Private Shareholder Engagements on Material ESG Issues

Abstract

We study private shareholder engagements with 2,465 listed firms about environmental, social, and governance (ESG) issues from 2007 to 2020. We examine to what extent private engagements address financially material ESG issues and contribute to firm performance. We find that material engagements succeed more often than immaterial engagements and that the 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 associated with improvements in profitability and cost ratios than immaterial engagements. Finally, our evidence indicates that a decrease in CO2e emission intensity accompanies environmental engagements.

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

JEL Classification: G34, M14, Q56