The Impact of a Socially Responsible Investment Index on Climate Change Management and Carbon Emissions
49 Pages Posted: 15 Jun 2016 Last revised: 6 Feb 2018
Date Written: June 12, 2016
Abstract
We examine the ability of a socially responsible investment index to effect firms' compliance with best-practice climate-change management and the subsequent impact on their carbon emissions. Using a quasi-experimental setting involving an international sample of large public companies we show that engagement by the index, reinforced by the threat of exclusion, stimulates compliance. The likelihood of companies adopting best practice is positively associated with the ease of moving to compliance and expectations regarding the companies' membership of the index, but adversely affected by concentrated equity ownership and by strong shareholder-oriented governance. Our measure of compliance is supported by improvements in an independent measure of emission reduction management practices. Crucially, our results offer preliminary evidence that compliance with climate change management requirements is associated with lower carbon emissions.
Keywords: Socially Responsible Investment, Carbon Emissions, Climate Change, Investor Engagement, Corporate Governance
JEL Classification: G30, M14
Suggested Citation: Suggested Citation