For organizations that genuinely aim to reduce their environmental or societal impact, it is crucial to align corporate policies with these objectives and to incentivize leadership to drive meaningful change. One popular strategy involves tying executive compensation to Environmental, Social, and Governance (ESG) criteria. Research in Finance by Matthias Efing of HEC Paris and his coauthors Stefanie Ehmann, Patrick Kampkötter and Raphael Moritz of the University of Tübingen, shows that despite the growing inclusion of ESG criteria in executive compensation across Europe, their limited weight, poor alignment with managerial roles, and lack of transparency raise concerns about their effectiveness and the potential for greenwashing. Key findings:1. Limited impact of ESG on executive pay: While ESG criteria can be found in the compensation of about 60% of European executives, most of these ESG metrics remain discretionary. Binding ESG targets account for only 2 to 5% of incentive pay.2. Misalignment with managerial responsibilities: ESG criteria are not adequately tailored to specific managerial roles.3. Risk of greenwashing: In some cases, ESG-linked pay appears to serve as a response to external pressures rather than driving substantial change.4. Need for greater transparency: Enhancing transparency and aligning ESG metrics with specific responsibilities could improve their effectiveness.
By Matthias Efing
HEC Paris professor Christophe Pérignon reveals why AI models must be tested for fairness, stability, and interpretability, not just predictive performance.
By Christophe Pérignon
As artificial intelligence reshapes industries, society grapples with its profound impact on creativity, governance, healthcare, misinformation, and the future of work. From the geopolitical race for digital sovereignty to creative industries' struggle with generative AI, these perspectives provide a nuanced understanding of how AI is both an opportunity and a challenge, requiring careful regulation, ethical considerations, and strategic adaptation across sectors. Part of the academic work featured in this dossier is funded by the Hi! PARIS Center, which is co-founded by HEC Paris and IP Paris, and supported by the French government as one of the nine projects chosen for the "Clusters IA". Find the pdf of the review here.
HEC Paris research reveals how AI transforms financial forecasting and trading, but may also magnify systemic risk and market fragility.
By Thierry Foucault
At the end of this year, marked by crucial elections in France and around the world, I would like to draw on recent research to shed light on the overlooked links between finance and politics. It has become a widely accepted idea that rising political polarization causes people with differing affiliations to view the world through distinct lenses and even to believe in different facts. Recent research shows that the financial industry is not immune to partisan biases; finance professionals, too, carry their political identities into their work. Let me take you on a tour of this research!
Online reputation matters in the food industry. With every star earned on Tripadvisor, for example, a popular eatery can attract more customers, bolster revenue and expand its business. What’s more, new research by HEC Professor of finance François Derrien and co-authors Alexandre Garel (Audencia Business School), Arthur Romec (TBS Business School) and Jean-Philippe Weisskopf (EHL Hospitality Business School) have confirmed there is a causal link between a restaurant’s ratings and its ability to service additional debt, making it easier for lenders today to identify successful restaurants and drive their growth.
By François Derrien
In this interview, Karen Degouve (H.94) explains her pivotal role in coordinating sustainable finance efforts within French banking groups, which face challenges in developing profitable yet planet-conscious businesses. Degouve offers valuable guidance for graduates entering the business world and investors seeking to align their financial decisions with sustainability goals. She also took the time to share her opinion on research findings on ESG and impact investment conducted by the HEC Paris faculty.
This special edition of the Knowledge@HEC review focuses on the Earth’s planetary boundaries. The issue highlights HEC Paris' approach toward organizational, environmental, and societal challenges linked to the nine planetary boundaries within which humanity can develop for generations to come. The review showcases research and initiatives aimed at informing and empowering businesses, policymakers, and future leaders. We highlight the multidisciplinary approaches in the school's research, teaching, and action, inviting HEC Paris students, graduates, professors, entrepreneurs, and donors to share their visions of a more sustainable future. "Aligning Business with Planetary Boundaries" will be officially launched at the HEC Climate Day on May 22. Meanwhile, you can find the pdf here.
HEC Paris undergoes a transformative shift in its curriculum. Building on its legacy of sustainability initiatives, the institution now prioritizes planetary boundaries and societal impact. The updated curriculum emphasizes sustainability integration and student empowerment for real-world impact. This reflects HEC's dedication to nurturing leaders prepared to address modern challenges.
If companies anticipate that the government might impose caps on carbon emissions, they will likely invest in green technologies. This, in turn, drives down the cost of achieving reductions for all. That’s according to HEC Paris finance professors Augustin Landier and Bruno Biais. In “Emission Caps and Investment in Green Technologies,” the co-authors also show that if these firms don’t think carbon restrictions are coming, they won’t invest, and the government eventually will find it too costly to the economy to impose caps. In other words, companies’ expectations about future government action play a crucial role in reducing the carbon emissions driving rapid climate change. So, ask the researchers, how can a balance be found? 4 key findings: Anticipating future regulations spurs green technology investments, lowering emission reduction costs; Early investments in green technologies create a self-fulfilling prophecy, facilitating feasible emissions caps; Private and public actions synergize for desired outcomes through a complementary equilibrium; One large investor can have a significant influence.
By Bruno Biais , Augustin Landier
