Shareholder advocacy works. Green Century and its investors have known this for years but a recent study confirmed it.
While ample studies have examined how engaged shareholders can affect a company’s governance, financial, and operational performance, with an aim of increasing shareholder wealth, there was a dearth of research into the ability of engaged shareholders to affect a corporation’s environmental performance, without a primary objective of simply protecting the environment.
The study, The Real Effects of Environmental Activist Investing, aimed to fill that gap in understanding. It was conducted by researchers from Hong Kong University of Science and Technology, Jesse H. Jones Graduate School of Business at Rice University, and the London Business School.
While the study’s finding may not be a surprise to Green Century investors, they are striking. The study found evidence that engaged shareholders “can affect sustainability characteristics of targeted firms.”
The study even found that shareholder engagements may “potentially have positive externalities on the local economies” around the production plants of targeted companies. The positive externalities largely were attributable to the improved public health arising from reduced emissions.
Finally, the study found evidence that targeted companies primarily focus on waste reduction but also improve “other less impactful activities, such as recycling, waste treatment, or disposal.” Evidence suggests that targeted firms improve their operational efficiency and initiate inventory controls, too.
The study concluded, “We document that long-term institutional investors can affect firm sustainability.”
Again, this is not news to Green Century, which has a long track record of improving corporate sustainability. Our in-depth, in-house, and award-winning shareholder advocacy program has helped convince dozens of corporations to adopt no-deforestation commitments, reduce their use of pesticides and medically-important antibiotics, source more renewable energy, decrease their plastic pollution and food waste, and more.
We welcome this addition to the academic literature that suggests that “engagements are an effective tool for long-term shareholders to address climate change risks.”
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