Shareholder proposals benefit ESG scores, but there's a catch
Often, improved scores come with extra costs and hits to financial performance.
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(Mark Hulbert, an author and longtime investment columnist, is the founder of the Hulbert Financial Digest; his Hulbert Ratings audits investment newsletter returns.)
CHAPEL HILL, N.C. (Callaway Climate Insights) — A comprehensive analysis of shareholder proposals at corporations’ annual meetings has some good news for climate-focused investors: Shareholder engagement can be surprisingly effective.
There is a catch, however, as I’ll discuss in a moment.
The study, “Shareholder Proposals: Do they Drive Financial and ESG Performance?,” began circulating in academic circles in January. It was conducted by Paola Mazza, a finance professor at the IÉSEG School of Management at the University of Lille, and Victoria Levasseur, one of Mazza’s former graduate students who now works at Societe Generale in Paris.
The researchers examined nearly 500 shareholder proposal campaigns conducted between 2010 and 2020 that targeted companies in either the S&P 500 or the Stoxx Europe 600 indexes. To analyze the impact of a given proposal on the target company’s behavior, the researchers constructed a control group of companies that were otherwise identical in numerous relevant respects but which did not receive a shareholder proposal.
They found that, compared to companies in the control group, “shareholder proposals are associated with … improved ESG scores.”
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