Featured faculty: Michael Zhang
Written by Sally Ho

Social media has levelled the playing field of access to financial knowledge, granting institutional and retail investors alike equal access to timely news and sentiment that shape their decisions. Take the collapse of Silicon Valley Bank in 2023, for example. A panic spiralled on social media turned a bank with US$212 billion in assets into bankruptcy in just two days.

Meanwhile, environmental, social and governance (ESG) performance has become one of the most talked-about corporate lingos, not just among consumers but also as a signal in modern investing. Companies are held accountable for their sustainability claims and practices, and failure to do so may put them in the spotlight or, even worse, lawsuits.

Retail investors nowadays increasingly express their views online, influencing other investors’ behaviour and market movements. On social media, a company’s stance on climate change, labour practices, or corporate governance can spark heated discussions. However, little is known about how much retail investors actually value ESG practices among corporates.

“Sustainable investing has accelerated in the past few years, but most discourses focus on how ESG affects firm value or analyst recommendations,” says Michael Zhang, Wei Lun Professor of Business AI at the Department of Decisions, Operations and Technology at the Chinese University of Hong Kong (CUHK) Business School.

“There is a significant gap between the rising importance of ESG in the corporate world and the lack of understanding regarding how retail investors actually process ESG-related information.”

Professor Zhang’s latest study, Attention or sentiment: How social media react to ESG?, aims to address this gap and finds that, when it comes to sustainability, retail investors’ talk and walk don’t always go hand in hand. While retail investors do care about ESG, they may not be able to determine if such practices are financially material in the short term.

Classic dilemma of profit vs. planet

To explore how retail investors react on social media about companies’ ESG performance, Professor Zhang, along with Kalok Chan at City University of Hong Kong, Xu Dapeng of South China University of Technology, and Hong Hong of Tongji University, examines tens of thousands of posts on Seeking Alpha, a popular online community platform for retail stock investors.

With more than 17 million monthly visitors, Seeking Alpha publishes content written by diverse contributors and features comment sections, forums, and groups where users discuss investment strategies. Given these characteristics, this platform has been dubbed social media for retail investors.

The researchers focus on firms in the S&P 500 index, or the top US-listed companies. After including only firms discussed on Seeking Alpha and having ESG scores, the final sample consists of 429 firms.

“Managers should realise that in the short term, ESG gets you noticed, but financial metrics likely still drive the sentiments.”

Professor Michael Zhang

Given that online attention and sentiment are often drivers of stock market volatility and trading volume, the team categorised the posts into two key responses: social media attention and social media sentiment. Attention refers to how many posts are about a certain company, and sentiment refers to the emotional tone, including optimistic or pessimistic attitudes, towards the company.

After matching and analysing the social media posts with ESG performance scores from Sustainalytics, a global provider of ESG ratings and data, the researchers found that firms with strong ESG scores attract more social media attention. ESG score upgrades are associated with increased social media attention, while downgrades result in decreases in the following months.

However, retail investors on the platform do not necessarily express more positive feelings toward firms with high ESG scores. Investors also do not show more positive sentiment after ESG upgrades or more negative sentiment after downgrades. This suggests a disconnect where sustainability sentiment does not always align with visibility.

Talk is cheap, but vibe speaks volumes

The study further examines the three major components of ESG separately and their individual impact on social media attention and sentiment. The environmental and social components represent the main drivers of increased attention online, while the governance aspect did not have any significant impact.

For online sentiment, social and governance aspects have no significant impact, but surprisingly, the environmental score alone is associated with less favourable sentiment. This finding might seem counterintuitive, but it aligns with a specific stream of financial theory: many retail investors treat environmental efforts as a cost, rather than a clear financial benefit.

“It is likely that retail investors in these online communities often view high environmental commitment as a financial burden,” Professor Zhang says. “From a utilitarian investment perspective, extensive spending on environmental initiatives, like emission cuts or resource reduction, can be seen as an expense that might hurt financial performance.”

Despite being beneficial to wider society, investing in sustainability initiatives can raise questions about short-term profitability and provoke scepticism due to a perceived threat to a company’s bottom line. It appears that retail investors on online forums tend to be driven primarily by financial concerns, rather than environmental causes.

Research implications and future directions

ESG activities may increase visibility among retail investors, but firms shouldn’t assume that higher visibility automatically translates into a positive image, since investor sentiment is driven by profit. “Companies need to manage their expectations regarding the return on their ESG investments when it comes to public perception,” Professor Zhang adds.

“Maintaining ESG standards is crucial for relevance and visibility, even if it doesn’t immediately result in a warmer reception from retail investors. Managers should realise that in the short term, ESG gets you noticed, but financial metrics likely still drive the sentiment.”

For market analysts and regulators, the disconnect between attention and sentiment raises questions about how ESG information is communicated and interpreted. Social media may amplify awareness, but it doesn’t guarantee confidence in sustainability practices or in their financial implications.

Looking ahead, Professor Zhang expects to examine whether the findings hold true for smaller-cap companies, not just S&P 500 firms. “We also plan to explore other digital channels such as X [formerly Twitter], Yahoo! Finance, or Google search to see if the attention and sentiment dynamics might differ on general social media platforms,” he adds.

For now, the key takeaway is clear. In the digital age, seeing isn’t always believing. ESG draws attention, but steering investor sentiment requires more than just doing good.

The post Do retail investors really care about sustainability? first appeared on China Business Knowledge.

Featured faculty: Zhou Xiaolu
Written by Putro Harnowo

Corporate social responsibility, or CSR, is an integral part of modern business strategy. Traditional CSR practices have revolved around charity, philanthropy, and volunteering, but the growing demand for sustainable business practices has transformed CSR activities into a broader scope well beyond simply giving back to society.

While regulators worldwide have now imposed mandatory CSR and sustainability reporting, a genuine desire to contribute to society may motivate corporate good deeds. However, the late American economist Milton Friedman famously argued that “there’s no such thing as a free lunch.” For businesses, CSR can improve brand perception and build public trust, but it comes at a cost.

Zhou Xiaolu, Assistant Professor of Accounting at the Chinese University of Hong Kong (CUHK) Business School, notes that CSR activities can be seen from two viewpoints: either firms genuinely care about the social and environmental impacts over profits, or they seek to enhance brand value and ultimately boost profits. An extensive body of literature shows the latter is more prevalent.

“CSR investment mostly depends on stakeholders’ demand and what the firm can offer cost-effectively,” says Professor Zhou. “Firms are constrained by limited resources to keep their reputation and meet regulatory requirements, so managers need to balance the various aspects of CSR.”

As companies face growing pressure to act responsibly on several fronts, navigating all dimensions of social responsibility becomes more challenging. Her latest study, Substitution between corporate social responsibility activities: Evidence from hiring and mistreating unauthorised workers and pollution, sheds light on the practicality of CSR initiatives and reveals that increasing one facet of social responsibility may lead to a reduction of another domain.

“When a regulation mandates one aspect of CSR to improve, managers may prioritise compliance and reduce investment in other CSR activities. Those with the highest marginal cost or the lowest return are most likely to be curtailed, resulting in a substitution among CSR initiatives,” she adds.

Evidence from the fields

In the study, Professor Zhou collaborates with Huang Ying and Li Ningzhong of the University of Texas at Dallas, and looks into a US government policy called E-Verify that allows companies to verify with the federal data whether their employees are eligible to take the job.

