The Materiality of Environmental and Social Shareholder Activism – Who Cares?!
47 Pages Posted: 23 Jun 2017 Last revised: 19 Sep 2017
Date Written: August 24, 2017
Is shareholder activism on environmental and social issues driven by a quest for shareholder value maximisation or do sponsors of environmental and social proposals use this channel to advance ulterior motives? I address this question from a new angle by using the industry-specific materiality standards by the Sustainability Accounting Standards Board (SASB) to classify the environmental and social proposals into financially material or immaterial for the target firm. Overall, the results indicate that a considerable amount of investor resources is spent on advancing immaterial environmental and social issues through shareholder activism. Based on a sample of 3,360 environmental and social proposals, I find that more than 56% of the submitted proposals focus on financially immaterial matters. While certain investors such as public pension funds, university and foundation endowments, religious institutions and specific asset managers are better at targeting financially material issues, the overall shareholder base does not seem to differentiate between the financial materiality, or otherwise, of a proposal. Material proposals neither receive greater vote support nor does the market react more positively to learning that a company has been targeted by a material proposal. Finally, my results suggest that companies are more likely to be targeted if they show past violations and concerns on material environmental and social issues.
Keywords: corporate social responsibility; CSR; environmental and social factors; materiality; shareholder activism; SRI
JEL Classification: M14; G34
Suggested Citation: Suggested Citation