Timing Sustainable Engagement in Real Asset Investments

82 Pages Posted: 8 Jul 2024 Last revised: 13 Sep 2024

See all articles by Bram van der Kroft

Bram van der Kroft

Massachusetts Institute of Technology (MIT)

Juan Palacios

Massachusetts Institute of Technology (MIT) - Center for Real Estate; IZA Institute of Labor Economics

Roberto Rigobon

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Siqi Zheng

Samuel Talk Lee Professor of Urban and Real Estate Sustainability, Faculty Director of MIT Center for Real Estate

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Date Written: July 2024

Abstract

This paper estimates the effect of sustainable shareholder engagement on firm's investments. We study the real estate industry where investments are sporadic and occur following depreciation cycles. SEC restrictions (rule 240.14a-8) on shareholder proposals, in combination with the asset depreciation cycles, create random variation enabling us to identify firms' sustainable investment decisions. Using unique micro-data tracking investments in all public US commercial real estate properties over the past two decades, we find that sustainable engagement effectively steers firms to initiate tangible and long-lasting sustainable retrofits. However, engagement is ineffective or impairs such investments when it does not coincide with reinvestment periods, or investors vote down the proposal.

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Suggested Citation

van der Kroft, Bram and Palacios, Juan and Rigobon, Roberto and Zheng, Siqi, Timing Sustainable Engagement in Real Asset Investments (July 2024). NBER Working Paper No. w32646, Available at SSRN: https://ssrn.com/abstract=4888022

Bram Van der Kroft (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Juan Palacios

Massachusetts Institute of Technology (MIT) - Center for Real Estate ( email )

United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Roberto Rigobon

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E52-447
Cambridge, MA 02142
United States
617-258-8374 (Phone)
617-258-6855 (Fax)

Siqi Zheng

Samuel Talk Lee Professor of Urban and Real Estate Sustainability, Faculty Director of MIT Center for Real Estate ( email )

Building 9-323
Cambridge, MA 02139
United States

HOME PAGE: http://https://siqizheng.mit.edu/

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