Nine states require universal E-Verify, compelling all employers to verify the work authorisation of employees. Meanwhile, 13 states enforce public E-Verify, which only orders public employers and contractors to verify all of their employee data. The researchers find that this policy profoundly influences CSR activities.

The Pew Research Centre’s report shows that the US had around 8.3 million undocumented workers in 2022, or almost five per cent of the workforce, who often took low-paying jobs in manufacturing, metal mining, electric power generation, and waste treatment. Fear of deportation left them vulnerable to workplace abuses, such as underpayment and unsafe working conditions.

“Firms are constrained by limited resources to keep their reputation and meet regulatory requirements, so managers need to balance the various aspects of CSR.”

Professor Zhou Xiaolu

The researchers analyse the Occupational Safety and Health Administration data from 2000 to 2018 and discover that the adoption of a universal E-Verify mandate reduces the likelihood of labour violations due to hazardous chemicals by 1.4 per cent and the likelihood of being fined for labour violations by 5.9 per cent.

Progress in one CSR area can undermine another

The researchers then compare the E-Verify data from 2000 to 2018 with the pollution data of 39,063 plants from the Toxic Release Inventory Programme that details the release of toxic chemicals to the air, water, and ground. Around eight per cent of observations in the sample are in states with universal E-Verify mandates, and 14 per cent are in states mandating public E-Verify.

The analyses suggest that when states adopt the universal E-Verify, pollution increases by 10 to 11 per cent with the effect becoming stronger over time. The public E-Verify mandate leads to a four to five per cent increase in pollution.

In states with a higher fraction of undocumented workers, toxic releases increase by 17 to 22 per cent after the universal E-Verify mandate and 13 to 15 per cent after the public E-Verify mandates.

Further analyses find that E-Verify mandates do not lead to financial constraints, and the increased pollution is mainly attributed to reduced emission efficiency. This means that companies substitute between different types of CSR activities as a trade-off when one area demands more attention.

“CSR substitution is a rational business decision to reallocate resources. Therefore, stakeholders may need to evaluate CSR holistically rather than in isolated aspects,” says Professor Zhou. “A company’s true commitment to sustainability can be understood by looking at the full picture and the trade-offs the company makes.”

Keeping accountability on responsibility

As many countries increasingly enforce certain aspects of CSR, such as Germany’s compulsory seats in supervisory boards for worker representatives, Australia’s mandatory environmental rehabilitation funds, and the like, the study shows that such policies may reduce other CSR activities. The substitution may occur gradually, making the hidden trade-offs harder to detect.

“When crafting policy, legislators should consider safeguards to prevent backsliding in other CSR domains. However, the optimal design will depend on many factors, such as regulatory context, industry characteristics, and resource constraints,” says Professor Zhou.

Furthermore, she notes that although substitution can theoretically apply to all CSR activities, the study does not imply that substitution should exist or should only exist for pollution.

“Cost and benefit trade-offs vary by firm and context, so it is difficult to have a one-size-fits-all prescription for CSR substitution,” she adds. “While our results show substitution between labour standards and pollution control, not all CSR activities are interchangeable, and some trade-offs are just impractical.”

Future studies could explore substitutions among other CSR activities and, if possible, develop a more robust framework for empirically identifying the most substituted activity.

The post Are companies just shifting CSR problems? first appeared on China Business Knowledge.

Featured faculty: Janja Brendel
Written by Sally Ho

The global push for environmental, social and governance (ESG) compliance has driven firms to live up to responsible business practices, but this demand does not always go hand in hand with profits. Some firms take a shortcut by fabricating claims, which can be perplexing to spot for untrained eyes. For non-governmental organisations (NGOs), spotting fraud is one of their bread and butter.

A German non-profit, Deutsche Umwelthilfe, to name a few, has put an end to false and misleading sustainable claims of more than 100 companies. In the US, the California-based Earth Island Institute has sued global major food and beverage companies and other big brands for making baseless statements about the recyclability of their products.

“Armed with little more than evidence, social and environmental activists can successfully challenge corporate giants. NGOs, in particular, may force tangible changes in their environmental and social conduct,” says Janja Brendel, Assistant Professor at the School of Accountancy at the Chinese University of Hong Kong (CUHK) Business School.

“NGOs play a crucial role in advancing corporate sustainability, but their impact remains underexplored. At the same time, the growing prevalence of misleading environmental and social claims by corporations underscores the need to assess NGOs’ effectiveness as independent watchdogs.”

In a paper titled The value of NGO activism, Professor Brendel, in collaboration with Chen Cai at CUHK Shenzhen, Thomas Keusch at INSEAD, and Zacharias Sautner at the University of Zurich, explores what happens when NGOs accuse firms of misleading environmental and social claims and whether those accusations lead to meaningful change.

“We wanted to understand whether NGO campaigns targeting misleading environmental and social claims influence corporate behaviour and investor perceptions, given the growing sustainability concerns,” Professor Brendel adds.

“Armed with little more than evidence, social and environmental activists can successfully challenge corporate giants.”

Professor Janja Brendel

When watchdogs bark, markets listen

Professor Brendel and the team compiled 1,212 allegations filed by 329 NGOs across 24 countries targeting 287 publicly listed firms between 2011 and 2022. These target firms are typically large consumer-facing firms, such as food giants and apparel brands, whose public image is often closely tied to their marketing.

Overall, larger firms with more media coverage are generally more exposed. The data reveal that consumer services and goods firms face more allegations due to their direct customer interaction. Oil and gas firms are also targeted heavily, especially for climate-related claims. Most of the bogus claims didn’t appear in official reports filed with regulators, but in marketing materials by presenting products as greener than they actually are.

NGO campaigns rarely exist in isolation and can quickly ripple into public discourse. Stories picked up by news outlets often snowball across mainstream channels, turning NGO’s tweets or press releases into a reputational storm that companies can’t ignore. Soon after NGOs publish an allegation, the study finds a 14.6 per cent increase in negative ESG-related media coverage about the alleged firms.

Shareholders often act quickly. Within three days, the alleged company’s stock price fell by an average of 0.34 per cent, marking a meaningful dip for large firms. Being accused of making false environmental claims also makes their profits drop by 11.4 per cent compared to similar companies that weren’t accused, suggesting consumers’ negative reactions, possibly influenced by NGO reports.

The backlash is more damaging for the firms when the NGO has a strong reputation and the issue is considered financially material, which can affect the company’s profits, stock price, or overall value. For instance, severe pollution could lead to costly fines and human rights violations would trigger catastrophic lawsuits or customer distrust.

The most consequential result is that NGO campaigns can actually change corporate behaviours. In the years following a greenwashing allegation, firms reduced their direct emissions by about five to seven per cent compared to similar firms without allegations.

“Therefore, NGOs may enhance their approach by highlighting issues that can bring financial impact to the alleged firms while also strategically convincing climate-conscious institutional shareholders, leveraging their campaigns as a catalyst to amplify corporate accountability within the ownership structure,” Professor Brendel adds.

Lessons for consumers, companies, and investors

The study highlights NGO’s role as a fact-checker, since misleading claims appear mostly in marketing materials rather than formal reports, helping the public see past the buzzwords. NGO reports can also serve as valuable resources to gauge corporate accountability, as evidence-backed allegations can affect stock prices and hint at deeper governance issues.

