Investor Activism and the Green Transition

Sebastian Gryglewicz, Simon Mayer and Erwan Morellec

No 21225, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study impact activism, where activist investors promote green transitions in firms. This activism faces two key challenges. First, an internal free-rider problem arises when insiders and activists free-ride on each other's efforts, weakening activism's effectiveness. Second, an external free-rider problem emerges when gains from activism are reflected in stock prices, discouraging activist investment or tilting it towards firms capable of transitioning independently. Our analysis highlights how factors such as investor preferences, carbon taxes, and firms’ ownership structure — public versus private — shape the effectiveness of activism, clarifying the conditions under which activism supports, rather than hinders, firms’ green transition.

Keywords: Activism (search for similar items in EconPapers)
Date: 2026-02
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