The NYU Stern Center for Sustainable Business (CSB) Research Grant program funds academic research in a variety of areas related to sustainable business. CSB Research Grants are awarded to Faculty and Ph.D. Students in pursuit of research that advances CSB’s mission of ensuring current and future business leaders develop the knowledge and skills to embed sustainability in core business strategy so they can reduce risk; creating competitive advantage; and developing innovative services, products, and processes while building value for society and protecting the planet.

We are pleased to announce the 2023 grant awardees:

 

- Adaptation to Climate Risk with Financial Incentives by Ammon Lam (PhD Student in Finance)

- Amazon Climate Badge’s Impact on Sales & Seller Competition by Xiao Liu (Associate Professor in Marketing)

- Biodiversity Risk by Johannes Stroebel (David S. Loeb Professor of Finance in Finance) and Theresa Kuchler (Associate Professor in Finance)

- Brand-Driven Recommerce and Sustainability by Arun Sundararajan (Harold Price Professor of Entrepreneurship in Technology, Operations, and Statistics)

- Do Firms Mitigate Climate Impact on Employment? by Viral Acharya (C.V. Starr Professor of Economics in Finance) 

- The Green Impact of Green Bonds by Jeffrey Wurgler (Professor in Finance)

- Improving Artisans’ Productivity with Data-driven Analytics by Divya Singhvi (Assistant Professor in Technology, Operations and Statistics) 

- The Unequal Distribution of Climate Risk Mitigation by Shan Ge (Assistant Professor in Finance) 

- Voluntary Disclosures of EEO-1 Forms by April Klein (Professor in Accounting) 

 

Please find the project descriptions below:

 

Adaptation to Climate Risk with Financial Incentives by Ammon Lam (PhD Student in Finance)
Are financial incentives effective in mitigating climate risk? I study this question by looking at local communities’ participation in the mitigation discount program of the National Flood Insurance Program (NFIP), which provides insurance discounts to communities when they engage in flood mitigation activities. Despite participation being financially beneficial, 30% of the high-risk communities did not participate. I study how communities respond to an increase in financial incentives through a diff-in-diff setup. I show that misaligned incentives between local government and flood policyholders create friction in program participation. I explore how local government activeness, the concentration of program beneficiaries, and financial constraints influence whether the community participates in the program and engages in mitigation activities. These results shed light on the effectiveness of financial incentives in mitigating climate risk and illustrate a common agency problem with climate risk mitigation.

Amazon Climate Badge’s Impact on Sales & Seller Competition by Xiao Liu (Associate Professor in Marketing)
As consumers become increasingly eco-conscious, more companies are applying for sustainability certifications to attract these consumers. As the largest e-commerce platform, Amazon launched the Climate Pledge Friendly (CPF) badge in 2020 to demonstrate commitment to sustainability, promote sales of sustainable products, and educate consumers. By partnering with 43 external certifications and creating its own certificate, Amazon tried to screen products that meet high standards of sustainability; however, the effect of the badge remains unclear. On the one hand, the badge could increase product exposure, establish a responsible brand image, and provide small businesses with equal opportunities to get certified in sustainability. On the other hand, the green badges may harm sales as it suggests a higher price, lower quality, and poor aesthetics in product design. Also, the green badge’s impact on seller competition hasn’t been explored before. 

Thus, we fill the gap and explore the impact of the badge on Amazon, sellers, and consumers by establishing a causal structural model and extracting information from unstructured image and text data with advanced machine learning models. We collect data on over 10K products, with 30% badged across different categories (e.g., household, personal care, food) on a daily basis over 3 months. We expand this structured data set by extracting visual features in product images with advanced computer vision techniques, and conducting sentiment analysis on consumer reviews with natural language processing tools. 

 

Biodiversity Risk by Johannes Stroebal (David S. Loeb Professor of Finance in Finance)
Our study proposes a novel approach to measure and hedge risks from biodiversity loss. To capture global biodiversity risk, we construct indices based on biodiversity news coverage of the topic. To assess different companies' biodiversity risk exposure, we use textual analysis of firms' 10k disclosure. We demonstrate a portfolio based on the firm' level biodiversity exposure measures that allow us to hedge the arrival of news about future biodiversity risk realizations. Finally, we suggest several future research directions on financial approaches to managing biodiversity risk.

 

Brand-Driven Recommerce and Sustainability by Arun Sundararajan (Harold Price Professor of Entrepreneurship in Technology, Operations, and Statistics)
Digitally-enabled secondary markets (markets for pre-owned goods) have existed for many decades. Economists studying these markets have noted that a potential secondary market that they cannot directly profit from creates an economic incentive for a manufacturer to make their products less durable. The incentives a manufacturer has to intentionally degrade the durability of their product was most notably raised by Coase (1972) in his celebrated Coase Conjecture. An extensive literature has since explored a range of economic tradeoffs created by secondary markets for a manufacturer.  For example, a vibrant market for pre-owned goods creates a substitute for new goods (a potential negative for the manufacturer), but also raises the perceived value of new goods (a positive for the manufacturer) because a consumer may take resale value into account when purchasing a new good. 

Our proposed research aims to understand the factors that could cause new digital developments in recommerce to alter manufacturer incentives in a manner that naturally leads them to produce more sustainable products of which they actively encourage resale through secondary markets. Our research examines whether each of these developments might motivate a systemic change wherein a manufacturer has an incentive to create new goods of greater durability and resilience, leading to more sustainable consumption, when they might have the opposite effect, and how to nudge outcomes towards the former rather than the latter. 

