Research Projects
The following is a selection of research projects led by IMAP’s affiliated faculty that we believe will be of interest to IMAP’s audience. IMAP provided financial support to most of the projects below, but some were completed under independent grants.
Active Projects
Externalities and Moral Hazard in Property Insurance
Can insurance pricing create efficient incentives for homeowners to reduce wildfire risk?
Climate change is increasing the prevalence and magnitude of wildfires worldwide. The United States has experienced longer and more severe wildfire seasons in recent years, including major conflagrations in California that have caused widespread destruction and disruption in the insurance industry. Insurers have responded to this disruption by reducing risk exposure, increasing premiums, and adopting novel technologies for property-level risk assessments. By leveraging high-resolution aerial images (typically < 1m resolution), these technologies offer the promise of capturing property-level mitigation through reductions in vegetation coverage surrounding a structure.
Granular measurement of vegetation coverage at the level of an individual property has the potential to create value for insurers, by enabling them to set higher prices for higher-risk properties and issue policies only to those they deem sufficiently low-risk. At the same time, this type of pricing has the potential to create benefits for society, by incentivizing homeowners to reduce their property risk in exchange for lower insurance prices. Indeed, recent regulation in California acknowledges the role of insurance in risk mitigation by mandating that insurers offer discounts for risk-reducing actions including vegetation management.
Is regulation of this form justified, or are private incentives sufficient to create value to society? The answer to this question is complicated by important features of the economic and regulatory environment. First, actions to mitigate wildfire risk often affect neighboring parcels, which may be insured by a competitor. Second, regulatory constraints on insurer pricing – designed to protect consumers from excessively high rates – may limit the extent to which insurers can leverage new technologies to accurately price differences in risk. This project will empirically examine the intersecting impacts of insurance pricing, risk-measurement technology, and insurance market regulation on wildfire risk. The goal of our research is to understand how business incentives can encourage homeowners to adapt to increased risks of natural disasters.
, Assistant Professor, Markets, Public Policy, and Law, Questrom School of Business
What do Shareholders Want?
Measuring What Shareholders Want Firms to Maximize
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 measures 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 measures 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 investigates how preferences vary between shareholders (who actually own stock in the firm) and non-shareholders.
, Professor of Markets, Public Policy, and Law at Boston University
Corporate Carbon Risk
What is the risk associated with carbon targets?
This research project will help investors determine the risk associated with corporations achieving their future carbon targets.
As corporations and investment firms both commit to targets for reducing their carbon emissions, there is growing desire to understand the risk associated with these future target statements. Whether or not a firm achieves its emissions targets can not only place its reputation at risk, but also that of those along its supply chain, including their investors. Current and future policies aimed at pricing climate externalities, mean that corporate climate performance can have a material impact on financial performance. Yet, the lack of reliable metrics to capture these risks pose severe challenges. This project aims to develop a novel methodology to predict the likelihood of achieving future corporate carbon targets. It will also publish an open database of the resulting risk measures for those companies that we analyze.
, Professor of Management and Professor of Finance, Questrom School of Business, Boston University
Susan Fredholm Murphy, Executive Director IMAP
Alicia Zhang, PhD Candidate
James Koehler, IMAP Sr. Fellow
Peter Fox Penner, Founding Co-Director IMAP
Sakshi Sharma, MS Candidate
Brand Risk due to Palm Oil
Which Indonesian palm oil plantations are associated with loss of tropical biodiversity?
Our research examines certified and non-certified palm oil plantations in Indonesia and Malaysia. Using remotely sensed Landsat data, we examine deforestation trends from 2000 to 2020. Further, we spatially correlate the deforestation loss with the presence of palm oil plantations and refineries. We validate our findings with the recently published research on palm oil plantations.
, Professor of Earth & Environment at Boston University
Mira Kelly-Fair, PhD Candidate in Earth & Environment at Boston University
Understanding ESG Risks through Textual Analysis
Are today’s ESG risk disclosures consistent with SASB recommendations?
This project examines an alternative measurement approach towards ESG topics: the use of textual analysis applied to various corporate filings and disclosures as a way to quantify firms’ exposure to these risks, and actions being taken to address them.
In our approach we link voluntary SASB Materiality Map recommendations to mandated 10-K Risk Factors section using text analysis. We then ask:
How (in)consistent are firms with SASB recommendations?
What drives observed variation?
, IMAP Director & Professor in Management, Professor of Accounting, Questrom School of Business, Boston University
Estelle Sun, Associate Professor of Accounting, Boston University
Aliya Korganbekova, Accounting Lecturer, Questrom School of Business, Boston University
Federico Siano, now Assistant Professor, University of Texas at Dallas
Measuring Impacts of Renewable Energy
What are the infrastructure costs, emission reductions, health impacts, and water consumption impacts of different climate mitigation strategies?
This research will evaluate the cost-effectiveness and related impacts of deploying renewable energy and carbon capture technologies in the United States.
, MS Student, Environmental Health
Jonathan Buonocore, Assistant Professor, Environmental Health
Completed Projects
Climate Adaptation Using Wastewatersheds in Agriculture
How can treated wastewater be used as a climate adaptation measure for agriculture?
This research explores how treated wastewater reuse can be utilized as a climate adaptation measure for agriculture. It looks at the “wastewatershed” concept as a novel framework to predict the success of wastewater reuse schemes in mitigating climate-induced water scarcity.
