Friends, I hope you’ve entered 2023 with refreshed purpose and commitment. I myself am energized, with lots of plans for a productive year of travel and collaboration on the slate. I am glad to be engaged in essential conversations about the work before us as business educators, even if recent news rocked me abruptly out of my pleasant post-holiday haze.

One shocker was the UN Global Compact’s 12th CEO study with Accenture, launched at the World Economic Forum in Davos. Talk about a splash of cold water to the face. Despite its hopeful title, the report Unlocking the Global Pathways to Resilience, Growth, and Sustainability for 2030 unequivocally demands that we “reimagine the agenda,” as we find ourselves nearly halfway to a significant emissions deadline without having made progress.

The study reports that 2,600 CEOs were surveyed and 130 interviewed. A majority express fears about the reversal of hard-won achievements, along with the belief that the rise of geopolitical instability threatens our collective pursuit of the SDGs. Many even indicate reluctance to trust in multilateral approaches to protecting the future.

And yet these corporate leaders are also realizing that they must be better at galvanizing public opinion into action. The study reflects that more CEOs are collaborating with competitors and governments in new ways, even “calling for more concrete commitments to sustainability and to working across stakeholder lines to avert global catastrophe.”

This is as it should be. But we must all be brave enough to enter delicate debates about the reversal of globalization.

As many of you may know, I have been studying the dynamics of financial globalization since I graduated from my PhD program in the early 1990s. Until the 2008 global financial crisis (GFC), we had had a phenomenal run of rising cross-border trade and capital flows associated with a significant rise of global GDP. Something seems to have gone into reverse with the GFC. I and my colleagues Craig Doidge (Toronto’s Rotman School of Management) and Rene Stulz (Ohio State’s Fisher College of Business) have been studying this reversal for over five years now. We wrote a working paper with the open question: Is financial globalization in reverse after the 2008 GFC? We have been presenting it dozens of times around the world. We know the answer, which is “yes.” But the more interesting, complex, uncertain, and challenging part of the paper is unraveling the fundamental reasons for the reversal.

We focus on the evolution of firm valuation trends in the wake of the 2008 Global Financial Crisis, which shows globalization is working in reverse. We’re now updating our 2020 study, which showed that for the past twenty years, non-US firms have lower valuations than comparable US firms. This so-called “valuation gap” has actually increased for developed markets, while staying stable for firms in emerging markets. We call this an unexpected paradox, as typically the positive and negative consequences of financial globalization are felt more acutely for emerging markets. In fact, the valuation gap for firms from developed markets increases dramatically by 31% after the GFC. There is no evidence of greater segmentation for non-US firms secondarily cross-listed on major US exchanges, and the typical valuation premium of such firms relative to domestic counterparts stays unchanged. However, the number of such firms shrinks sharply, so that the importance of US cross-listings as a mechanism for market integration diminishes. This is what we point to as evidence of the financial globalization story.

There is so much more to unravel here.

One of the toughest market environments in recent history

I couldn’t help but notice that BlackRock’s CEO Larry Fink, in his highly anticipated 2023 letter to CEOs, is expected to focus on how asset managers across the industry have suffered steep declines amid one of the toughest market environments in recent history. Global stocks and bonds fell last year by nearly 20 percent and 14 percent, respectively.

It was fascinating to watch his Bloomberg TV Davos interview earlier in January from the World Economic Forum. No hints about any bold ESG investing pronouncements in the spirit of Fink’s 2020 “climate risk” letter that sent shockwaves across the investing and political landscape. Of course, the firm will not move away from the use of sustainability and ESG analysis/processes, but the renewed focus will likely be on best professional practices and the proper exercise of fiduciary duty.

Back to the classroom to talk about responsible investing

I’m happier than ever to be heading back into the classroom to teach our Finance MBA dual-degree Tsinghua-Cornell students. Even if only for one module in our special topics course, I get to teach jointly with Professors Maureen O’Hara, Bob Jarrow, and Will Cong, whose partnership is invigorating. My module’s title is “Investing in a VUCA World.” If you think about the UN Global Compact/Accenture report discussed above and the anticipated Larry Fink 2023 letter, this has got to be the perfect topic right now! Could our world be any more volatile, uncertain, complex, ambiguous (VUCA)? But I would add it is also resilient and functioning.

The timing of my return to the classroom to talk about responsible investing coincides with the or a new round of recognitions of the importance of responsible management education. Of course, there’s a great deal of debate about the future of business education and the responsibilities inherent in business education. The Financial Times’ Special Report: Responsible Business Education Awards arrived mid-January. This is the second year to acknowledge institutions, researchers, students, and alumni around the world whose efforts are “to help recast business.” I was very pleased to see that our own Professor Ivan Rudik’s American Economic Review article on tackling global warming with carbon taxes was duly recognized. It was fascinating to see how our faculty at the Cornell SC Johnson College of Business ranked #9 out of all business schools around the world on our prolific publication of topics related to the 17 UN Sustainable Development Goals among the top 50 business, economics and management journals. This ranking is based on machine-learning analysis of SDG-related content in the Financial Times 50 journals from 2018-2021, a methodology not without controversy developed by Rotterdam School of Management’s Wilfried Mijnhardt, a fellow working board member at Responsible Research in Business and Management (www.rrbm.network). These methodologies will evolve. Until they’re perfected, I say well done to my faculty colleagues!

And I could not close without mentioning…

What a wonderful College of Business Forum event we hosted last week in New York City! Cornell’s own Sarah Phelps wowed the alumni gathered with her presentation on the future of space tourism. She has a unique vantage point as Director of Astronaut and Customer Experience for Blue Origin. She described her professional journey to Blue Origin and her sheer enthusiasm for what this fast-growing company can accomplish. My favorite quote from the evening (offered by Google’s Eric Schmidt to Meta’s Sheryl Sandberg) that Sarah shared was, “If you’re offered a seat on a rocket ship, don’t ask what seat. Just get on.” Thank you, Sarah, for joining us, and to all our alumni who came along for the ride.

Finally, our celebrations of the 100th anniversary of the Cornell Peter and Stephanie Nolan School of Hotel Administration continue apace. Nearly 400 attendees at the American Lodging and Investment Summit (ALIS) in Los Angeles last week joined Dean Kate Walsh and myself to celebrate like only Hotelies know how. Thank you to all who joined, especially Peter and Stephanie Nolan themselves, whose presence added so much to the event.