Greg Bala, Hendrik Bartel, James P. Hawley and Yung-Jae Lee. February 2015. Tracking Companies’ Real Time Sustainability Trends: Cognitive Computing’s Identification of Short-Term Materiality Indicators, Working Paper.
The article argues that what as known as big data analytics using cognitive computing can be applied to sustainability (environmental, social and corporate governance) analysis. This can supplement what is now almost entirely done by human analysis, but this new technology is scalable and can create multiple real time data points (trends). Proprietary sustainability data analytics has been developed by a technology start up, TruValue Labs, Inc. Using early data for a six month period, we have found statistically significant short term volatility variations correlated against what is called (and defined as) compounded TruValue (cTV), a sustainability indicator. This has been especially true in the E and S, and to a lesser degree, G areas. We argue that such short-term movement, previously undetected, and therefore not measured, has potential materiality (hence value) implications. The article sets the stage for these conclusions with a review of sustainability ratings and measurement systems currently in use, a brief review of cognitive computing, a discussion of materiality and sustainability as well as how TruValue data is generated.
Hawley, James P., Hoepner, Andreas G. F., Johnson, Keith L., Sandberg, Joakim, and Waitzer, Edward J. June 2014, 'Cambridge Handbook of Institutional Investment and Fiduciary Duty', Cambridge University Press.
The Cambridge Handbook of Institutional Investment and Fiduciary Duty is a comprehensive reference work exploring recent changes and future trends in the principles that govern institutional investors and fiduciaries. A wide range of contributors offer new perspectives on dynamics that drive the current emphasis on short-term investment returns. Moreover, they analyze the forces at work in markets around the world which are bringing into sharper focus the systemic effects that investment practices have on the long-term stability of the economy and the interests of beneficiaries in financial, social and environmental sustainability. This volume provides a global and multi-faceted commentary on the evolving standards governing institutional investment, offering guidance for students, researchers and policy-makers interested in finance, governance and other aspects of the contemporary investment world. It also provides investment, business, financial media and legal professionals with the tools they need to better understand and respond to new financial market challenges of the twenty-first century.
Although many believe that companies' political activities improve their bottom line, empirical studies have not consistently borne this out. We investigate the relationship between corporate political activity (CPA) and financial returns on a set of 943 S&P 1500 firms between 1998 to 2008. We find that firms' political investments are negatively associated with market performance and cumulative political investments worsen both market and accounting performance. Firms placing former public officials on their boards experienced inferior market performance and similar accounting performance than firms without such board members. We find, however, that CPA is positively associated with market performance for firms in regulated industries. Our results challenge the profit-maximizing assumptions underlying CPA research and focus on agency theory to better understand CPA.
This article is a somewhat technical review (although only minimally quantitative) of both the origins of modern portfolio theory (MPT) and some of the consequences of its widespread adoption, which have had, we argue, the effect of undermining its original insights as well as well as its successes. Unlike many proponents of MPT (in various forms) as well as some critics of it, we argue that the widespread adoption of MPT as the basis for much of contemporary finance has contributed, although unwittingly, to financial instability in general, and to the 2008 financial crisis specifically.
White, J., 2010, 'NGO Leaders on the Edge: The Moral Courage to Fight for Human Rights', in Cormer, DR & Vega, G (eds) Moral Courage in Organizations: Doing the Right Thing at Work, M.E. Sharpe Publishers, Armonk, New York.
Hawley, J. 2012, 'Recent developments in U.S. Corporate Governance, Dodd-Frank and After', Revue D'Economie Financiere
The article (in French) argues that although the Dodd-Frank financial reforms in the U.S. supposedly eliminated the too big to fail problem, it in fact specified a variety of means whereby the federal government can in fact ‘bail out’ systemically important financial firms. While eliminating easy ways to bail out large banks and financial institutions, a number of far less easy ways were created, all of which involve a number of federal institutions cooperating, e.g. the Federal Reserve, U.S. Treasury, the President.
We argue in this piece that the legal duty of fiduciary duty in common law countries is at an inflection point: in some jurisdictions already expanding to confront the new challenges and opportunities that large (and smaller) institutional fiduciary investors (e.g. saving and mutual funds) confront. Among these challenges are inter-generational, long-term risks/opportunities such as climate change, resource scarcities (e.g. water in some regions) that investors must confront (and in some case are currently confronting). The article briefly traces the changes in the understanding of fiduciary duty over centuries, suggesting that contrary to some understandings all too current, such duties are not written in stone and unchanging.
This chapter looks at how a fiduciary capitalism perspective both overlaps and differs from more traditional ‘ethical’ conceptions of business ethics. It suggests with the growth of large fiduciary institutional investors (increasingly a global phenomenon) the previous distinction between stock owners and stakeholders is significantly less meaningful. This is because fiduciary investors increasingly represent a very large (and in some countries like the U.S., the U.K. and Canada) a substantial majority of citizens. Thus, while often citizens wear two hats, in many cases their interests as stakeholders and long-term stock owners (albeit mostly indirectly via the institutions) overlaps. It thus forces us to reconsider significant beliefs that have dominated traditional business ethics.
The article reviews the then rapid growth of sovereign wealth funds (funds owned and run by central governments, based typically on oil wealth (e.g. Norway, Kuwait) or on large export surpluses (China). It then ranks these funds based on how democratic their governments are (or are not); on how transparent the funds are (both in terms of their investment assets and their governance); and finally suggests that along these two dimensions, some funds are more likely to be invested in sustainable/responsible investment assets and/or to be involved in active corporate governance. Norway stands out as exemplary, while others (e.g. Kuwait) are entirely opaque so that no one can know what they own, in what they invest and whether or not they take part in active ownership (corporate governance), and how any of this might be ‘responsible.’
Hawley, J, Dickenson, P & Williams A.T. 2009 'Corporate Initiatives on Climate Change', in Rosencrantz, A & Schneider, S (eds) Climate Change Science and Policy, Island Press, Washington, D.C.
This chapter reviews both what the authors consider then significant corporate level climate change programs, as well as briefly reviews what institutional owners of those (and other) corporations urged, using corporate governance means, those firms to undertake regarding climate change issues.