Institutional Investors as Climate Activists: Curb Your Enthusiasm

26 Pages Posted: 7 Sep 2022

Date Written: August 23, 2022

Abstract

Institutional investors control a sizable portion of all votes in major public corporations. In contrast to their traditional deference to management, some institutional investors have begun to lobby portfolio companies for reductions in greenhouse gas (GHG) emissions because even broadly diversified portfolios are vulnerable to the systemic risks associated with climate change. In theory, this logic could align the interests of diversified investors and those of society at large, resulting in welfare-enhancing climate activism. However, because of the chasm between the portfolio-level goal of GHG reduction and the company-level goal of value maximization, climate activism by institutional investors is bound to trigger conflicting fiduciary duties on several levels. This paper analyzes how these economic and legal limitations make it unlikely that the enormous financial power wielded by institutional investors will ultimately translate into similarly massive decarbonization effects.

Keywords: corporate law, climate change, portfolio, institutional investors, sustainability, green finance

Suggested Citation

Lieberknecht, Markus, Institutional Investors as Climate Activists: Curb Your Enthusiasm (August 23, 2022). Available at SSRN: https://ssrn.com/abstract=4198042 or http://dx.doi.org/10.2139/ssrn.4198042

Markus Lieberknecht (Contact Author)

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

HOME PAGE: http://https://www.ipr.uni-heidelberg.de/personen/weller/lieberknecht/

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