Essays on Sustainable Finance, Climate Risks, and Investor Behavior

Abstract

This doctoral thesis comprises six papers that investigate various questions in the field of sustainable finance. The overarching theme is the integration of environmental, social, and governance (ESG) considerations into financial decision-making, with particular attention to climate-related risks and investor behavior. The thesis begins by assessing the design and effectiveness of sustainability-linked loans (SLLs), revealing that while these instruments aim to incentivize corporate sustainability through ESG-linked key performance indicators, they often lack materiality and fail to improve borrowers’ ESG performance. Subsequent chapters examine how sustainable finance literacy shapes retail investment decisions, how shareholder engagement on ESG issues manifests at annual general meetings, and how greenhouse gas emissions are considered in investment decisions. Further chapters use natural language processing to evaluate climate-related financial disclosures under the TCFD framework and present interview-based findings on the integration of climate risks into bank risk management and capital requirements. Overall, the thesis suggests concrete pathways to improve the design and implementation of sustainable finance instruments and policies.