“NGOs can complement regulators by scrutinising a wider range of corporate communications, especially consumer-facing ads and labels that fall outside formal reporting rules,” says Professor Brendel. “Their independent expertise and evidence-based allegations provide a crucial oversight, helping to ensure stakeholders have unbiased information.”

Furthermore, Professor Brendel anticipates a more interconnected system where NGO activism directly catalyses investor engagement and regulatory scrutiny, creating a feedback loop that pressures corporations. “Regulators like the European Securities and Markets Authority have declared the vital role of NGOs as indispensable watchdogs. We will probably see more regulators following suit, making use of the evidence collected by civil society.”

For companies, the findings can be interpreted as a clear warning. Overselling sustainability may not only tarnish their reputations but also trigger financial consequences. Unfortunately, some firms manage to find a loophole by shifting their carbon-intensive activities. While the alleged firms eventually reduce their emissions, the study finds their carbon emissions from the supply chain increase, suggesting that they relocate polluting industrial processes overseas.

This underscores a broader lesson. NGO activism can drive firms to reduce emissions, but lasting progress depends on the accountability of the shared ecosystem between civil society and regulators.

The post How non-profits push firms to walk their green talk first appeared on China Business Knowledge.

Featured faculty: Elisa Chan
Written by Pan Jingyi

You might think that being eco-friendly, such as choosing sustainable products, conserving energy and water, and using public transport instead of driving, means you’re doing your part for the planet. But if you’re still tossing out wilted lettuce or forgotten leftovers, you’re missing a crucial piece of the sustainability puzzle.

Food production, transport, and disposal emit carbon dioxide, and when wasted food ends up in landfills, it releases an even more potent greenhouse gas: methane. According to the UN’s 2024 report, food waste accounts for 8 to 10 per cent of annual global greenhouse gas emissions, nearly five times the total emissions generated by the aviation sector each year.

“Enhancing individuals’ awareness of the risks and consequences associated with food waste should be a primary goal in addressing the food waste challenge.”

Professor Elisa Chan

Nevertheless, food waste often slips under the radar. The UN Sustainable Development Goal has aimed for a 50 per cent reduction in food waste at the retail and consumer levels by 2030, but an estimated one-third of the food produced globally for human consumption is still either wasted or lost in the supply chains.

A new study by Elisa Chan, Assistant Professor at the School of Hotel and Tourism Management at the Chinese University of Hong Kong (CUHK) Business School, reveals that even environmentally conscious people often overlook the serious consequences of food waste. People’s eco-friendly habits often stop at the kitchen door, and the solution isn’t just simply more education.

Being environmentally friendly only leads to real action against food waste if individuals also understand the actual harm it causes. In other words, general awareness is not enough to bridge the gap between pro-environmental beliefs and practical behaviours. “Enhancing individuals’ awareness of the risks and consequences associated with food waste should be a primary goal in addressing the food waste challenge,” says Professor Chan.

The culinary, restaurant, and broader food industry should tailor their sustainability campaigns to emphasise the serious consequences of food waste, thereby strengthening consumers’ negative attitudes towards wasting food. This will urge consumers to take more environmentally conscious actions, such as careful food planning, proper food storage, and mindful food consumption.

Why doesn’t a green mindset translate to action?

In collaboration with Carlos Martin-Rios of the EHL Hospitality Business School (Switzerland) and his PhD student Julneth Rogenhofer, as well as Maria-Eugenia Ruiz-Molina of the University of Valencia (Spain), Professor Chan explores Young professionals’ attitudes towards food waste: A global study on awareness, behaviour, and regional differences.

The team conducted an online survey of more than 600 young professionals across Asia, Europe, and North America, particularly those transitioning from academic studies into professional careers. “These young professionals are the future decision-makers and are encouraged to take on more social responsibilities,” says Professor Chan.

Participants were asked how strongly they try to avoid wasting food, how often they engage in various environmental actions, and how well they understand the negative impacts of food waste.

The researchers presumed young people’s general pro-environmental behaviours would be positively associated with negative attitudes towards food waste. However, the analyses show that there is no significant correlation between environmentally friendly actions and anti-food waste attitudes.

Professor Chan points to a psychological phenomenon called “intention-behaviour gap,” where people have good intentions but fail to follow through. “This is why most pro-environmental campaigns fall short,” she says.

The analysis of the data also indicates that the gap lies in the lack of awareness about the consequences. When people realise that throwing away food means wasting resources and harming the environment, they are much less likely to do it. “The risks and consequences awareness acts as a critical connector and turns a general concern for the planet into a tangible action about the food on our plate,” Professor Chan adds.

Why culture matters

The study also reveals cultural influences when it comes to food waste. Young professionals from European countries have stronger negative attitudes towards leftovers compared to their counterparts in Asia and the US.

Professor Chan notes that deep-rooted cultural values play a role and may still be ingrained in young professionals. For example, in Chinese culture, showing hospitality often means offering voluminous and variety of food at social events, shifting the focus away from overconsumption and leftovers concerns.

This doesn’t mean one culture cares about food waste more than another. Rather, it highlights that anti-waste campaigns need to be culturally tailored. As Professor Chan notes, “Food waste reduction messages and educational initiatives that neglect these culturally embedded values may be less effective.” She also points to traditional practices, like Shanghai’s “xiao die” or small plates, as ways to provide variety without excess in meal planning for both restaurateurs and individual households.

The education paradox

Education is often assumed to be a powerful tool to fill the gap. Therefore, the researchers specifically examined whether students in hospitality or food management programmes had stronger anti-food waste attitudes.

Surprisingly, the results show that students enrolled in such programmes do not exhibit stronger negative attitudes towards food waste. This finding may suggest that academic institutions have not effectively incorporated sustainable and ethical approaches to food waste management into their curricula.

“The current food waste discussion at school may be mostly focused on the supply chain aspect. For example, hotels and restaurants invest in technology to track kitchen waste, but such tools are not available at the consumer level,” Professor Chan says. “Supply side aspect is essential in food waste management and reduction from industrial perspective, but it seems we didn’t put enough focus on consumers’ individual consumption.”

Practical strategies for a greener future

Making food waste more visible can be a strategy to increase awareness. When leftovers and scraps are hidden away, it’s easy for people to ignore the problem. Professor Chan suggests restaurants or canteens could install transparent trash bags and bins, or use waste trackers, to make people aware of how much they’re throwing away.

From the consumer perspective, Professor Chan notes, “Another useful strategy is to leverage rather than change people’s habits in encouraging pro-environmental behaviours.” For instance, as consumers are habitually concerned about pricing, restaurants can charge meals based on the weight of the amount of food taken to discourage food waste. A buffet restaurant in Switzerland called Tibits is known for this pricing scheme.

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Restaurants can also lead by example. Showing the details about their source of ingredients will highlight transparent waste-reducing practices throughout their supply chain. “Seeing how a restaurant expends effort in ensuring pro-environmental and pro-social operations would legitimise the notion of sustainable dining, which would motivate the guests to minimise food waste,” says Professor Chan.

Additionally, Professor Chan notes that creating interactive dining experiences that emphasise aroma, taste, and visual presentation can shift the focus from quantity to quality, making meals memorable for the experience. In doing so, restaurants not only help lower the environmental impact but also meet the growing consumer demand for sustainability.

