The Curse of Green Shareholder Oversight: Evidence from Emission Spillover of Divested Plants

Abstract

This paper provides novel evidence on how green shareholder pressure can propagate emission spillover to asset owners who are subject to fewer oversights. Using shareholder proposals, engagement, and activism campaigns, I find publicly listed energy firms divest pollutive assets and lead to an increase in emissions at the sold plants if the acquirers are private firms. Specifically, such emission increases are driven by cutting down costly emission abatement activities and are concentrated in plants bought by private independent buyers, sold by firms that have started environmental reporting, or located in areas with low environmental regulation risks. Overall, evidence highlights that green shareholder oversight plays an important role in the allocation of pollutive real assets and the internalization of environmental externalities.

Keywords: Shareholder Monitoring, Plant Divestiture, Emissions Leakage, Corporate Social Responsibility

JEL Classification: G23, G32, G34, G38, L33, P18, Q53, Q54