The importance of climate risks for institutional investors

According to our survey about climate risk perceptions, institutional investors believe climate risks have financial implications for their portfolio firms and that these risks, particularly regulatory risks, already have begun to materialize. Many of the investors, especially the long-term, larger, and ESG-oriented ones, consider risk management and engagement, rather than divestment, to be the better approach for addressing climate risks. Although surveyed investors believe that some equity valuations do not fully reflect climate risks, their perceived overvaluations are not large

ESG shareholder engagement and downside risk

We show that engagement on environmental, social, and governance issues can benefit shareholders by reducing firms’ downside risks. We find that the risk reductions (measured using value at risk [VaR] and lower partial moments) vary across engagement types and success rates. Engagement is most effective in lowering downside risk when addressing environmental topics (primarily climate change). Further, targets with large downside risk reductions exhibit a decrease in environmental incidents after the engagement. We estimate that the VaR of engagement targets decreases by 9 percent of the standard deviation after successful engagements, relative to control firms

ESG Shareholder Engagement and Downside Risk

We show that engagement on environmental, social, and governance issues can benefit shareholders by reducing firms’ downside risks. We find that the risk reductions (measured using value at risk and lower partial moments) vary across engagement types and success rates. Engagement is most effective in lowering downside risk when addressing environmental topics (primarily climate change). Further, targets with large downside risk reductions exhibit a decrease in environmental incidents after the engagement. We estimate that the value at risk of engagement targets decreases by 9% of the standard deviation after successful engagements, relative to control firms

Improving the measurement of oral health-related quality of life: Rasch model of the oral health impact profile-14

Objectives: The 14-item Oral Health Impact Profile (OHIP-14) is the most frequently used instrument to measure oral health-related quality-of-life (OHRQoL) in adults. Despite its popularity, its psychometric properties have been predominantly investigated based on the classical test theory while the fundamental principles of measurement have not been fully assessed. Therefore, our aim was to investigate to what extent the OHIP-14 meets the fundamental requirments of measurements. Methods: We used the Rasch model to explore person-item-targeting, unidimensionality, local independence of items, invariance (differential-item-functioning, DIF), and the order of thresholds between response-options in the German version OHIP-14. We used data from osteoarthritis patients because hand disabilities and joint pain might influence oral hygiene. Furthermore, osteoarthritis in the temporomandibular-joint directly affects oral functioning. Results: Five-hundred sixteen patients were included (mean age 66.5 years [+/- 10.2; ranging from 34 to 89]; 71.3% [368] females). The OHIP-14 median total score was 0 (interquartile-range from 0 to 4), indicating a right-skewed distribution because many patients reported good OHRQoL. The instrument was found unidimensional. However, there was strong evidence of local dependency, disordered thresholds between responseoptions, and age-related DIF for item 5. A revised scoring scheme with three instead of five answer-options in all items and eliminating two items resolving local dependency, the newly adapted OHIP-12, showed better reliability and item-fit to the Rasch model than the original OHIP-14. Conclusions: This study assesses, for the first time, the OHIP-14 in terms of fundamental principles of measurement and proposes an item-reduced OHIP-12 as a psychometrically more accurate version of the instrument. Clinical significance: The Rasch model is essential to ensure instruments' precision and clinical meaningfulness when measuring OHRQoL in clinical practice and research. The OHIP-12, derived from the OHIP-14 by deleting two items due to local dependency, with a revised scoring scheme for all items distinguishing three answeroptions instead of five, represents a psychometrically improved version of the instrument.Clinical epidemiolog

Demographic, clinical and antibody characteristics of patients with digital ulcers in systemic sclerosis: data from the DUO Registry

OBJECTIVES: The Digital Ulcers Outcome (DUO) Registry was designed to describe the clinical and antibody characteristics, disease course and outcomes of patients with digital ulcers associated with systemic sclerosis (SSc). METHODS: The DUO Registry is a European, prospective, multicentre, observational, registry of SSc patients with ongoing digital ulcer disease, irrespective of treatment regimen. Data collected included demographics, SSc duration, SSc subset, internal organ manifestations, autoantibodies, previous and ongoing interventions and complications related to digital ulcers. RESULTS: Up to 19 November 2010 a total of 2439 patients had enrolled into the registry. Most were classified as either limited cutaneous SSc (lcSSc; 52.2%) or diffuse cutaneous SSc (dcSSc; 36.9%). Digital ulcers developed earlier in patients with dcSSc compared with lcSSc. Almost all patients (95.7%) tested positive for antinuclear antibodies, 45.2% for anti-scleroderma-70 and 43.6% for anticentromere antibodies (ACA). The first digital ulcer in the anti-scleroderma-70-positive patient cohort occurred approximately 5 years earlier than the ACA-positive patient group. CONCLUSIONS: This study provides data from a large cohort of SSc patients with a history of digital ulcers. The early occurrence and high frequency of digital ulcer complications are especially seen in patients with dcSSc and/or anti-scleroderma-70 antibodies

ESG and Downside Risks: Implications for Pension Funds

Due to their long-term horizons, pension funds face enhanced exposures to the long-lived effects of many ESG risks. Moreover, given the potential consequences of being underfunded, pension funds are particularly exposed to ESG-related downside risks, especially those related to climate change. We discuss the implications of these risks and provide evidence on institutional investors’ perspectives on climate-related downside risks and how these risks are priced in financial markets. We also document how institutional investors address climate risks in the investment process, with a focus on the role of engagement versus divestment

Managerial Short-Termism and Investment: Evidence from Accelerated Option Vesting

We show that executives cut investment when their incentives become more short term. We examine a unique event in which hundreds of firms eliminated option vesting periods to avoid a drop in income under accounting rule FAS 123-R. This event allowed executives to exercise options earlier and thus profit from boosting short-term performance. Our identification exploits that FAS 123-R’s adoption was staggered almost randomly by firms’ fiscal year-ends. CEOs cut investment and reported higher short-term earnings after option acceleration, and they subsequently increased equity sales