Working Together for a Sustainable Future

An exert from our MT21 Insight magazine written by Claire Tan.


Researchers at Oxford University’s very own Smith School of Enterprise and the Environment are united in working towards the common purpose of creating a healthy planet and a fairer, more prosperous world. Their world-class research aims to equip enterprises with the information they need to achieve net zero emissions and meet their sustainable development goals. With climate change on the rise and corporations playing a huge part in this, their research is instrumental in understanding how we can evolve sustainably. I interviewed Dr. Xiaoyan Zhou to find out more about the work they do there and her personal motivations.


Please could you introduce yourself and how you got to where you are today?


My name is Xiaoyan Zhou, and I have been working as a Research Associate/Lead on Performance at the Sustainable Finance Programme at the Smith School of Enterprise and the Environment for 4+ years. I completed my Ph.D. in Finance at Henley Business School in 2017. Four years of systematic training in teaching, independent research and the development of academic activities allow me to continue my research in sustainable finance at the University of Oxford.


What motivated you to focus your research on sustainable finance?

I decided to start research in responsible investment (today this refers to sustainable finance) at the age of 30 when my daughter Mary was born in 2010. Ten years ago, neither the concept nor the importance of sustainable finance drew much attention in society. Luckily, I got to know this area through a lecture at the University of St. Andrews, where I did my first-year Ph.D. Sustainable finance is an effective way to direct funding to low-carbon business activities and help transition to a more sustainable and greener economy. I wanted to contribute to this area and do my bit for the good of the next generation.


What does leading the Sustainable Finance Performance theme at the Smith School of Enterprise and the Environment’s Sustainable Finance Programme involve?

At the heart of sustainable finance are questions related to financial performance. This research theme explores empirically how sustainable finance is changing financial markets, altering risk preferences, and impacting the real economy.


Research topics include:

- Firm-level ESG performance and its relationship with macro-economic performance

- Changing risk preferences across the financial system as a result of the energy transition

- Analysing performances of (un)sustainable investments in different asset classes using novel datasets

- Measuring changes in sustainable finance practice across the financial system and what that means for performance

- The efficacy of sustainable finance-related policies and regulations


Why, in your opinion, is sustainable investment important?

To transition to a more sustainable and greener economy, a significant scaling-up of low-carbon investment is required. Sustainable Investment is important as it integrates environmental, social and governance factors into investment decisions and directs capital flow towards climate-resilient business sectors.


Please tell us about a current research project that you would like to share.


We have been undertaking a research project on the Energy Transition Risk and Cost of Capital Project (ETRC). The primary objectives of our work is to understand the pricing of transition risk and how it affects the costs of capital and thus the economics of energy projects.


In Phase 1 on the ETRC project, we analysed historical transaction data to identify trends in the cost of capital in the loan market. Our core findings were that:

- The cost of capital for coal power and coal mining has risen sharply over the past decade, with the biggest increases occurring in developed markets.

- The cost of capital for oil & gas power and production has remained more stable.

- The cost of capital for renewable energy has fallen sharply over the past decade.

- In both high-carbon and low-carbon power, there is significant geographic variation in the cost of capital, with developing markets facing higher financing costs.

What advice would you give to young women who are interested in a career in academia?

Many think that research is creative work. However, before making any amazing discovery or contribution, it often involves many repetitive tasks and a long process of trial and error. I would suggest that you think twice before deciding to go into academia. It is important to consider carefully:

Whether you get long-term family assistance.

Whether you accept that you probably have a relatively lower income for the next ten years compared with your peers working in the industry. Women researchers, in particular, must learn to balance work and family life regarding pregnancy and childcare. Sometimes, there are no clear boundaries between work life and home life when an unsolved research question hangs in your mind day and night. It would be helpful to leave research behind when you spend time with family in the evening or at the weekends. And mental health is at the top of the priority list — seek support from your colleagues or institutions when necessary.