Shareholder Engagement on Environmental, Social, and Governance Performance

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.