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Investor Impact on ESG
The seventh seminar in the ECGI Spotlight Series was held on Monday, 18 October 2021 at 16:00 CEST (10:00 EDT).
The seminar focused on three research papers from the ECGI Working Paper Series, presented by:
Roni Michaely, Michelle Lowry, Gaizka Ormazabal:
ES Risks and Shareholder Voice
The Big Three and Corporate Carbon Emissions Around the World
ABOUT THIS EVENT
Investors’ support for environmental and social (E&S) proposals at shareholder meetings has reached new heights in 2021, demonstrating that investors’ support on these issues has become increasingly strong.
In this seminar three separate studies regarding financial institutions’ involvement in promoting ES goals were presented and discussed. These studies focus on whether and when financial institutions’ funds vote in support of ES proposals, whether they do so when their votes actually make a difference, and whether institutions’ votes contain information on firms’ future risks.
Additionally, the seminar touched upon the engagements of large financial institutions with respect to reducing corporate carbon emissions around the world, and the impact of such engagements.
The ECGI Spotlight Series is a global online seminar programme highlighting chosen papers from the ECGI Working Paper Series.
Spotlight Team:
Mike Burkart (Editor) | Miriam Schwartz-Ziv | Amir Licht (Editor) | Geeyoung Min
Contact: Spotlight@ecgi.org
Supported by
Monday, 18 October 2021 | 16:00 CEST (10:00 EDT)
Introductory Remarks
Speakers:
ES Votes That Matter
Speakers:
ES Votes That Matter
Authors:
Roni Michaely
The University of Hong Kong; ECGI
Guillem Ordonez-Calafi
University of Bristol
Silvina Rubio
University of Bristol
Abstract:
We find that environmental and social (ES) funds in non-ES families adopt a strategic voting pattern: they are supportive of ES proposals that pass or fail by large margins, but unsupportive when their votes are likely to be pivotal. As such, these funds are able to show considerably high support for ES proposals on average, consistent with their stated objectives, while aligning with conflicting family preferences when their votes are likely to make a difference. This voting pattern is predominantly driven by actively managed funds. Our results highlight possible conflict of interest between ES funds and their families; showing that, when it matters the most, family preferences towards ES prevail over funds stated objectives, and perhaps with their fiduciary responsibilities.
Paper: ES Votes That Matter
Speakers
ES Risks and Shareholder Voice
Speakers:
ES Risks and Shareholder Voice
Authors:
Yazhou He
University of Manchester
Bige Kahraman
University of Oxford - Said Business School; Centre for Economic Policy Research (CEPR)
Michelle Lowry
Drexel University; European Corporate Governance Institute (ECGI)
Abstract:
While shareholder proposals related to ES issues nearly always fail, we show that investors’ support for these proposals contains information regarding future risks that firms face. Support levels are informative regarding the probability of negative tail returns that stem from future ES incidents. Examining the economic channels underlying this finding, we find that agency frictions contribute to proposal failure, leading to predictable tail events. Contrasting ES versus non-ES failed proposals within the same firm, we find that predictability is unique to ES initiatives; this is consistent with higher uncertainty regarding the value of ES initiatives exacerbating agency frictions.
Speakers
The Big Three and Corporate Carbon Emissions Around the World
Speakers:
The Big Three and Corporate Carbon Emissions Around the World
Authors:
José Azar
University of Navarra, IESE Business School; CEPR
Miguel Duro
IESE Business School
Igor Kadach
University of Navarra, IESE Business School
Gaizka Ormazabal
University of Navarra, IESE Business School; European Corporate Governance Institute (ECGI)
Abstract:
This paper examines the role of the “Big Three” (i.e., BlackRock, Vanguard, and State Street Global Advisors) on the reduction of corporate carbon emissions around the world. Using novel data on engagements of the Big Three with individual firms, we find evidence that the Big Three focus their engagement effort on large firms with high CO2 emissions in which these investors hold a significant stake. Consistent with this engagement influence being effective, we observe a strong and robust negative association between Big Three ownership and subsequent carbon emissions among MSCI index constituents, a pattern that becomes stronger in the later years of the sample period as the three institutions publicly commit to tackle ESG issues.
Paper: The Big Three and Corporate Carbon Emissions Around the World
Speakers
Q&A
Speakers
Presentations
Introductory Remarks
Speakers
ES Votes That Matter
Authors:
Roni Michaely
The University of Hong Kong; ECGI
Guillem Ordonez-Calafi
University of Bristol
Silvina Rubio
University of Bristol
Abstract:
We find that environmental and social (ES) funds in non-ES families adopt a strategic voting pattern: they are supportive of ES proposals that pass or fail by large margins, but unsupportive when their votes are likely to be pivotal. As such, these funds are able to show considerably high support for ES proposals on average, consistent with their stated objectives, while aligning with conflicting family preferences when their votes are likely to make a difference. This voting pattern is predominantly driven by actively managed funds. Our results highlight possible conflict of interest between ES funds and their families; showing that, when it matters the most, family preferences towards ES prevail over funds stated objectives, and perhaps with their fiduciary responsibilities.
Paper: ES Votes That Matter
Speakers
ES Risks and Shareholder Voice
Authors:
Yazhou He
University of Manchester
Bige Kahraman
University of Oxford - Said Business School; Centre for Economic Policy Research (CEPR)
Michelle Lowry
Drexel University; European Corporate Governance Institute (ECGI)
Abstract:
While shareholder proposals related to ES issues nearly always fail, we show that investors’ support for these proposals contains information regarding future risks that firms face. Support levels are informative regarding the probability of negative tail returns that stem from future ES incidents. Examining the economic channels underlying this finding, we find that agency frictions contribute to proposal failure, leading to predictable tail events. Contrasting ES versus non-ES failed proposals within the same firm, we find that predictability is unique to ES initiatives; this is consistent with higher uncertainty regarding the value of ES initiatives exacerbating agency frictions.
Speakers
The Big Three and Corporate Carbon Emissions Around the World
Authors:
José Azar
University of Navarra, IESE Business School; CEPR
Miguel Duro
IESE Business School
Igor Kadach
University of Navarra, IESE Business School
Gaizka Ormazabal
University of Navarra, IESE Business School; European Corporate Governance Institute (ECGI)
Abstract:
This paper examines the role of the “Big Three” (i.e., BlackRock, Vanguard, and State Street Global Advisors) on the reduction of corporate carbon emissions around the world. Using novel data on engagements of the Big Three with individual firms, we find evidence that the Big Three focus their engagement effort on large firms with high CO2 emissions in which these investors hold a significant stake. Consistent with this engagement influence being effective, we observe a strong and robust negative association between Big Three ownership and subsequent carbon emissions among MSCI index constituents, a pattern that becomes stronger in the later years of the sample period as the three institutions publicly commit to tackle ESG issues.
Paper: The Big Three and Corporate Carbon Emissions Around the World