Shareholder Engagement on Environmental, Social, and Governance Performance

Shareholder Engagement on Environmental, Social, and Governance Performance

June 19 2017

We study investor activism promoting environmental, social and governance (ESG) improvements by means of a proprietary dataset covering 660 companies globally over 2005-2014. Targets have a higher market share, analyst coverage, stock returns, and liquidity. The engagements lead to significant ESG rating adjustments.

Activism is more likely to succeed for companies with a good ex ante ESG track record, and with lower ownership concentration and growth. Successful engagements positively affect sales growth, without changing profitability. Targets outperform matched firms by 2.7% over 6 months post-engagement, while the (ex ante) lowest ESG quartile earns an extra 7.5% over 1 year.