The post The green illusion: why eco-conscious people still waste food? first appeared on China Business Knowledge.

Featured faculty: Zhang Qi
Written by Putro Harnowo

The global community is increasingly taking a stand on climate change. In July this year, the World Court called out countries failing to meet goals outlined in the Paris Agreement as violating international law, supporting the decision made by the Inter-American Court on Human Rights that a healthy climate is a human right.

While these advisory opinions are not legally binding, a growing number of climate change-related lawsuits are emerging worldwide. Businesses are held accountable for their contributions to or inaction on greenhouse gas emissions and for making false claims about their net zero commitments, a practice known as “greenwashing.”

Recent cases include a US$1.16 million fine imposed on online fashion retailer Shein by an Italian regulator for misleading environmental claims, and legal actions by the Australian consumer watchdog against the producer of popular sunscreen brands, Hawaiian Tropic and Banana Boat, over the claims of reef-friendly products.

These trends signal businesses to double down on or, at the very least, remain mindful of their environmental, social and governance (ESG) efforts. “Reputational damage unfolds quickly as negative climate news sparks public scrutiny, spreading rapidly across the media,” says Zhang Qi, Assistant Professor of Accounting at the Chinese University of Hong Kong (CUHK) Business School.

When facing an ESG crisis, Professor Zhang notes that issuing public statements in a timely manner is critical for businesses to mitigate the damage. However, companies often face challenges in weighing their options. Some prefer to disclose detailed information, and others choose vague messages, corporate lingo or even remain silent. “Negative news amplifies criticism and forces firms to respond, but the responses can either benefit or backfire,” he adds.

In a paper titled Responding to climate change crises: firms’ trade-offs, Professor Zhang and his co-authors underline that sharing information early is crucial for maintaining public trust, and disclosing verified information, such as audited reports, can enhance credibility and lower the risk of further damage. “Without credible, substantive information directly addressing the environmental incident, firms risk losing stakeholder trust, facing boycotts, or experiencing sustained negative sentiment.”

Although giving out detailed information is effective, firms may strategically balance it with a softer approach. For instance, when the consequences of giving less detailed information are negligible, the firm’s established reputation can substantiate allusive statements, but this only works if such reputation exists through the history of publishing ESG reports. So, how to tailor a media strategy that effectively addresses environmental crises threatening a company’s reputation?

Machine learning and social media can help

Along with Felix Fritsch of the University of Mannheim and Xiang Zheng of Nanyang Business School, Professor Zhang leverages machine learning to look at how companies balance different approaches when deciding what to say about climate issues after negative media coverage. For this purpose, social media provides an ideal setting for examining corporate climate-related disclosures, due to its speed, reach and flexibility.

Specifically, the researchers turned to Twitter, which later rebranded to X in July 2023, and developed Climate-TwitterBERT that combines a keyword discovery algorithm with bidirectional encoder representations from transformers (BERT), a language model developed by Google. The researchers then analysed tweets posted by various firms from 2007 to 2020 and were able to pick 136,899 tweets relevant to climate change crises.

“We cover all US public companies with active corporate Twitter accounts, which naturally includes many well-known brands experiencing environmental incidents related to greenhouse gas emissions, global and local pollution, biodiversity or landscape impacts, and waste management,” says Professor Zhang.

“Reputational damage unfolds quickly as negative climate news sparks public scrutiny, spreading rapidly across the media.”

Professor Zhang Qi

The language model was further fine-tuned to categorise tweets into three types: hard responses, soft responses and promotional tweets. Hard responses provide verifiable and measurable information, such as emission reports detailing specific emissions data and quantitative progress toward climate targets. Soft responses reflect vague messages, including aspirational remarks about a commitment to sustainability without specific data and statements on moral positioning on climate issues. Promotional tweets focus on marketing green products and are excluded from analyses.

Their analyses found hard responses generate greater engagement, as measured by number of likes, retweets and replies, suggesting that the public appreciates empirical evidence the most. “Firms in the utilities, consumer cyclicals and basic materials sectors are most likely to issue hard climate disclosures,” he adds. “These industries face higher climate exposure and stakeholder scrutiny, increasing the incentive to provide verifiable information.”

Different problems require bespoke solutions

To understand the distinct approaches employed by the firms, the researchers classify environmental incidents based on media attention. An incident is of low influence if small NGOs, local media and local government report it. Medium-influence are covered by national media and government, as well as international NGOs. Highly influential ones are those covered by international media.

Soft responses typically follow low-influence incidents, but medium-influence crises prompt hard responses. High-influence disasters trigger both responses, supporting the idea that high-profile cases pressure firms to act across multiple fronts. Firms are 37 per cent more likely to disclose hard responses within three days of the incidents, particularly driven by medium and high influences.

Furthermore, having previously published ESG reports gives firms a higher degree of flexibility in deploying hard and soft responses. In contrast, firms that never issued ESG reports tend to avoid providing soft responses, but are also very unlikely to provide hard responses, making the best use of silence.

Firms with ESG reports dealing with low-influence problems tend to use soft responses to provide a quick and straightforward approach. When medium-influence incidents arise, these firms prefer to elicit a hard response as the public expects a substantive explanation. Sustainability reports act as a buffer, allowing firms to respond with initial messages that may be irrelevant and provide more detailed information later.

It is worth noting that not all ESG reports are assured by a credible third party, such as an accounting or audit firm. Firms with assured reports have higher chances of issuing hard responses compared to those with unassured reports. Third-party verification strengthens the substantive messages to deal with medium and high-influence crises.

Interestingly, firms with unassured ESG reports are more likely to respond to non-environmental issues with hard responses on climate change to showcase their commitment to sustainability. However, firms with verified ESG reports tend to respond to non-environmental issues simply with soft responses.

Strengthening ESG disclosures with AI

While the study was conducted using social media data, Professor Zhang believes that the findings can be applied to broader platforms, although the magnitude may differ. “The underlying mechanism should apply across media channels,” he says. “Incidents covered by national or international media outlets tend to elicit hard responses, but whether traditional channels like broadcast and print media exert a stronger effect than social media remains uncertain.”.

ESG issues comprise three core elements. While climate action is powered largely by the environmental piece, ignoring the social and governance sides would be a costly blind spot. As the machine learning model used in the study now focuses on environmental issues, further refinement will be extended to analyse disclosures across wider aspects. “Our model is a general BERT-based framework that can be adapted to other ESG topics. While our current study focuses on Twitter and US firms, future work will extend the approach to different ESG dimensions such as labour practices and diversity.”

Amid the increasing scrutiny on sustainability issues and the advancement of technology, the study opens a higher possibility of applying artificial intelligence (AI) to improve ESG disclosure practices and identify greenwashing. Having said that, achieving greenwashing detection with AI requires clear terminologies and categories, robust fact-claim training datasets and refined models, which means much more needs to be done to make automated greenwashing detection feasible.

As recent large language models can further link the company’s ESG claims to external evidence, such as news articles, financial reports and regulatory filings, enabling scalable fact-checking, Professor Zhang anticipates that these technological breakthroughs will eventually provide easier access for stakeholders to monitor firms’ disclosure practices, forcing companies to provide truthful and high-quality ESG information.

