For the 8th time, VP Bank presents the Best Paper Award at the Liechtenstein Workshop of Sustainable Finance

The "Best Paper Award", sponsored by VP Bank, went to Lennart Sperling and co-author Rainer Baule of the Fern Universität in Hagen for their paper "Transition Risk Premiums in Option Prices". This is the eighth time that VP Bank has awarded this prize.

The transition to a low-carbon economy is a major social and economic challenge. In recent years, a veritable sustainability euphoria has led the financial industry and academia to take a one-sided view of the issue. The transition is seen as a threat to 'brown' companies in particular, because their business is based on a dirty and CO2-intensive model. But the transition to a low-carbon or even carbon-neutral economy is not a one-way street. The election of Donald Trump in the US threatens to roll back climate targets, and Europe's ambitious phase-out of the internal combustion engine is also under scrutiny. Companies and new technologies could also fail. Regulatory changes, less ambitious targets or a slower pace also pose a risk for 'green' companies, as they are particularly exposed to the transition.

In his paper "Transition Risk Premiums in Option Prices", Lennart Sperling has shown that the financial market prices in a risk premium not only for 'brown' but also for 'green' companies. Sperling uses the so-called carbon beta of a company and compares it with option prices. This effect only emerged between 2016 and 2018, when investors became aware of the importance of this transition process.