, PhD candidate, Earth & Environment
Andrew Bell, Assistant Professor, Earth & Environment
U.S. Capital Market Consequences of the Brussels Effect: Evidence from Sustainability Reporting
Examining U.S. investor reaction to the extraterritorial European regulatory risk in the context of the sustainability transition.
This research explores whether US investors price in the risk inherent in the Brussels Effect—which reflects theoretical expectations that European Union (EU) regulations exert extraterritorial influence (Bradford, 2020)—by examining the capital market reaction to the approval of the Corporate Sustainability Reporting Directive (CSRD).
, PhD candidate, Accounting, Questrom School of Business
Eddie Riedl, John F. Smith Jr. Professor in Management, Professor of Accounting, Questrom School of Business
Optimizing Electric Vehicle Charging Infrastructure on University Campuses: A Queueing-Theoretic Analysis of Capacity and Congestion
Analyzing electric vehicle charging infrastructure data such as arrival rates, service times, and station capacity to quantify congestion patterns and utilization levels, helping to optimize network expansion.
This research looks at how data-informed queueing models can guide capacity planning and congestion mitigation in electric vehicle (EV) charging systems. Zhang plans to model congestion and capacity management in EV charging networks using queueing theory and simulation tools, with the goal of optimizing infrastructure expansion and reducing environmental externalities caused by long wait times and inefficient station distribution. The project integrates empirical data from local charging stations with theoretical models to evaluate and forecast system performance under various policy interventions.
, PhD candidate, Operations Technology Management, Questrom School of Business
Justin Ren, Associate Professor & Department Chair, Operations Technology Management, Questrom School of Business
Jinglong Zhao, Assistant Professor, Operations Technology Management, Questrom School of Business
Justice in Urban Climate Finance
How cities' climate finance impact just urban transitions
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.
, Associate Professor, Department of Earth & Environment
Claudia Diezmartínez, PhD Candidate, Earth & Environment at Boston University
Managing Social Issues
How can we predict when a sociopolitical issue will blow up a brand?
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.
, PhD candidate/Lecturer, Marketing
Shuba Srinivasan, Professor of Marketing, BU Questrom School of Business
Dokyun Lee, Associate Professor of Information Systems, BU Questrom School of Business
Susan Fournier, Professor in Marketing, BU Questrom School of Business
Native Advertising
How native advertising is used by corporations
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?
, Associate Professor, Department of Mass Communication, Advertising and Public Relations
Chris Wells, Associate Professor, BU Emerging Media Studies at Boston University
Evaluating Hedge Fund Activism
Engine Number 1 and ExxonMobil
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.
, Director, IMAP
Robert Kaufmann, Professor of Earth & Environment, BU College of Arts & Sciences
Green Investors Are Green Consumers
Why does the impact of green investing on polluting firms’ costs of capital appear to be limited?
Read Paper
Oliver David Zerbib, Associate Professor of Finance at EDHEC Business School
Maxime Sauzet, Assistant Professor of Finance at Boston University
Market Myopia’s Climate Bubble
Why should we regulate corporate disclosures of physical climate risk?
A growing number of financial institutions, from BlackRock to the Bank of England, have reached the conclusion that markets are not accurately assessing climate change-related risks. European Central Bank President Christine Lagarde recently warned that central bankers “will have to ask themselves” if they are “taking excessive risk by simply trusting mechanisms that have not priced in the massive risk that is out there.”[1] According to one survey, 93 percent of institutional investors agree with her that climate risk “has yet to be priced in by all the key financial markets globally.”[2]
Yet while the consensus (and evidence) grows that assets are mispriced, there has been less attention paid to diagnosing why that might be; what are these faulty “mechanisms” that Lagarde says are not to be trusted?[3] In my new article, Market Myopia’s Climate Bubble, I seek to explain how this mispricing can exist, disputing arguments that climate risks are “already reflected in existing stock prices.”[4] I describe six drivers of mispricing.
Boston University School of Law
The Evolving Landscape of Big Data Analytics and ESG Materiality Mapping
How are big data analytics assisting in ESG materiality mapping?
Read Paper
Sucharita Gopal, Professor of Earth and Environment at Boston University
Joshua Pitts, Kalyani Inampudi, Yingqiang Xu and Graham Cook
Physical Climate Risk and Firm Performance
How Do Physical Climate Changes Affect Firm Performance?
This study combined a large sample of global supplier-customer relationships with granular data on local temperatures, floods, and climate projections, to document the occurrence of climate-related shocks at the locations of supplier firms has significant negative direct and indirect effects on the operating performance of suppliers and their customers.
Results:
- When realized climate risks at supplier locations exceed ex-ante expectations, customers are 6 to 11% more likely to terminate existing supplier-relationships. Replacement suppliers with lower expected climate-rise exposure are then chosen.
- Supplier termination and replacement decisions are insensitive to long-term climate projections – even when experienced and projected change diverge substantially suggesting that climate change related risks affect the formation of global production networks.
Publications:
Pankratz, Nora M. C. and Schiller, Christoph, Climate Change and Adaptation in Global Supply-Chain Networks (June 25, 2021). Proceedings of Paris December 2019 Finance Meeting EUROFIDAI – ESSEC, European Corporate Governance Institute – Finance Working Paper No. 775/2021, Available at SSRN:
https://ssrn.com/abstract=3475416 or
http://dx.doi.org/10.2139/ssrn.3475416
UCLA Luskin Center for Innovation
Christoph M. Schiller, Arizona State University W.P. Carey School of Business