Shareholder campaigns influence firm environmental impacts

Award-winning research: environmental activism by shareholders leads to corporate change

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How can asset managers and institutional investors actively support responsible investment? New research - and winner of the 2020 Moskowitz prize from Northwestern University’s Kellogg School of Management - shows the power of shareholder environmental campaigns.

Co-ordinated action by long-term institutional investors can influence company decisions leading firms to cut their environmental impact and address climate change risk, according to the latest and award-winning academic research.  The Moskowitz prize is a top global award for quantitative academic research into sustainable and responsible finance. 

Firms targeted by environmental activist campaigns reduced the intensity and toxicity of their polluting activities, typically cutting the release of toxic chemicals by 13%, according to the research. At the same time, these firms boosted their investment in pollution-abatement activities. This led to improved air quality within a one-mile radius of a plant, benefiting local stakeholders and society. 

These were key findings from the study on The Real Effects of Environmental Activist Investing by Assistant Professor Lakshmi Naaraayanan of London Business School, Kunal Sachdeva Assistant Professor at Rice University and Varun Sharma, PhD student from LBS.  Varun receives funding from the Wheeler Institute for Business and Development for his research on climate finance.  


Commenting on the research, Dr Naaraayanan of London Business School explains:

“Given growing demand among pension holders and investors for businesses to act responsibly towards the environment, this research provides empirical evidence on the positive effects of shareholder campaigns and how they contribute to responsible business practices. Very importantly, we find clear evidence that shareholder engagements can benefit the firm, its many stakeholders, and society.

“Importantly, our results demonstrate that co-ordinated action by large institutional shareholders, adopting a firm-specific mandate on sustainability, can bring about positive change by influencing board level decisions so companies mitigate their environmental impact. 

He continued: “UK regulators now stipulate that pension funds must assess the risks associated with environmental, social and governance (ESG) factors of investee companies. This requirement, coupled with the growing demand for ethical investment, means it’s important for asset managers to understand where and how they can exert influence. 

“To be successful, campaigns require investors to monitor each target firm’s environmental behaviour and combine this with the threat of discipline.


In the US, for example, pressure can be applied through rules on proxy access which effectively empower long-term shareholders, such as pension funds, to place alternative candidates on a company’s ballot for directorships. This approach has become mainstream practice among S&P 500 companies and adopted by around half of the Russell 1000 companies.