Research
Job Market Paper
Digital Innovation and the Value of Corporate Sustainability
Presented at:
ICBFS
ASFAAG
QMUL Internal Seminar
EDHEC Workshop
Finance Symposium
APF
World Finance
IFABS London
ICFAB
Abstract
Why does corporate sustainability pay off for some firms and not others? I argue that the payoff depends on complementary digital capability, which lowers the cost implementing and verifying sustainability activities. Among U.S. firms that patent digital technology over 2002-2022, Asset4 ESG scores have no reliable standalone association with subsequent performance, but their interaction with the market value of the firm's digital patents is positively associated with net profit margin two years later. A one-standard-deviation increase in the ESG score is associated with a margin 0.28 percentage points higher at the 75th than at the 25th percentile of digital patent value, rising to 1.15 points, about 13 percent of the median margin, between the top and bottom quintiles. The association survives industry-byyear effects and holds with citation-weighted patents, is absent for raw patent counts, and is weaker for valuation and for MSCI ratings. Sustainability is best evaluated alongside firms' technological capabilities rather than in isolation.
Why does corporate sustainability pay off for some firms and not others? I argue that the payoff depends on complementary digital capability, which lowers the cost implementing and verifying sustainability activities. Among U.S. firms that patent digital technology over 2002-2022, Asset4 ESG scores have no reliable standalone association with subsequent performance, but their interaction with the market value of the firm's digital patents is positively associated with net profit margin two years later. A one-standard-deviation increase in the ESG score is associated with a margin 0.28 percentage points higher at the 75th than at the 25th percentile of digital patent value, rising to 1.15 points, about 13 percent of the median margin, between the top and bottom quintiles. The association survives industry-byyear effects and holds with citation-weighted patents, is absent for raw patent counts, and is weaker for valuation and for MSCI ratings. Sustainability is best evaluated alongside firms' technological capabilities rather than in isolation.
Working Papers
The Price of Green: Policy-Induced Climate Salience and Corporate Trade-Offs
Presented at:
ARCS 18th Annual Research Conference
RBFC
Abstract
Does carbon pricing expand corporate innovation or redirect it? Using the 2009 Regional Greenhouse Gas Initiative, the first mandatory U.S. cap-and-trade programme, and a matched difference-in-differences design for U.S. public firms (2006-2013), I find that regulated firms improve environmental performance and raise green patenting while cutting general R&D. The reallocation is concentrated among financially constrained and power-sector firms: carbon pricing redirects innovation, and the cost falls on the firms least able to raise external finance.
Does carbon pricing expand corporate innovation or redirect it? Using the 2009 Regional Greenhouse Gas Initiative, the first mandatory U.S. cap-and-trade programme, and a matched difference-in-differences design for U.S. public firms (2006-2013), I find that regulated firms improve environmental performance and raise green patenting while cutting general R&D. The reallocation is concentrated among financially constrained and power-sector firms: carbon pricing redirects innovation, and the cost falls on the firms least able to raise external finance.
The Informational Environment of Climate Transition Risk: Tone, Salience, and Green Innovation (Work in Progress)
Abstract
Does uncertainty about the climate transition deter green innovation? I measure firmlevel transition-risk exposure from earnings-call transcripts and attention to climate policy from Wall Street Journal coverage, and link both to patent data for U.S. public firms (2002-2017). Firms with higher transition-risk exposure file fewer green patents, consistent with firms postponing irreversible green investment under policy uncertainty. The effect is weaker when the transition is discussed on the call in a supportive tone. The information environment, not only exposure itself, shapes green innovation.
Does uncertainty about the climate transition deter green innovation? I measure firmlevel transition-risk exposure from earnings-call transcripts and attention to climate policy from Wall Street Journal coverage, and link both to patent data for U.S. public firms (2002-2017). Firms with higher transition-risk exposure file fewer green patents, consistent with firms postponing irreversible green investment under policy uncertainty. The effect is weaker when the transition is discussed on the call in a supportive tone. The information environment, not only exposure itself, shapes green innovation.