ESG Shareholder Engagement and Downside Risk
33 Pages Posted: 25 Nov 2016 Last revised: 1 Jan 2018
Date Written: December 2017
We show that shareholder engagement on environmental, social and governance (ESG) issues creates value by reducing downside risk, measured using lower partial moments and value at risk. We document this effect by exploiting proprietary access to the complete engagement database of one of the world’s largest institutional shareholder activist. The risk effect of ESG engagement varies across engagement themes. It is effective when governance or strategy topics are addressed, and if changes in firms’ environmental policies (especially on climate risk) are coupled with governance improvements.
Keywords: ESG, Shareholder Activism, Downside Risk, Corporate Governance, Climate Change
JEL Classification: G32, M14
Suggested Citation: Suggested Citation