The post Weathering the media storm over the sustainability crisis first appeared on China Business Knowledge.

Featured faculty: Zoe Yang
Written by Pan Jingyi

When someone says, “I drive an electric vehicle or EV because it protects the environment,” it could be music to the ears of climate advocates. Regardless, EVs have reshaped the global transportation landscape, with major traditional global carmakers now joining the race in battery-powered vehicles. In this new wave of the automotive evolution, no country has achieved what China has done.

The Chinese market held almost two-thirds of global EV sales last year, followed by Europe and the US with 17 and 7 per cent, respectively, as reported by Bloomberg. Another report by the International Energy Agency highlights that electric cars accounted for almost half of all China’s car sales in 2024. Meanwhile, the country continues to be the manufacturing hub, contributing to more than 70 per cent of the world’s EV production.

A quick glance may hint that consumer purchase subsidies and government stimulus to boost production capacity are the main drivers. However, despite similar financial incentives, the EV adoption rate in Western nations still lags behind that of their East Asian counterpart. So, what makes China’s approach different, and how does this approach shape market dynamics and consumer choices?

“The expansion of the high-speed rail system is one of the main reasons for the increase in EV market share and sales in China.”

Professor Zoe Yang

“Many countries are growing increasingly concerned about how competitive Chinese EVs have become, and whether that success is primarily due to government support,” says Zoe Yang, Associate Professor at the School of Hotel and Tourism Management at the Chinese University of Hong Kong (CUHK) Business School.

Professor Yang notes that the tariffs imposed by the US and the EU on Chinese EVs in late 2024 reflect growing tensions and a gap in understanding the underlying reason for such rapid ascendancy in green technology. Therefore, she sought the answer in her recent paper, High-speed rail and China’s electric vehicle adoption miracle, and discovered a crucial yet often overlooked factor: Rather than serving as substitutes, high-speed rail and electric vehicles function as complementary modes of transport, together creating an integrated system that supports and accelerates EV adoption.

“The expansion of the high-speed rail system is one of the main reasons for the increase in EV market share and sales in China,” she adds. “Our data indicates that the high-speed rail connectivity can explain up to one-third of the total increase during our sample period.”

In the past two decades, China’s high-speed rail network has risen to become the world’s most extensive and most heavily utilised system. The country’s railway operator aims to extend its operational high-speed rail tracks to about 60,000 km by 2030, up from 48,000 km by the end of 2024.

Putting peace of mind on wheels

While purchasing an EV could be cost-effective and environmentally friendly, one of the biggest hurdles for potential buyers is “range anxiety,” a fear that the car’s battery won’t last for the expected long trips or reach its intended destination. Although there have been considerable improvements in battery capacity and the expansion of charging facilities, the study finds that concerns about such anxiety, especially under certain geographical or climatic conditions, still linger. As a result, conventional cars often remain a more appealing choice for single-car owners.

High-speed rail, however, offers a solution by making long-distance travel more convenient, allowing consumers to rely on EVs for daily short-distance commutes while using faster trains for longer journeys. In other words, high-speed rail enhances the overall practicality of having EVs. “The extensive and well-integrated network of China’s high-speed rail system serves as a reliable complement to EVs, alleviating range anxiety by offering an efficient option for medium to long-distance travel,” Professor Yang says.

Working together with Li Ming of CUHK-Shenzhen, Fang Hanming of the University of Pennsylvania and Wang Long of Fudan University, Professor Yang analysed vehicle registration data from 2010 to 2023 comprehensively, and compared changes in EV market share and sales before and after new high-speed rail lines were built across more than 300 prefectural cities in mainland China.

The team found that the growth in EV adoption following the introduction of high-speed rail connections is substantial, but its impact varied across different regions of the country. The benefits of connected transportation networks are less pronounced in the western part of China, likely due to lower economic development and less developed EV-related infrastructure, as well as in the northeast, where colder climates can pose a challenge to battery performance.

Connectivity and synergy with other policies

In the following steps, more than 7,000 EV-related policy documents were examined between 2010 and 2022, along with data on EV charging stations across 328 Chinese cities from 2010 to 2023, and China’s road infrastructure and connectivity through 2023. The results confirmed that high-speed rail connectivity is an independent and robust factor that contributes to the rapid adoption of EVs.

However, the well-connected railway network is not the exclusive driving force behind EV adoption. Other factors, such as local industrial policies, charging infrastructure and economic development, cannot be neglected in building a comprehensive grid that boosts confidence in electric cars.

Specifically, consumer purchase subsidies are particularly effective in fostering EV adoption for cities connected by high-speed rail, and the high-speed rail connectivity also leads to more charging stations. When both combine, the positive impact on EV adoption is greater than either factor would achieve alone.

“While the high-speed rail connection enhances early EV adoption by alleviating consumers’ range anxiety, the larger consumer base creates an agglomeration effect and further fosters the construction of charging stations, and the two jointly benefit future consumers,” Professor Yang says, adding that the synergy between the high-speed rail network and other infrastructure and policies may explain why the connection has a persistent and growing effect on EV adoption.

Integrated strategies for sustainable development

The study challenges the misconception that China’s dominance in the EV market is attributed solely to consumer purchase subsidies and government policies aimed at enhancing production capacity, revealing a more nuanced picture and offering valuable insights for policymakers around the world. The lesson is clear: accelerating the transition to EV requires not just better cars, more supportive policies, and more charging stations, but also integrated transportation systems.

“The high-speed railway is not the only solution,” Professor Yang says. The essential takeaway for other countries is that complementary transportation can reduce long-distance travel concerns and accelerate EV adoption. “Whether it is high-speed railway, express bus systems or charging networks, the goal is to build confidence in the practicality of EV ownership, especially for users who still depend on long-distance mobility.”

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At the same time, due to regional disparities, strategies must be tailored to local conditions such as infrastructure readiness, income levels and travel patterns. “Governments can offer higher EV purchase subsidies in less-developed areas and expand heated or indoor charging stations in cold regions,” she adds.

Whether in transportation or other sectors, Professor Yang underscores the significance of integrated planning, which can drive significant and long-term change. “Infrastructure and technology adoption are deeply interconnected. Aligning the two can create powerful synergies that drive sustainable development.”

 

The post How high-speed rail supercharges China’s EV adoption first appeared on China Business Knowledge.

Featured faculty: George Yang
Written by Ellis Ng

Environmental, social and governance (ESG) are the three words that have transformed the stock market over the past decade. As investors increasingly factor sustainability into their decisions, the shift is creating unexpected ripples in how stock prices reflect company performance.

By late 2024, green, social, sustainability and sustainability-linked bonds reached a staggering US$6.6 trillion globally, according to a leading European financial services group Societe Generale. The growth has been particularly significant in Asia, where companies are racing to meet international ESG standards to maintain their competitive edge and support the region’s transition to net-zero emissions.

“Firms’ performance in addressing ESG issues and ESG reporting and disclosure is more and more emphasised by corporate stakeholders and regulators, but the inherent complexity of making financial implication from ESG information means that investors will encounter severe challenges to incorporate it in their investment decisions,” says George Yang, Professor of School of Accountancy at the Chinese University of Hong Kong (CUHK) Business School. “Therefore, it should be enlightening to understand the status of the impact of such challenges in stock valuation.”

