Private Shareholder Engagements on Material ESG Issues

Abstract

We study private shareholder engagements with 2,465 publicly listed firms from 2007 to 2020 about environmental, social, and governance (ESG) issues. We examine to what extent private engagements address financially material ESG issues and contribute to firm performance. We find that around 75% of engagements are financially material and that targets of successful material engagements significantly outperform their peers by 2.5% over the next 14 months. Further, we find that material engagements are more often significantly associated with improvements in profitability, sales, and cost ratios than immaterial engagements. Finally, our evidence indicates that a decrease in CO2e intensity accompanies environmental engagements but that total CO2 emissions are unaffected.

Keywords: shareholder engagement, ESG, corporate sustainability, active ownership, materiality, sustainable finance, responsible investing

JEL Classification: G34, M14, Q56