ESG shareholder engagement and downside risk

Andreas G F Hoepner, Ioannis Oikonomou, Zacharias Sautner, Laura T Starks and Xiao Y Zhou

Review of Finance, 2024, vol. 28, issue 2, 483-510

Abstract: We show that engagement on environmental, social, and governance issues can benefit shareholders by reducing firms’ downside risks. We find that the risk reductions (measured using value at risk [VaR] and lower partial moments) vary across engagement types and success rates. Engagement is most effective in lowering downside risk when addressing environmental topics (primarily climate change). Further, targets with large downside risk reductions exhibit a decrease in environmental incidents after the engagement. We estimate that the VaR of engagement targets decreases by 9 percent of the standard deviation after successful engagements, relative to control firms.

Keywords: ESG; shareholder engagement; downside risk (search for similar items in EconPapers)
JEL-codes: G11 G23 G34 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (10)

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Working Paper: ESG Shareholder Engagement and Downside Risk (2023)
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