This study explores the profound implications of ambiguity aversion for asset price dynamics and wealth distribution. In a continuous-time macroeconomic model with heterogeneous agents and financial frictions, we demonstrate analytically and numerically that ambiguity aversion leads to a lower risk-free rate, reduced consumption, higher precautionary savings, and wealth redistribution, resulting in significant asset price misalignment. These distortions cause universal welfare loss, making a case for policy intervention. We find that while distortionary capital taxes can mitigate price misalignment, conventional monetary policy, if well-calibrated, can reduce distortions and improve welfare without such trade-offs.

A new large-scale study reveals that uncertainty in climate policy (CPU) is a significant driver for improving corporate Environmental, Social, and Governance (ESG) performance. Analysing data from 4,490 Chinese listed companies (2011-2022), researchers found a strong positive correlation between CPU and ESG scores. The primary motivation is risk mitigation: companies facing higher systemic risk use enhanced ESG performance as a strategic shield. The effect is most pronounced in non-state-owned enterprises, heavy-polluting industries, and highly competitive markets. The findings provide crucial insights for businesses strengthening sustainability strategies and for policymakers aiming to foster resilient, low-carbon economic growth.

Aston University’s Professor Patricia Thornley has been appointed as the new chief scientific adviser (CSA) for the Department for Transport. Professor Thornley is a highly respected leader in the field of sustainable energy, recognised for her extensive contributions to advancing low carbon innovation and clean technologies. She is currently based at Aston University, where she is based at the Energy and Bioproducts Research Institute. She will join the Department for Transport early next year, where she will be based four days a week, spending one day a week at the University.