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Hills Sustainability
THEME: SUSTAINABILITY
11 July 2023 Financial Analysts Journal Volume 79, Issue 4

Private Shareholder Engagements on Material ESG Issues

  1. Rob Bauer
  2. Jeroen Derwall
  3. Colin Tissen

Do private shareholder engagements on ESG issues have an impact? Analyzing thousands of firms over 14 years, this study finds that engagements on material issues more often succeed and correspond with outperformance and reduced CO2 intensity.

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Abstract

We study private shareholder engagements with 2,465 listed firms about environmental, social, and governance (ESG) issues from 2007 to 2020. We examine the extent to which private engagements address financially material ESG issues and contribute to firm performance. We find that material engagements succeed more often than immaterial engagements and that the targets of successful material engagements significantly outperform their peers by 2.5% over the next 14 months. Further, we find that material engagements are more often associated with improvements in profitability and cost ratios than immaterial engagements. Finally, our evidence indicates that a decrease in CO2e emission intensity accompanies environmental engagements.