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An interview with Steven Ongena, Markus Leippold, Falko Paetzold and Zacharias Sautner
Steven: I am an industrial engineer by training but didn’t feel particularly passionate about it. Coincidentally, I received a scholarship offer because someone else had dropped out. They called me and asked, “Do you want to come over to Canada to study for a Master's next week?” I said “Yes.”, and that is when research got interesting for me, so I stayed in North America to do a PhD.
Markus: During my PhD, pursuing a professorship was the furthest thing from my mind. During my undergraduate years in the early '90s, I balanced my studies with part-time jobs in the finance industry. After graduating, I started to work full-time for consultancy firms and banks. Despite the demands of my industry career, my passion for research never faded, and I continued to write and publish research papers, even during my holidays. When a professor suggested I apply for an assistant professorship, I decided to pursue it. Although it meant a lower salary, it was the path I truly wanted to follow.
Falko: A critical moment for me happened while working as a sustainability analyst at a bank in Switzerland. I observed that advisors resisted to talk about sustainable investing with their wealthy private banking clients. Due to the secrecy around wealth holders, there was no research about such barriers to sustainable investing. In my research, I wanted to explore what was really going on, and I still focus on that topic today.
Zacharias: My undergraduate degree was a dual degree, a mix of studying and gaining practical experience. I had the chance to work at a savings bank in Germany and it would later define my research profile and interests. Going through all the different roles at the bank (from standing behind the counter to working on risk management) made me particularly interested in practical real-life issues. After my master’s in the UK, where I dived deeper into theoretical concepts and empirical methods, I got really excited about research in finance. Nowadays, my research focuses almost exclusively on sustainable finance. For me, sustainability is one of the key themes of our time and the field of finance plays a crucial role as a catalyst for a more sustainable future.
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"My passion for research never waned, and I continued to write and publish research papers, even during my holidays." – Markus Leippold |
Steven: I am very excited about my current work, where we show that fossil fuel firms are migrating away from the bond market. Our data shows that institutional investors have concerns about investing in fossil fuels. We can prove that the corporate bond market reacts to sustainability pressures. We also find that fossil fuel firms react to this and start asking the big global banks for financing instead. Revealing these connections is why I do this work. We, as a society, want to make sure that the banking sector does not enable fossil fuel firms. Climate policy risk and the pricing of bank loans
Markus: My most significant contribution is the development of the Climate Bert model—an AI tool we created in 2019 to fact-check sustainability claims. Recognizing the urgency of addressing global challenges, we made this tool freely accessible on chatclimate.ai. The basic model has already been downloaded over 840,000 times on Hugging Face, reflecting its impact and widespread use.
Zacharias: In my paper "Behind the scenes: The corporate governance preferences of institutional investors", my co-authors and I surveyed institutional investors on whether and how they address climate risks in the investment process. We discovered that institutional investors did very little, and it was important to document this. This research started in 2017 and our paper has received a lot of attention since then. The paper has now been cited more than 1,600 times. One reason is that it establishes that institutional investors do not ‘walk the talk’. Since the paper was published, institutional investors have become much better in addressing climate risks. Perhaps our work has played a part in that. Behind the scenes: The corporate governance preferences of institutional investors
Falko: Already during my PhD, my mentor Timo Busch and I wrote the paper "Unleashing the Powerful Few: Sustainable Investing Behavior of Wealthy Private Investors". We found that private wealth holders tend to be held back by their advisors. That was the starting point for us to run training programs for private investors that want to have a positive impact. The resulting insights and access to data has been the basis of many further exciting projects, such as our paper "Do Investors Care about Impact?" where we show that investors care for impact but are rather insensitive to how much impact they have. Unleashing the Powerful Few: Sustainable Investing Behavior of Wealthy Private Investors
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"We, as a society, want to make sure that the banking sector does not enable fossil fuel firms." – Steven Ongena |
Steven: About five years ago I had a personal health scare during a very hot summer. After that experience, I wanted to do something even more meaningful. I read the Intergovernmental Panel on Climate Change (IPCC) reports and realized that I was very late to the topic. So, I dropped my projects and shifted most of my focus to sustainability.
Markus: I am optimistic that we can turn the tide and achieve a more sustainable future. This optimism drives me to work long hours, focusing on the critical question: how can we motivate individuals, policymakers, and companies to take action? In my view, scaling and enhancing science communication is essential. I also believe that my work on generative AI can play a pivotal role in achieving this goal.
Zacharias: Sustainable finance requires sound foundations and this is what researchers can provide. Many of the most fundamental questions in sustainable finance are still unresolved; just think of the link between the ESG quality of a company and its stock returns: should it be positive, negative, or should there be no link at all. Getting an answer to this question is important as many investors question what ESG issues to be incorporated into the investment process. Research can provide important guidance to this and other questions. For example, my and others’ work shows that ESG is not just about some esoteric issue but instead that it can create financial value or reduce risks. This is why every investment manager and corporate strategist should care about it. Hence, I believe our work is critical to advancing sustainable finance further.
Falko: I agree with my colleagues and would like to add that just because we have interesting research, it does not mean that our findings land with the right actors. When it comes to sustainable finance, we have a responsibility to make sure that our research reaches actors who have the power to implement change.
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"The Paris Agreement has been a pivotal moment. It signaled that […] capital allocation must change." – Zacharias Sautner |
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"…we have a responsibility to make sure that our research reaches actors who have the power to implement change." – Falko Paetzold |
Initiative in Sustainable Finance News
