SGFIN focuses on developing two streams of research:
Fundamental research on sustainable and green finance
SGFIN will pursue foundational and inter-disciplinary research covering sustainable and green finance, including topics in household finance, corporate finance, investments, financial development and inclusions, developments of sustainable banking practices, sustainable considerations of industry and business processes, and other related topics.
Applied research on sustainable finance
A key research focus at SGFIN will be on developing a sustainability and impact measurement and assessment framework to capture the monetary value of companies’ environmental and social performance. The development of such a framework is crucial for Asia, given the lack of consistent and standardised measures for firms operating in Asia. A more transparent and standardised measurement of companies’ environmental and social performance will facilitate more efficient capital allocations to business entities that are capable of creating social and environmental values that meet the expectations of investors and other stakeholders. By aiding financial institutions with comprehensive data, robust benchmarks and indexes, SGFIN aims to support businesses with solutions designed to facilitate access to green finance and achieve broader sustainable growth objectives.
SGFIN will also develop collaborative research to meet sustainability needs of the financial and commercial sectors. SGFIN will collaborate with industry partners who are interested in improving the sustainability performance of financial and real investments, both in Singapore and the region.
Strategic Research Initiatives
Impact Pricing
Impact Pricing
AI-Driven Impact Pricing
At SGFIN, our research on impact pricing revolves around estimating the effects of environmental features on corporate valuation. When examining the financial implications of a firm’s environmental features, the focus of previous studies is often on the dynamics of specialized trading markets of each specific feature, especially carbon emissions trading markets (carbon market).
Our primary objective is to analyze the stock market pricing of environmental features of (public) companies, including their Greenhouse Gas (GHG) emissions and energy consumptions. Our research also aims to identify which environmental variables have material effects on firm values and how these effects evolve over time across regions and industries. With numerous corporate fundamental features (e.g., profitability, efficiency, and leverage) likely related to market valuation, their impacts on valuation are complex and non-linear. This complexity underscores the inadequacy of conventional approaches, such as linear regression analysis, in linking corporate environmental features to stock market valuation.
We therefore employ a machine-learning-based approach to achieve our objectives. With our machine-learning framework covering 90+ financial variables for firms listed on 100+ financial markets globally, our research contributes to the valuation analysis by allowing non-linearity in linking environmental features with firm values. The valuation models we are developing would be useful for industry practitioners in estimating the impact of environment-related features on corporate valuation and generating more accurate valuation of both public and private firms, which would reflect the sensitivity of their future cash flows to environmental events, such as natural disasters and environmental regulatory and policy changes.
ESG Data Primer
Against the context of needing to achieve a rapid and comprehensive decarbonisation of our economic systems, Environmental, Social, and Governance (ESG) data has emerged as the predominant mechanism for consistently recording, tracking and benchmarking corporate sustainability performance. ESG data is rapidly growing in availability and has become a key tool for assessing sustainability practices of companies, and facilitate socially responsible investors' capital allocation decisions.
Despite the increasingly mainstream use of ESG data, there remain many misconceptions and incomplete understandings, hence the need for the primer contained in this whitepaper. Moreover, under scrutiny we observe (potentially material) ESG data inconsistencies which could result in unintended investment allocations. We probe this issue closely to highlight that not only are there inconsistencies within and between ESG data providers, but also that there are inconsistencies in underlying data used by ESG data providers versus companies self-reported sustainability data.
Informed by our observations of the ESG data construction methodology, and the research use cases it has been used for, we outline an ESG data users’ action plan, distilling the most central points of focus for new and experienced ESG data users to keep in view when working with these data.
Sustainable Consumption
Sustainable Consumption
At SGFIN, our research initiatives in sustainable consumption aim to provide a comprehensive perspective on the intricate interplay between human activities, environmental impacts, and societal well-being. The research agenda includes several sub-topics:
- Air pollution,
- Water and electricity consumption,
- Real estate market, and
- Consumer carbon scorecard.
The ongoing research on air pollution investigates the influence of unexpected air pollution events on service-oriented industries. Utilizing data from major hotel-booking platforms, the analysis delves into customer satisfaction dynamics during and after environmental shocks, revealing immediate effects on consumer sentiment and the resilience of service quality.
The research on water and electricity consumption focuses on Singapore policies and households, and examines how environmental risks and relevant public policy, specifically price announcements and subsidies on water and electricity consumption, impact conservation efforts by households. Emphasizing the importance of calibrated information provision, particularly for vulnerable socio-economic groups, the research guides the public and policymakers toward more effective behaviours and strategies for balancing environmental conservation with societal and economic well-being.
Our commitment to a holistic understanding of sustainable consumption extends to the real estate market. The research examining the consequences of environmental punishments on housing prices sheds light on the delicate balance between regulatory measures, public awareness, and property values. These insights contribute to shaping sustainable urban development strategies that consider the nuanced relationships between regulatory interventions and societal responses in the climate change era.
In our latest endeavour, SGFIN is developing the Consumer Carbon Scorecard, with the aim of empowering individual consumers to consume more sustainably with insights into the carbon emissions linked to their consumption of goods and services. By estimating each individual consumer’s carbon footprint and establishing a benchmarking system for their carbon usage relative to their peers, the research aims to enhance carbon literacy among end consumers, raise public awareness on climate actions, and promote sustainable lifestyle choices, thereby advancing long-term sustainability.