Stock price represents the company value and it reflects the company’s all future profits in investors’ expectations. However, the increasing ownership by investors with an emphasis on ESG may be shortening that “futureness.”

A new study by Professor Yang and his PhD student Zhang Yaojia, as well as Zhan Xintong of Fudan University and Zhang Weiming of IE University, uncovers a surprising consequence of this transformation. Their research paper titled Socially responsible investors and stock price informativeness discloses that the growing influence of socially responsible investing makes stock prices less reflective of companies’ future earnings.

Green waves sweep markets

When companies have many investors focused on social responsibility, the study found they experience two interesting effects. First, their stock prices don’t change as dramatically when earnings information comes out. However, when these companies face any issues related to ESG, their stock prices react more strongly.

To reach these conclusions, researchers studied the data of 22,059 American listed companies between 2004 and 2019 from S&P Compustat, the Centre for Research in Security Prices and Thomson Reuters. They identified socially responsible institutional ownership by examining how high their investment portfolios scored on ESG factors. They then analysed how much information about future earnings is reflected in the current stock price and studied whether having more socially responsible investors changes this relationship.

The researchers needed to ensure their findings weren’t skewed by investors’ selection. To do this, they looked for situations where exogenous events, rather than investor preferences, caused changes in socially responsible institutional ownership.

“An increase of the socially responsible investor ownership by one standard deviation is associated with about a reduction of 9 per cent of the stock price informativeness on future earnings.”

Professor George Yang

To see the funds’ performance, the researchers turned to the Morningstar Rating that ranks publicly traded mutual funds and exchange-traded funds. Due to random market or industry factors instead of savvy investment, the funds can earn an extra star in their rating, and this small change typically attracts additional cash flows. The researchers then compared socially responsible funds that received rating upgrades against similar traditional funds that didn’t get upgrades.

The analyses found that mutual funds that receive a higher rating from Morningstar suddenly had more socially responsible investors, likely not because of improved financial performance, business fundamentals, or overall quality, but merely for their better rankings. This result helped the researchers understand how an increase in green investors affects stock prices.

The study shows an important change in how company stocks are valued when they have many socially responsible investors. A higher level of socially responsible investors is associated with a lower level of stock price informativeness on future earnings, which implies that the green investors do not invest in firms’ long-term financial success as they promised.

“Socially responsible investor ownership has been substantially increasing in public firms around the world,” Professor Yang says. “Our evidence shows that the rise of such ownership is accompanied by reduced informativeness of stock price on firms’ future earnings.”

Socially responsible investors are found to place more weight on a company’s environmental and social impact than on its financial performance. As a result, the stock prices of these companies tend to reflect more ESG information and less earnings information, representing significant challenges investors face when processing information and allocating attention.

“An increase of the socially responsible investor ownership by one standard deviation is associated with about a reduction of 9 per cent of the stock price informativeness on future earnings,” he adds.

Feedback loop challenge

Professor Yang highlights that the above effect becomes even stronger when rating agencies like MSCI and Thomson Reuters ASSET4 give conflicting assessments of the same company. This is likely because socially responsible investors spend more time understanding these disparities and making their own judgments, meaning they have less time and resources to analyse traditional financial information.

When climate change gets more media coverage, socially responsible investors become more focused on environmental issues. They spend more time evaluating how companies are handling climate-related risks and opportunities and less time analysing financial performance.

“We observe that when socially responsible investor ownership increases, a company’s stock price is less responsive to information about future earnings, including the earnings forecasts supplied by firm management or those produced by financial analysts,” Professor Yang says.

These analysts, who typically focus on traditional financial measures, find it harder to predict earnings for these companies. They also struggle to adapt their analysis methods to include the environmental and social factors that socially responsible investors care about.

It all but leads to a feedback loop: As more socially responsible investors buy into companies, stock prices become less reflective of future earnings. It makes these companies less penetrable to investors who are familiar with the traditional valuation framework but not yet equipped with tools to dichotomise the new valuation factors (namely, ESG-related risk and performance).

Professor Yang notes that investors face significant challenges when trying to include environmental and social factors in their investment decisions because these factors aren’t purely financial. As more investors embrace socially responsible investing, there is a need to understand how the trend is affecting the sustainability of the financial system.

“Investors should spend more effort to figure out how to parse out the value-relevant portion of the ESG-related information and integrate such information with traditionally used financial information to form investment decisions,” he adds. “They need to be aware that this is not an easy task.”

The post Are green investments hurting the futureness of the stock price? first appeared on China Business Knowledge.

Featured faculty: Hong Ying-yi
Written by Pan Jingyi

Each year, scientists issue warnings about breaking temperature records, and regrettably, this troubling trend continues. The latest World Meteorological Organisation State of the Climate Update indicates that 2024 is on track to be the warmest year, with a global mean surface temperature of 1.54 °C above pre-industrial levels during the first nine months.

From the severe drought in central China during the summer of 2024 to Spain’s devastating floods in October of the same year, people around the world are grappling with increasingly frequent extreme climate events. However, a 2023 report by French energy company EDF reveals that 36 per cent of the global population continues to question the human origins of climate change.

“As extreme weather events become more prevalent, our findings indicate that climate change sceptics would shift their beliefs after experiencing these events by themselves.”

Professor Hong Ying-yi

Experiencing anomalous weather conditions first-hand may influence people’s perceptions of climate change, but what about those who believe in climate change conspiracy theories? Will they still trust the conspiracy after experiencing the direct effect of global warming? How does scepticism surrounding climate change impact businesses? And what can companies do to foster scientific literacy on this critical issue?

“As extreme weather events become more prevalent, our findings indicate that climate change sceptics would shift their beliefs after experiencing these events by themselves,” says Hong Ying-yi, Choh-Ming Li Professor of Management at the Chinese University of Hong Kong (CUHK) Business School.

In a study titled Hotter weather, less of a hoax? Testing the longitudinal association between experience of temperature anomalies and belief in climate change conspiracy theories, Professor Hong and her collaborators investigate the links between the experience of unusual temperatures and climate change conspiracy beliefs.

The findings could have implications for businesses in sectors sensitive to climate conditions. A report titled Investing in the green economy 2024 by the London Stock Exchange Group unveils that the green economy has been second only to the technology sector in growth and financial performance in the past decade, generating a total annual revenue of almost US$5 trillion in 2023. Understanding public perceptions of climate change would be useful for businesses to develop strategies in communication, marketing, and sustainability practices.

“Companies that care about sustainability would grow their brand equity in the long run,” she adds. “Businesses that ‘walk the talk’ can convince their stakeholders to understand the importance of sustainability and mitigate potential risks associated with climate change scepticism.”

Hotter weather, fewer conspiracy beliefs?

Working together with Chan Hoi-Wing of the Hong Kong Polytechnic University, Wang Xue of Beijing Normal University, Tam Kim-Pong of the Hong Kong University of Science and Technology, and Huang Bo of the University of Hong Kong, Professor Hong conducted two studies in the US and China.

The team recruited around 1,000 adults from each country to complete online surveys. The results indicated that individuals who perceived unusual summer temperatures were less likely to believe in climate change conspiracy theories in both countries. In the US, the effects lasted even four months later.

