competitive markets, such as by lowering prices or avoiding “shrouded fees.” Finally, it investigated how preferences vary between shareholders (who actually own stock in the firm) and non-shareholders.

Sociopolitical issues are often categorized as controversial in firms’ management of ESG (Environmental, Social, and Governance) risks and opportunities; it is critical for firms to be aware of, learn from, and prepare for these controversies. This project seeks to create a method to predict when controversies will impact a company. The research asks the following questions:

• How can we capture and quantify firms’ real-time sociopolitical communication and associated public opinion?
• How can we predict firms’ sociopolitical performance using historical firm information?
• Are adverse events such as severe sociopolitical firm risk events predictable? (ex. Gillette’s “The Best Men Can Be” campaign; AT&T violating pregnancy discrimination law, etc.)
• What is the variable’s importance in both predictions? (ex. Does ESG’s strength or weakness matter more?)
• What is the association between firms’ sociopolitical performance and firm value?

The researchers will create a real-time firm sociopolitical performance measurement, based on relevant public opinion towards the firm. They will then evaluate and rank variable importance in identifying and predicting potential sociopolitical firm risk events. They will also investigate the association between firms’ sociopolitical performance and firm value, including what types of variation of sociopolitical performance (static vs. dynamic) influence firm performance and firm value in the long-term.

This research focuses on corporations’ use of a form of paid content known as “native advertising” to shape citizens’ views of issues such as sustainability and climate change. The format of native ads mimics that of news articles and research has made clear that most readers do not recognize the difference between the paid posts and genuine journalistic articles. Moreover, research has shown that when this type of content is shared on social media, the required disclosures identifying the content as paid advertising often disappear. Another study suggests that the use of native advertising by corporations more often than not results in significantly less ensuing news coverage of that corporation. This is concerning when a news outlet’s coverage may contradict the claims made by that corporation’s advertising, in essence offering competing news agendas. Given the evidence that fossil fuel companies are leveraging native advertising to whitewash their image, more scrutiny into the nature, extent, and effects of this practice are warranted. However, we know of no existing research on how companies are using native advertising to shape views about climate change and mitigation. Research questions:

• Which corporations or organizations employ native advertising to communicate about sustainability and/or climate change and how extensive are these campaigns?
• What are the topical themes of these campaigns?
• To what extent are the claims in the campaigns accurate/inaccurate?
• On which digital (news) platforms are these campaigns posted?
• Does the journalistic coverage of these companies/organizations change after NA campaigns? If so, how?
• On which social media platforms do these campaigns receive engagement, by whom, and what is the valence of this engagement?
• Which major public relations and advertising firms create and amplify this misinformation?

This project analyzed efforts by a small activist hedge fund, Engine Number 1, to create change in the financial and environmental performance of ExxonMobil by electing directors to ExxonMobil’s Board in 2021. According to Engine Number 1, electing new board members would improve how ExxonMobil manages the risks posed by climate change, which would increase returns to ExxonMobil stock, benefiting shareholders – and helping to ameliorate climate change. Our research compared the performance of ExxonMobil to six peer corporations across the same time period by expanding a five-factor statistical model for asset returns to include oil prices, oil price volatility, and variables that identify one-time and sustained changes in returns. Low returns to ExxonMobil stock may be caused by its position along the supply chain and not poor management of climate risk, suggesting that electing directors to ExxonMobil’s board will not raise returns.

The analysis found that Engine Number 1’s actions affected returns to ExxonMobil stock for short periods, but electing its candidates have no permanent financial effect. These results suggest that markets react to information that may not be available to the public and that using windows around public announcements may be too blunt to accurately assess the effects of hedge fund activism on stock returns. Although it is too soon to judge the new directors’ impact on environmental management, the lack of a negative effect on stock returns contradicts the economic notion that firms who voluntarily ameliorate externalities put themselves at a competitive disadvantage relative to firms that ignore externalities. If correct, hedge fund activism may be successful if it generates social benefits without negative effects on financial performance, which we call a ‘win-draw’ outcome.