The Real Effects of Environmental Activist Investing

76 Pages Posted: 5 Dec 2019 Last revised: 30 Mar 2021

See all articles by S Lakshmi Naaraayanan

S Lakshmi Naaraayanan

London Business School

Kunal Sachdeva

Rice University - Jesse H. Jones Graduate School of Business

Varun Sharma

London Business School

Date Written: September 18, 2020

Abstract

We study the real effects of environmental activist investing. Using plant-level data, we find that targeted firms reduce their toxic releases, greenhouse gas emissions, and cancer-causing pollution. Improvements in air quality within a one-mile radius of targeted plants suggest potentially important externalities to local economies. These improvements come through increased capital expenditures on new abatement initiatives. We rule out alternative explanations of decline in production, reporting biases, and forms of selection, while also providing evidence supporting the external validity of environmental activism. Overall, our study suggests that engagements are an effective tool for long-term shareholders to address climate change risks.

Keywords: Activism, Environmental Social and Governance, Socially Responsible Investment, Corporate Social Responsibility, Pensions

JEL Classification: G23, G34, M14, Q50

Suggested Citation

Naaraayanan, S Lakshmi and Sachdeva, Kunal and Sharma, Varun, The Real Effects of Environmental Activist Investing (September 18, 2020). European Corporate Governance Institute – Finance Working Paper No. 743/2021, Available at SSRN: https://ssrn.com/abstract=3483692 or http://dx.doi.org/10.2139/ssrn.3483692

S Lakshmi Naaraayanan

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

HOME PAGE: http://www.lakshmin.com

Kunal Sachdeva (Contact Author)

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

HOME PAGE: http://kunalsachdeva.com

Varun Sharma

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

HOME PAGE: http://www.sharmav.com

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