ZF-Centre for Sustainability Research

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The ZF-Centre for Sustainability Research has been founded in 2023 and is sponsored by ZF Friedrichshafen. The academic research at the Centre is developed under the supervision of Prof. Dr. Florentina Paraschiv.


In our research, we aim at understanding how businesses and governments facilitate the transition towards a sustainable economy. We propose solutions to respond to business risks posed by sustainability issues, including Environmental, Social, and Governance (ESG) investing. We analyze which actions firms can undertake to mitigate ESG regulatory challenges and the role played by the institutional framework. We further analyze the capital market in relation to climate risk, and ways in which the capital market, businesses and regulators can accelerate the transition towards addressing climate issues. Ongoing research focuses on the following research lines:


  • Implications of climate risks on business value and capital costs
  • Risk premia in green instruments
  • ESG in the context of mergers and acquisitions
  • Optimal ESG variables reporting
  • Greenwashing
  • Assessment of climate risks
  • Sustainable Banking
  • Challenges of renewable energies on the price dynamics in energy markets
Paraschiv, Florentina
Paraschiv, Florentina Prof Dr

Recent publications

Picture: Arteum.ro | Unsplash.com

Abstract:

Previous research shows that renewable energies have a direct negative marginal effect on electricity prices. Gas plants play an essential role in the electricity generation in several fuel-based energy systems through balancing out intermittent renewable energies, which is why it is labeled “green” in the EU Taxonomy. We show the substitution effect between renewable energies, wind and PV, and gas, in the context of a threshold model. Applied to daily Dutch natural gas prices (TTF) between 2016 and 2020, we determine the effect of demand/supply price drivers and lay special emphasis on the asymmetric effects of the day-ahead forecasts of wind and PV infeed. Results show a negative marginal effect of the day-ahead wind and PV infeed forecasts on day-ahead natural gas prices. Employing threshold models we find that in regimes with low wind infeed, marginal increases in the wind and PV infeed forecasts decrease gas prices faster than in regimes with high infeed. Our findings further reveal that the day-ahead TTF price is positively associated with heating demand, supplier concentration, coal, and CO2 prices. We discuss these findings in the context of the debate on the usage of gas for the European energy transition.

Picture: Anders J. | Unsplash.com

Abstract:

The shift from carbon-based to green energy is pivotal in addressing climate change. However, this transition is expensive, and the availability of financing sources is a necessary precondition for the green transformation of the economy. We therefore examine the role of financial institutions and capital markets in facilitating this change, focusing on a heterogeneous sample of 32 EU and ASEAN countries covering the years 2000 to 2020. Our findings reveal a persistent preference by financial institutions and banks for carbon-intensive energy production, negatively impacting renewable energy consumption. Contrarily, developed capital markets demonstrate a positive influence on green energy initiatives, especially pronounced in EU countries. The results highlight a dichotomy in financial support for green energy transition. While traditional financial institutions lag in supporting renewable energy, developed capital markets show a positive effect for green energy production. Concluding, we advocate for an increasing financialization of renewable energy markets and enhanced regulatory support for banks and financial institutions in supporting renewable energy business models.

Christoph Halser, Florentina Paraschiv, Marianna Russo: Oil-Gas Price Relationships on Three Continents: Disruptions and Equilibria

Picture: Khamkéo Vilaysing | Unsplash.com


Abstract

In this paper, we revisit traditional gas pricing formulas and show the ever-changing relationships between natural gas and oil prices in Europe, the United States, and Japan between 2009 and 2021. The results suggest a stronger oil-gas link for all investigated markets after 2019, significantly impacted by fundamental supply and demand factors. However, the strength of the equilibria link differs across markets due to different price formation processes under the impact of the COVID-19 pandemic and the Ukraine war. For Japanese LNG prices, our results imply an enduring impact of oil-price indexation with a tight link to monthly crude prices. TTF and monthly oil prices enter a temporary equilibrium in times of high market volatility, whereby the long-term equilibrium dissipates. Despite the absence of oil indexation in the North American market, we find evidence of re-coupling of oil and gas prices given the demand shock of the COVID-19 pandemic. These findings are relevant to policy makers to assess market inefficiencies caused by the European gas crisis.