Why do experiences of unusual temperatures affect people’s climate change beliefs? Professor Hong and her collaborators identified two possible reasons. The first one is the perceived psychological distance, referring to how individuals perceive the relevance of climate change—whether it will affect their local area, people in other countries, or future generations.

As the psychological distance diminishes, individuals are more inclined to view climate change as an imminent and pressing threat. “The experience of hotter local temperatures would lead to less perceived psychological distance of climate change and, in turn, attenuate climate change conspiracy beliefs,” Professor Hong concludes.

Secondly, the team found that experiencing hotter temperatures also triggered stronger negative emotions toward climate change, leading to fewer conspiracy beliefs. “Negative emotions may make people more vigilant of potential threats and, therefore, would be more likely to reject the hoax conspiracy narratives,” Professor Hong explains.

However, unlike the subjective experience above, the researchers observed a mixed picture regarding objective temperature anomalies. Objective temperature anomalies refer to the actual measured anomalies or deviations from a long-term average temperature for a specific location and time period.

They found that objective summer temperature anomalies were associated with higher climate change conspiracy beliefs in some contexts. In the American sample, a hotter summer was linked to increased conspiracy beliefs, contradicting the initial finding. This suggests that personal experiences and perceptions matter the most in shaping conspiracy beliefs.

Strong conspiracy mentality can be changed

Extreme weather events often prompt individuals to seek out more information about climate change, and more exposure through discussion and other means of communication could promote climate change concerns and beliefs. The researchers found that climate change information exposure was linked to lower conspiracy beliefs in the long term, though the effects were less noticeable in the short term. “The beneficial effect of climate change discussion, information seeking, and information exposure on reducing scepticism may take time to emerge,” Professor Hong says.

The study also highlights the role of personal experience in shaping opinions. While individuals with stronger conspiracy mentalities are more likely to hold climate change conspiracy beliefs, their attitudes could still shift based on personal experiences and increased exposure to relevant information.

“The increased information exposure may help people with a conspiracy mentality to develop a better scientific understanding of climate change, as exposure to non-hoax narratives and climate change discussion may contribute to enhancing the perceived scientific consensus on the issue,” says Professor Hong.

What businesses can do to address climate change scepticism?

The intensified challenges posed by climate change require various sectors, including businesses, to collaborate to tackle these pressing issues. Embracing sustainability not only nurtures healthy global ecosystems but also fosters the prosperity of businesses.

Nevertheless, scepticism about climate change remains a barrier. “Climate change sceptics will not be willing to engage in pro-environmental behaviours nor to support pro-environmental policies and regulations,” Professor Hong says. “This can undermine the sustainability effort by government and businesses.”

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The current research highlights the potential for shifting climate change conspiracy, suggesting that occurrences of temperature anomalies could be a crucial opportunity to promote scientific understanding of this phenomenon. “Businesses can be ‘change’ agents on this matter. They can enhance their collaborations with scientific institutions and help to promote scientific understanding of climate change via their marketing and public relations activities,” Professor Hong says.

In conclusion, she emphasises that sustainability stands as one of the fundamental pillars of the human future. Therefore, companies that can harness its power are poised to flourish in the years to come.

The post How to sway the minds of climate change deniers first appeared on China Business Knowledge.

By Pan Jingyi, Principal Writer, China Business Knowledge @ CUHK

From cultivation to consumption at the dining table, every stage of food production can create greenhouse gases that exacerbate global warming. Around a third of all human-caused greenhouse gas emissions are associated with food production, such as methane from cattle’s digestive process and carbon dioxide from deforestation, according to the United Nations’ Intergovernmental Panel on Climate Change (IPCC).

As the popularity of eco-friendly food grows, the IPCC also underscores the imperative of shifting consumer diets to fulfil the Sustainable Development Goals. Nevertheless, most studies exploring the impact of dietary changes on global warming centred around Western consumer habits.

Therefore, Francisco Cisternas, Assistant Professor in the Department of Marketing at the Chinese University of Hong Kong (CUHK) Business School, investigated whether Asian consumers are willing to alter dietary patterns to mitigate climate change and the factors influencing their choices.

“Our findings suggest that younger generations are increasingly considerate of environmental factors when making food choices.”

Professor Francisco Cisternas

He conducted a study titled Cultural and generational factors shape Asians’ sustainable food choices: Insights from choice experiments and information nudges, along with his PhD student Sun Chongyan, and CUHK scholars from different institutes, namely Carolina Contador, Lam Hon Ming, and Tse Lap Ah. Scholars from other universities in mainland China, Canada, the UK, and Vietnam also took part.

“Our findings reveal that Asian consumers are largely unwilling to deviate from current dietary habits, particularly regarding the consumption of animal proteins,” Professor Cisternas says.

However, presenting messages in a way that highlights personal benefits is found to resonate well and motivate Asian consumers to change their dietary habits. For example, instead of saying the dangers of global warming, the impetus should focus on how dietary changes can lead to better health or quality of life.

Not just that. With the growing trend of environmental certifications, the study found different acceptance across countries and generations, underscoring the complexity of dietary transitions in Asia and the need for targeted strategies that resonate with cultural and individual motivations.

Dietary choices of three Asian economies

The researchers recruited more than 5,000 participants from mainland China, Japan, and Vietnam. In general, the research shows that meat (including pork, chicken, fish, and beef) is the top choice, followed by price and environmental certification as crucial attributes when consumers decide what to eat. While similarities exist in food preferences among consumers in these nations, variations in socio-economic and cultural factors lead to differences in their dietary selections.

Cow farming significantly contributes to greenhouse gases, and beef is often regarded as a premium choice among Asian consumers. The study confirmed a direct correlation between household incomes and the inclination towards beef, with lower-income households showing a preference for chicken and fish. However, this tendency is moderated by the age of the respondents. Older Asian consumers prefer traditional dietary habits focusing on pork and rice.

Many believe that consumer demand for pork and beef in China significantly contributes to global agricultural greenhouse gas emissions, but the research reveals that Chinese consumers prioritise fish and chicken over pork compared to their Vietnamese and Japanese neighbours. However, when pricing comes into play, Asian consumers across three countries will consider chicken or fish over pork or beef.

Sustainable certifications or labels for food products are welcome in Western markets, but this trend is quite different in Asia. More than half of Vietnamese and Chinese respondents put their trust in government certification schemes for sustainable foods, whereas only 26 per cent of Japanese respondents share this sentiment.

However, this trust in government certifications can diminish over time as the economies develop, especially if consumers perceive these certifications as less credible or effective. “Existing sustainability-labelling schemes across Asia may lose their anticipated effects on consumer behaviour over time and with economic development,” Professor Cisternas says.

Younger consumers and households with children care more about certified environmental and health attributes. Participants in the 18 to 30 age group are more willing to pay for food with environmental certification. “Our findings suggest that younger generations are increasingly considerate of environmental factors when making food choices,” Professor Cisternas adds.

Self-enhancement framing is more effective

Although much research has explored how presenting information subtly – or as the study says, information nudge – influences people’s choices on health, environment, and climate change towards dietary choices, Professor Cisternas’ research is among the first to provide cross-national empirical evidence.

Furthermore, the researchers used different ways to test whether sharing information about climate change, environmental harm, or health impacts of certain foods from intense farming can encourage individuals to choose a sustainable diet.

