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Divestment and Engagement: The Effect of Green Investors on Corporate Carbon Emissions

SSRN Electronic Journal
2024
  • 4
    Citations
  • 3,375
    Usage
  • 12
    Captures
  • 2
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    4
    • Citation Indexes
      2
    • Policy Citations
      2
      • Policy Citation
        2
  • Usage
    3,375
    • Abstract Views
      2,776
    • Downloads
      599
  • Captures
    12
  • Mentions
    2
    • News Mentions
      2
      • News
        2
  • Ratings
    • Download Rank
      92,513

Most Recent News

Investors Should Engage With Firms They Want To Go Green, Not Divest

How can investors use capital markets to encourage emissions reductions? In new research, Matthew E. Kahn, John G. Matsusaka, and Chong Shu examine whether public

Article Description

This paper investigates whether green investors can influence corporate greenhouse gas emissions through capital markets, and if so, whether the effect is larger from divesting polluters’ stock in order to limit their access to capital, or acquiring polluters’ stock and engaging with management as owners. We focus on public pension funds, classifying them as green or nongreen based on which political party controlled the fund. To isolate the causal effects of green ownership, we use exogenous variation caused by state-level politics that shifted control of the funds, and portfolio rebalancing in response to returns from non-equity investment. Our main finding is that companies reduced their greenhouse gas emissions when stock ownership by green funds increased and did not alter or increased their emissions when ownership by nongreen funds increased. Other evidence based on proxy voting, shareholder proposals, and activist pension funds suggests that ownership mattered because of active engagement by green investors, and through attempts to persuade more than voting pressure. We do not find that companies with green investors were more likely to sell off their high-emission facilities (greenwashing). Overall, our findings suggest that (a) corporate managers respond to the environmental preferences of their investors; (b) divestment of polluting companies may lead to greater emissions; and (c) private markets may be able to partially address environmental challenges independent of government regulation.

Bibliographic Details

Matthew E. Kahn; John G. Matsusaka; Chong Shu

Elsevier BV

Carbon emissions; greenhouse gases; divestment; investors; shareholders; pension funds

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