金融与财务学系列讲座之326期

Time：14:00-15:30, Thursday, Oct 23, 2025

Location: Room 603, Starr Building（史带楼603室）

Topic: Model-free ESG Frontier

Speaker: Kai Li

Peking University HSBC Business School

Abstract: This paper develops a novel, model-free framework for ESG-integrated asset pricing, grounded in the classical Law of One Price (LOOP) and a new principle proposed in this study—the Law of One ESG-adjusted Price (LOOE). LOOE extends LOOP into the ESG dimension, enabling consistent valuation of sustainability attributes across portfolios, including long- short strategies. Together, these assumptions support the construction of an ESG-adjusted stochastic discount factor (ESDF) that jointly prices financial and ESG risks without relying on explicit utility functions. We derive a generalized four-fund separation theorem and a two-beta representation linking asset returns to market and ESG exposures. Empirically, the two-beta model enables flexible fund selection along the ESG-efficient frontier, substantially improves pricing performance relative to the CAPM, and nests existing ESG-factor models under weaker assumptions, and remains robust to ESG-rating noise. By introducing LOOE and extending classical pricing theory, this paper provides a flexible and empirically robust foundation for ESG investing.

Bio: Kai Li is Professor of Finance at Peking University HSBC Business School. He earned his Ph.D. in Economics from Duke University. His primary fields are macro-finance, green finance, asset pricing, and Chinese financial markets. He is a recipient of the National Science Fund for Distinguished Young Scholars (Class A) from the National Natural Science Foundation of China (formerly the Outstanding Young Scientist). He has published more than twenty papers in leading journals such as the JF, RFS, JFE, JME, and RF. His research on green finance is among the most-cited articles in the JF, and has received the Best Empirical Paper Award at the WFA Annual Meeting and the Amundi-ESFC ESG Award, among other honors. He currently serves as Associate Editor for 《经济学（季刊）》, JBF, RAPS, EL, APJFS, and CFRI.