This entry pertains to the 2025 Baruch-JFQA Climate Finance and Sustainability Conference. I was only able to attend the second day, and I summarize my reactions to each of the papers followed by some outstanding questions at the end.

Introduction

I attended the second annual Baruch-JFQA Climate Finance and Sustainability Conference and presented my paper “Climate Capitalists.” My colleague Pari Sastry (one of the most knowledgable person in climate finance) highly recommended it, and the event certainly delivered.

Panel Discussion

The day began with a panel featuring practitioners with diverse backgrounds:

• Linda-Eling Lee (Founding Director and Head of the MSCI Sustainability Institute)
• Dan Labovitz (Co-Founder and CEO of Green Impact Exchange, GIX)
• Nehan Naim (ESG Strategy Officer, NYC Office of the Comptroller)
• Marc Siegel (former partner, PWC, Former FASB & SASB Board Member)

A recurring theme throughout the discussion was the need to estimate and communicate the financial value of sustainable investing. The panelists converged on the notion that relying solely on non-pecuniary motives would be insufficient to drive the scale of capital allocation needed for meaningful climate action.

Session: Corporate Climate Strategies

• Adair Morse presented her paper, “Roy Sorting: Climate and Status Quo Strategies” whose central premise is refreshingly clear: companies face a choice between embracing the green transition or maintaining business-as-usual operations. Just as Roy models predict that the best fishers fish and the best hunters hunt, the authors examine whether firms optimally sort themselves into climate strategies based on their comparative advantages. Using a dataset of ESG score edits (a clever proxy for strategic signaling), they document that firms making these adjustments experience a sizable bump in stock prices. However, this effect disappears in jurisdictions with stricter environmental policies like Europe and Japan, suggesting either that regulations are forcing convergent transition paths or that firms in these regions have become adept at obscuring their true strategies. For the Roy sorting mechanism to apply, there must be clear economic advantages to each strategy—some firms should profit more by staying brown, while others benefit more from going green. Given the profound uncertainty in this domain, I found these results somewhat surprising. The discussion by Xiaoyun Yu (SHAIF) was excellent.
• Pedro Matos presented his paper, “The Green Transition: Evidence from Corporate Green Revenues” where they use a novel dataset measuring “green revenues” across firms. As one of the first papers leveraging this data, much of the discussion centered on measurement accuracy and validation. One question is how much incremental information green revenue figures provide beyond existing metrics. Do they capture meaningful dimensions of sustainability that current measures miss? The granularity of revenue-based measures potentially allows for more nuanced analysis of how firms are actually transitioning their business models, rather than merely making commitments.
• Matteo Gasparini presented his paper, “An Empirical Examination of Business Climate Alliances: Effective and/or Harmful?” which evaluates whether climate business alliances deliver on their promises or potentially create harmful side effects. The study separately tests the costs and benefits of these collaborative initiatives. A particular strength, as emphasized by the discussant, is the comprehensive dataset covering a wide range of financial institutions with global coverage.

Keynote Address: Kai Li

• In the keynote address, Kai presented her recent work, “Dissecting Corporate Culture Using Generative AI” where she leverages ChatGPT to analyze 2.4 million analyst reports from 2000 to 2020. It was a great example of how generative AI is becoming a powerful tool in the context of finance research. The most interesting finding is that analysts’ take on corporate culture doesn’t always align with how companies present themselves. This suggests that sell-side research isn’t just an echo chamber—it adds independent value.

Session: Climate Transition and Investment

• Aymeric Bellon presented “Do carbon markets undermine private climate initiatives?” which provides evidence on the interaction between corporate climate pledges and carbon markets, particularly focusing on the EU Emissions Trading System (EU ETS). The message is somewhat sobering — companies in the carbon market promise emission reductions, and indeed achieve them, but then sell their unused carbon allowances to other firms. This “waterbed effect” means that one firm’s reduction simply shifts pollution elsewhere, keeping total emissions unchanged. Meanwhile, these companies benefit from higher ESG scores without creating real climate impact. The discussant was notably enthusiastic about the findings, stating she was “fully convinced by all the empirical patterns documented.” The research naturally raises critical questions about optimal market design—how might policymakers adjust carbon markets to prevent this offsetting effect and ensure that voluntary corporate initiatives meaningfully reduce overall emissions?
• Martijn Cremers presented “The complex materiality of proprietary ESG information: Evidence from actively managed funds” where he introduces “Active ESG,” a novel metric for measuring how actively fund managers utilize proprietary ESG information distinct from third-party ratings. The findings suggest that this metric predicts fund performance, but only among specialized ESG funds, pointing to the value of focused expertise in this domain. The presentation sparked discussion about what exactly constitutes proprietary ESG information and whether there might be ways to more directly measure these information advantages. Are these managers leveraging novel data sources, applying superior analytical frameworks, or simply interpreting standard disclosures more skillfully?

Takeaways

1. Adair’s paper came at the right time to challenge the one-size-fits-all narrative around climate transition. Some firms really do seem better positioned to stay “brown” while others thrive by going green. With the new political landscape, this heterogeneity is only going to become more pronounced.
2. Perhaps we’ve spent too much time assuming investors will accept lower returns for sustainability and not enough time quantifying actual financial benefits. The most compelling moment for me was when one panelist said that at the end of the day, capital will only flow at scale when there’s a clear financial case.