ESG Shareholder Engagement and Downside Risk

ESG Shareholder Engagement and Downside Risk

Andreas G.F. Hoepner, Ioannis Oikonomou, Zacharias Sautner, Laura Starks, Xiao Y. Zhou

Series number :

Serial Number: 
671/2020

Date posted :

April 16 2020

Last revised :

April 16 2020
SSRN Share

Keywords

  • ESG • 
  • shareholder activism • 
  • Downside Risk • 
  • Corporate governance • 
  • climate change

We examine whether engagement on environmental, social and governance (ESG) issues can benefit shareholders by reducing firms’ downside risk, measured using the lower partial moment and value at risk. Using a proprietary database, we provide evidence supporting this hypothesis. We further find that the measured risk effects vary across engagement success and engagement themes.

Engagement appears most effective in lowering downside risk when addressing environmental topics (primarily climate change). We find corroborating evidence in that successful engagement reduces the firm’s exposure to a downside-risk factor.
 

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Authors

Real name:
Andreas G.F. Hoepner
Real name:
Ioannis Oikonomou
Real name:
Xiao Y. Zhou