Picture: Mike Benna | Unsplash.com


Abstract

The war in Ukraine has sensitized German policy makers towards the negative economic impact of a curtailment of natural gas flows from Russia. Given its large import dependency, Germany has implemented regulatory measures for mitigating a possible gas shortage and is seeking to diversify from pipeline imports of liquefied natural gas (LNG). In this context, we provide a comprehensive review of the natural gas crisis in Europe and place it in the context of the peculiar role of natural gas in Germany. We critically discuss the economic impact of an embargo, and assess demand and supply factors capable of mitigating a supply shortage. We derive a short-term import substitution potential of 13 bcm, assuming timely installation of Floating Storage and Regasification Units (FSRUs). We discuss the potential for demand reductions in the power sector, in industry consumption, and in households, and estimate a combined maximum of 24.1 bcm. Under decreased industrial demand, the most optimistic scenario indicates an import gap of about 9 bcm for a one-year perspective. Given our findings, we advocate for the delayed phasing out of coal and nuclear power, the accelerated deployment of renewable energy, and caution in the initial execution of storage quotas and restrictions to industrial consumers.

Picture: Karsten Würth | Unsplash.com


Abstract

With the increasing integration of wind and photovoltaic power in the whole European power system, there is a longing for detecting how to trade energy in the ever-changing intraday market from electric power industries. Intraday trading becomes even more relevant in the wake of the European Cross-Border Intraday (XBID) project, which aims at integrating electricity trading across Europe. Therefore, optimal trading strategies to address forecast fluctuations in renewables output are growingly required to be designed. In this study, we model, simulate and predict the evolution of wind and PV infeed forecasting errors over eight days preceding the start of a given quarter-hourly delivery period and updated in 15-min steps. We test comparatively the performance of several stochastic and probabilistic models, and recommend their complementary use, depending on the frequency in which forecast values are adjusted. Since ex-ante updated forecasting errors of renewables infeed are usually not available to researchers, simulations based on our proposed models break the ground for further applications to intraday pricing and optimization.

Foto: American Public Power Association | Unsplash.com


Abstract

We investigate cross-border dynamics between the Spanish and French electricity markets in the light of EU's market integration. The analysis is highly relevant given the isolation of the Iberian Peninsula from the rest of European markets and its unique electricity market design. Results show the shift in the merit order curve in each market. Electricity prices in Spain follow the dynamics of the French ones, fostered by Spain's import-dependence. Benefits of grid integration are asymmetric, with Spanish users taking advantage of the market integration with France. The substitution effect between domestic fuel-based units and imported green electricity allows Spain to further decarbonize its energy mix and increase the security of supply. The expansion of the cross-border grid until 2030 will be key for a successful phasing out of the remaining coal-based units. Our findings should be considered in support schemes for integration projects to align the incentives of participants.

Ongoing research

Sustainable Finance Trends – Computational Challenges

To optimize their strategies, investors and creditors integrate EGS scores to consider social and environmental factors in their decision making. However, the depiction of the different ESG dimensions is characterized by distinct degrees of complexity. Consequently, coherent industry standards for ESG disclosure are subject to future research. ESG-score providers rely heavily on voluntary disclosures by firms and on subjective methodologies to select, examine, and weigh individual ESG indicators. Consequently, ESG-scores of individual firms show large heterogeneity across rating agencies (Berg et al. 2023).


In this project, we provide solutions to the current challenges of corporations to implement the EU taxonomy steps stemming from the heterogeneity of ESG variables reported by companies even in the same field of activity, which distorts a direct comparison of their climate risks. We aim at identifying the optimal set of ESG variables to be reported by firms accordingly to size/sector of activity for improved ESG scoring and for optimal climate risks assessments. We further shed light on the banks` positioning in the sustainability picture. Empirical banking literature shows that banks continue to provide loans to “brown” industries and to profit from higher margins on such loans. Furthermore, domestic climate policy stringency decreases loan supply to domestic borrowers with high carbon risk while increasing loan supply to such borrowers abroad (Benincasa et al. 2023).


We derive two research questions: 1) Do banks with a larger proportion of brown assets communicate more positive ESG-related news? 2) Do banks with a larger proportion of brown assets have lower ESG scores?

Team

Ayari, Rayan
Ayari, Rayan
Research Fellow
Phone:+49 7541 6009-1232
Room:Semi 1.27
Horky, Florian
Horky, Florian
Phone:+49 7541 6009-1244
Room:Semi 0.22
florian.horky@zu.de
Paraschiv, Florentina
Paraschiv, Florentina Prof Dr
Head of Institute for a Sustainable Economy | ISE
Director ZF-Centre for Sustainability Research
Phone:+49 7541 6009 -1231
Room:Semi 1.13L
Sarkisyan, Joël
Sarkisyan, Joël
Research Fellow
Phone:+ 49 7541 6009-1235
Room:SMH Semi | 1.27

Guest Researchers

Minh Nhat Nguyen

Minh Nhat Nguyen

Curriculum Vitae

Emma Serwaa Obobisi

Curriculum Vitae

Emma Serwaa Obobisi
Time to decide

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