Shareholder Activism on Climate Change: Evolution, Determinants, and Consequences

Abstract

We study 944 shareholder proposals submitted to 343 U.S. firms on climate change issues during 2009–2022. We use logistic and two-stage regression to estimate the propensity for a firm to be targeted or subjected to a vote at the annual general meeting and, for voted proposals, the determinants of that vote. We also examine whether climate-related proposals affect investor returns and how they relate to firms’ future environmental performance and greenhouse gas emissions. Compared to a matched sample, we first find that activists target larger, more carbon-intensive, and less R&D-active firms. Second, voting likelihood is higher for firms with repeated and operations-related proposals and lower pre-proposal environmental ratings. By contrast, disclosure-related proposals are likelier to be negotiated and withdrawn. Third, repeated and operations-related proposals receive higher votes in favor, whereas votes on carbon-intensive firms do not. Fourth, building on the theory that investors act as if they distinguish among the different shareholder proposals based on the expected cost to the firm, we find evidence to support this idea. We find that investors respond negatively to ex-ante costlier proposals, such as those that relate to emissions reduction and target carbon-intensive firms. Fifth, targets’ future environmental performance rating is almost twenty percent higher after a proposal than before compared to the matched sample, whereas emissions do not budge appreciably.