Shareholder Engagement on Environmental, Social, and Governance Performance
CentER Discussion Paper Series No. 2017-040
67 Pages Posted: 31 May 2017 Last revised: 13 Apr 2018
Date Written: April 2018
We study investor activism promoting environmental, social and governance (ESG) improvements using a proprietary dataset. Targets have a higher market share, analyst coverage, stock returns, and liquidity. The engagements lead to ESG rating adjustments. Activism is more likely to succeed when targets have a good ex ante ESG track record, lower ownership concentration and growth. Successful engagements positively affect sales growth, without changing profitability. A portfolio of targeted firms earns superior returns to that of matched firms. E.g., targets in the ex ante lowest ESG quartile outperform nonengaged peers by 4.7%. Similarly, successful engagements generate higher returns than unsuccessful ones.
Keywords: activism, corporate social responsibility, socially responsible investing (SRI), engagement, environmental, social and governance (ESG)
JEL Classification: G15, G23, G32, G34, G39
Suggested Citation: Suggested Citation