 

Do Firms Mitigate Climate Impact on Employment? by Viral Acharya (C.V. Starr Professor of Economics in Finance) 
This study examines the extent to which multi-establishment firm networks can mitigate the impact of climate change on employment. Using establishment-level data on public and private firms, we investigate whether firms relocate labor and capital from establishments impacted by heat shocks to non-impacted establishments (especially to those in regions less exposed to heat stress) of the same firm. We find that firms with geographically dispersed networks adjust more strongly, resulting in lower aggregate employment losses. Firm characteristics (e.g., size, leverage, and CEO commitments) and industry characteristics (e.g., energy consumption and labor mobility) significantly affect the firm's ability to adjust to shocks. Overall, our findings contribute to a better understanding of how firms adapt to the changing climate and the economic implications of climate change.

 

The Green Impact of Green Bonds by Jeffrey Wurgler (Professor in Finance)
Some observers view “green bonds” as a promising capital market response to environmental concerns. We examine a large sample of U.S. green bond issues and track the extent to which the proceeds are associated with incremental environmental benefits over and above the assets and businesses in which the issuer has traditionally engaged. In fact, we find that numerous green bond issuers—exact % to be computed, expected ~40% of corporate issuers and exact % to be computer, expected ~30% of municipal issuers—use the proceeds of green bonds merely to refinance ordinary (non-green-labeled) debt. Most of the remaining issuers apply green bond proceeds to expand projects in which they were already heavily engaged or initiate new projects of little green novelty.

 

Improving Artisans’ Productivity with Data-driven Analytics by Divya Dinghvi (Assistant Professor in Technology, Operations and Statistics) 
In many developing countries, textile manufacturing continues to be a significant employment sector (e.g., accounting for 8% of total employment in India), making artisans’ welfare an important social, economic, and political issue. Textile supply chains in developing countries are highly fragmented and opaque. In the upstream, thousands of smallholder artisans (mostly women), often distributed in remote and isolated geographical regions, continue to be the main producers. In the middle, there is a complex network of traders and intermediaries who buy from artisans and eventually sell to consumers. In the downstream, end consumers pay a premium for products, but with limited traceability in the supply chain, only a small fraction of it ultimately goes back to the upstream artisans. Due to the highly fragmented and nontransparent nature of these supply chains, smallholder artisans in developing countries persistently struggle with low productivity and high poverty (Brannigan 2020). Improving artisans’ livelihoods can contribute to addressing the challenge of economic inequality and poverty in the developing world. 

To this end, many countries in Latin America, Africa and Asia have seen multiple digital platforms that improve artisans’ market access, and better inform their decisions. The common mode of operation for these platforms is as follows. First, since most smallholder artisans are poor, the platforms provide raw materials, infrastructure (looms, sewing machines, etc.), and training to artisans. Second, these platforms have a team of supervisors who are the touch points with artisans to manage and monitor production. Third, since artisans are often located in geographically isolated regions, they also sell the finished goods to customers across the globe through the platform. While rapid growth of digital platforms in this area offers a valuable opportunity to benefit artisans through analytics and optimization, how to best use the data to optimize the operations remains a challenge. 

The Unequal Distribution of Climate Risk Mitigation by Shan Ge (Assistant Professor in Finance)
We study two forms of mitigation to climate risk, their unequal distribution across demographics, and their economic effect. First, we examine tree coverage, which we find can substantially reduce summer temperatures, as global warming worsens. Trees provide natural adaptation to climate change-related heat risk but are less prevalent in minority and poorer areas. We investigate whether these benefits are capitalized into house prices and how tree coverage will shape the burden of climate risk across neighborhoods and demographic groups. So far, we find that houses in neighborhoods with more tree coverage experience a relative price appreciation in hot summers compared to those with less tree coverage within the same county and year.

Second, we examine levees. One of the most devastating effects of climate change is sea level rise, which will cause more flooding. Since 1990, 214 levees have been built in the U.S., which substantially changed the flood risk for over 600,000 houses. In this project, we study the effect of these community adaptation efforts on the supply of residential properties and home prices. We first focus on the areas that are protected by these levees. So far, we find that building activities and the supply of new residential properties increase drastically following the building of levees. However, home prices decline in areas newly protected by levees, potentially driven by a reduction in building costs due to the relaxation of building requirements. When levees are built, some other areas can become more prone to flooding since flood water now has more limited outlets. We aim to examine the effect on areas that are negatively affected by levees next.

 

Voluntary Disclosures of EEO-1 Forms by April Klein (Professor in Accounting) 
An increasing number of institutional investors have been advocating the disclosure of regulated, quantitative workforce diversity data that make firms comparable over time and across industries. In response to those initiatives, many Fortune 500 companies started publishing Consolidated EEO-1 reports, a comprehensive yet standardized breakdown of employees by gender, ethnicity, and job category (see attached). All firms with at least 100 employees are obligated on a yearly basis to file these reports with the U.S. Equal Employment Commission. EEO-1 forms are (so far) FOIA-protected, so any publication of this document by a firm would be done strictly on a voluntary basis. Our project aims to shed light on how the public disclosure of such mandated yet voluntary workforce data impacts business practices and how those new practices translate into real benefits for society.

 

Additional information about the CSB Research Grant program is available here.