“We found that information nudges are not an effective tool for shifting consumer choice behaviour toward more sustainable diets,” says Professor Cisternas, adding that self-centred and caring motives may play a role in individual decision-making.

Encouraging dietary changes shouldn’t rely solely on environmental concerns for Asian consumers. Greater motivation for diet transition can be achieved by highlighting the negative personal health consequences of current consumption habits, particularly among older consumers.

Strategies tailored for different groups

As sustainable diets are pivotal in curbing global greenhouse gas emissions, it is imperative for policymakers and businesses to promote them effectively. Despite the increasing favour of animal-based protein, beef consumption in Asia has not reached the levels observed in Western economies, giving a window of opportunity to shift the trend by appealing to food culture and traditions.

Asian consumers are receptive to adopting sustainable food practices if they are informed about their personal well-being and associated health benefits. These motives also depend on their demographic characteristics, such as age and income level.

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“We argue that the policies should be tailored to different population groups, emphasising their own motives. For example, health motives could be highlighted for the elderly, while younger and relatively wealthy populations may respond better to food certification emphasis,” Professor Cisternas adds.

When talking about the younger generation’s reluctance to change dietary habits, even though they demonstrate an increased concern for the environment, Professor Cisternas suggests encouraging sustainable food choices from a young age. “By integrating education about sustainable eating into schools and communities and providing engaging experiences with sustainable foods, we can help foster lasting changes in dietary habits.”

The post Are you ready to eat green for a sustainable future? first appeared on China Business Knowledge.

By Pan Jingyi, Principal Writer, China Business Knowledge @ CUHK

In the wake of escalating environmental concerns and the urgent need for sustainable practices, the global business landscape is witnessing a significant shift towards the adoption of renewable energy sources. Prominent industry players like Amazon has achieved its goal that all of the electricity consumed by its operations was matched with 100 per cent renewable in 2023.

Utility suppliers are investing in new green sources and developing approaches to meet their energy goals. However, such increasing adoptions are not without flaws. The variability in energy demand throughout the day and across seasons has been a big hurdle. Moreover, the intermittent nature of green sources, such as wind and solar, poses additional complexities.

“The variability of the energy intermittency usually does not align with the fluctuations in demand, which poses a significant challenge for suppliers,” says Wang Shixin, Assistant Professor of the Department of Decisions, Operations and Technology at The Chinese University of Hong Kong (CUHK) Business School.

To add fuel to the flames, the transition to renewable energy often requires significant upfront investments in technologies and infrastructures. For utility companies operating under tight budgets or regulatory constraints, finding an effective way to manage the cost is imperative.

How should utility suppliers decide where to invest among various renewable energy sources? How should they design optimal approaches? Professor Wang and Professor Jayashankar Swaminathan of the University of North Carolina–Chapel Hill (Kenan-Flagler) Business School sought to tackle these problems in their study titled Renewable Energy Investments for Utilities Facing Supply Targets and Intermittency.

A two-stage framework

Professor Wang and Professor Swaminathan proposed a comprehensive framework to help suppliers achieve their renewable energy targets and service level requirements while minimising costs. After combining theoretical modelling with practical simulations and case studies, the researchers came up with a two-stage stochastic programme. In the first stage, utility suppliers shall decide to invest in various energy sources based on expected needs. Next stage, the suppliers adjust the plan according to actual supply and demand.

“This framework includes dispatching existing resources and purchasing additional conventional resources from the market at a price higher than using on-hand sources,” Professor Wang says.

“In practice, utility suppliers trade off lower costs against higher output stability in resources.”

Professor Wang Shixin

Several variables play a role in influencing investment outcomes. On the supplier’s side, the features of renewable sources impact the overall costs as the fluctuations in energy sources directly impact the operations. As such, renewable sources with less variability and more stability would make supply more predictable and eventually help to lower overall costs.

On the consumer’s end, the relationship between demands and renewable energy goals influences power outcomes. When consumer demands are negatively correlated, it helps to save costs compared to when the demands are independent or positively correlated. For instance, the demand for heating goes up in winter while air conditioning demand decreases and conversely in summer, residential energy demand peaks in the evening while commercial energy demand drops and vice versa.

This trade-off can help utility companies manage their supply more efficiently, as they are less likely to face simultaneous high demand from consumers. When demands are negatively correlated, utility companies can optimise their resource allocation by investing in fewer resources by focusing on the resources that will be needed most based on the expected demand patterns or relying less on expensive power sources, leading to lower overall costs.

Diversifying energy sources

Based on their findings, Professor Wang and her collaborator propose three strategies to realise optimal resource allocation. Firstly, they advocate for diversifying renewable energy sources. Professor Wang notes that the integration of multiple renewable sources can significantly reduce the total investment costs compared to those associated with a single renewable source.

Although a diversified renewable energy portfolio may pose challenges like substantial initial investment costs, Professor Wang highlights the opportunities for suppliers. For example, the government often offers subsidies or other incentives for companies to incorporate different types of renewable energy.

“Such diversification not only lowers the overall costs but also enhances the system’s ability to adapt to fluctuations in energy generation from various sources, thus providing a more resilient and reliable energy supply,” she says.

Perfection is not always the best

As customers demand more renewable energy, the extra cost of reaching higher targets would also increase faster. Meanwhile, increasing the renewable energy target becomes more expensive if the current target is already high. The team thus suggests their second strategy: decreasing renewable energy targets from one hundred percent.

The analysis showed that marginally reducing renewable energy targets can result in substantial cost savings, particularly when the power generators face intermittency issues.

However, while reducing the targets may seem advantageous, she also highlights that such benefits diminish as the target is further lowered. “It would be more cost-effective to lower a renewable energy target slightly below 100 per cent, like 99 per cent,” Professor Wang suggests.

Thirdly, the team found that resource pooling, where multiple consumers share renewable energy systems and collectively manage their energy needs, would be beneficial in making renewable energy more accessible and affordable. “Resource pooling results in lower investment costs as it mitigates the variability effect of total demand,” she says. “However, it becomes less advantageous in the presence of high intermittency when demand is high and generation is low.”

The trade-off between costs and stability

In shifting towards renewable energy sources, most utility companies still use the traditional coal-fired generator to its stability. The researchers then applied their theoretical framework to the real-world scenario, where power companies mix non-renewable sources and the two most widely used renewable sources, wind and solar, and analysed how these sources vary in availability and cost.

The result shows that when the energy target is low, investing in renewable resources with lower costs, like solar, would be better. As the target gets higher, it would be more cost-effective to put more investment into renewable sources with stable output, such as wind. When the renewable target approaches 100 per cent, using a mix of different renewable sources would contribute to meeting the goal.

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The researchers observed that when there are higher goals for renewable energy and when energy availability aligns closely with demand fluctuations, suppliers tend to opt for more costly but stable energy sources. “In practice, utility suppliers trade off lower costs against higher output stability in resources,” Professor Wang adds.

The transition to renewable energy sources is a complex yet imperative journey as the world faces increasing challenges posed by climate change. “To the best of our knowledge, our research work is the first to provide near-optimal capacity investment and allocation policies for meeting renewable energy targets under supply intermittency,” says Professor Wang, adding that they hope this framework could offer a structured approach for energy suppliers navigate the challenges of renewable energy investment wisely.

The post How to effectively invest in renewable energy first appeared on China Business Knowledge.