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

Can shareholder activism genuinely alter corporate climate behaviour?

Ivan Diaz-Rainey, Paul A. Griffin, David H. Lont, Antonio J. Mateo-Márquez, and Constancio examine 944 climate-related shareholder proposals at 343 U.S. firms (2009–2022) to answer this question in « Shareholder Activism on Climate Change: Evolution, Determinants, and Consequences ».

They analyse which firms get targeted and how votes turn out and conduct event-studies to see if these proposals affect stock prices and future environmental performance.

Their findings include:

• Shareholder climate proposals have soared, rising 43.5% in 2021 and a further 4.3% in 2022, reaching 944 filed proposals across 343 companies in the sample.
• Large companies with heavy carbon footprints and low innovation spendings are more likely to be targeted by climate proposals.
• Activists especially pursued operational changes at these firms, with 43% of proposals pressing for climate risk mitigation in operations (as opposed to pure disclosures).
• One in three climate resolutions was a repeat filing, with these proposals seeing higher odds of reaching a vote and greater shareholder approval on average (often exceeding 30-40% in favour).
• Resolutions sponsored by investor coalitions like the UN PRI achieved significantly higher approval rates than others.
• Two years after a climate proposal, targeted firms' environmental performance ratings jump nearly 20% relative to pre-activism levels, but actual carbon output barely budged.
• Climate proposals deemed more demanding like forcing emission cuts saw share prices dip on the proxy voting dates, implying investors anticipated compliance costs.

This paper shows activists achieved better climate transparency and policies for issuers, as well as higher sustainability ratings, but not significant decarbonisation along the way.

In the long-term, such changes could translate into better risk management and competitiveness, but investors must temper expectations and be prepared to tolerate short-run stock price dips.

This study also suggests different types of proposals have different implications: a disclosure-only request might boost transparency without costly changes while an operations-focused proposal could signal deeper transformation at a short-term financial cost.

As a limitation, the research captures formal proposals that made it to proxy statements or were withdrawn, but does not track behind-the-scenes engagements where investors press for change without filing a resolution.