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When Does Institutional Investor Activism Increase Shareholder Value?: The Carbon Disclosure Project


  • Kim Eun-Hee

    () (George Washington University)

  • Lyon Thomas

    () (University of Michigan, Ann Arbor)


This paper presents the first empirical test of the financial impacts of institutional investor activism towards climate change. Specifically, we study the conditions under which share prices are increased for the Financial Times (FT) Global 500 companies due to participation in the Carbon Disclosure Project (CDP), a consortium of institutional investors with $57 trillion in assets. We find no systematic evidence that participation, in and of itself, increased shareholder value. However, by making use of Russia’s ratification of the Kyoto Protocol, which caused the Protocol to go into effect, we find that companies’ CDP participation increased shareholder value when the likelihood of climate change regulation rose. We estimate the total increase in shareholder value from CDP participation at $8.6 billion, about 86% of the size of the carbon market in 2005. Our findings suggest that institutional investor activism towards climate change can increase shareholder value when the external business environment becomes more climate conscious.

Suggested Citation

  • Kim Eun-Hee & Lyon Thomas, 2011. "When Does Institutional Investor Activism Increase Shareholder Value?: The Carbon Disclosure Project," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-29, August.
  • Handle: RePEc:bpj:bejeap:v:11:y:2011:i:1:n:50

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    References listed on IDEAS

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    Cited by:

    1. Stefano Carattini & Suphi Sen, 2019. "Carbon Taxes and Stranded Assets: Evidence from Washington State," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1910, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
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    3. Frederik Dahlmann & Layla Branicki & Stephen Brammer, 2017. "‘Carrots for Corporate Sustainability’: Impacts of Incentive Inclusiveness and Variety on Environmental Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 26(8), pages 1110-1131, December.
    4. Omaima A.G. Hassan & Peter Romilly, 2018. "Relations between corporate economic performance, environmental disclosure and greenhouse gas emissions: New insights," Business Strategy and the Environment, Wiley Blackwell, vol. 27(7), pages 893-909, November.
    5. Bikki Jaggi & Alessandra Allini & Riccardo Macchioni & Annamaria Zampella, 2018. "Do investors find carbon information useful? Evidence from Italian firms," Review of Quantitative Finance and Accounting, Springer, vol. 50(4), pages 1031-1056, May.
    6. Dragan Ilic & Janick Christian Mollet, 2016. "Voluntary Corporate Climate Initiatives and Regulatory Loom: Batten Down the Hatches," CER-ETH Economics working paper series 16/261, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    7. Han, Jianlei & Linnenluecke, Martina K. & Pan, Zheyao (Terry) & Smith, Tom, 2019. "The wealth effects of the announcement of the Australian carbon pricing scheme," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 399-409.
    8. Hjort, Ingrid, 2016. "Potential Climate Risks in Financial Markets: A Literature Overview," Memorandum 01/2016, Oslo University, Department of Economics.
    9. Khaled Alsaifi & Marwa Elnahass & Aly Salama, 2020. "Carbon disclosure and financial performance: UK environmental policy," Business Strategy and the Environment, Wiley Blackwell, vol. 29(2), pages 711-726, February.
    10. Denis Cormier & Michel Magnan, 2015. "The Economic Relevance of Environmental Disclosure and its Impact on Corporate Legitimacy: An Empirical Investigation," Business Strategy and the Environment, Wiley Blackwell, vol. 24(6), pages 431-450, September.
    11. Chonnikarn Fern Jira & Michael W. Toffel, 2011. "Engaging Supply Chains in Climate Change," Harvard Business School Working Papers 12-026, Harvard Business School, revised Oct 2012.
    12. Bento, Nuno & Gianfrate, Gianfranco, 2020. "Determinants of internal carbon pricing," Energy Policy, Elsevier, vol. 143(C).
    13. Halil Emre Akbaş & Seda Canikli, 2018. "Determinants of Voluntary Greenhouse Gas Emission Disclosure: An Empirical Investigation on Turkish Firms," Sustainability, MDPI, Open Access Journal, vol. 11(1), pages 1-24, December.
    14. Konur, Dinçer, 2017. "Non-collaborative emission targets joining and quantity flow decisions in a Stackelberg setting," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 105(C), pages 60-82.
    15. Su‐Yol Lee & Yun‐Seon Park & Robert D. Klassen, 2015. "Market Responses to Firms' Voluntary Climate Change Information Disclosure and Carbon Communication," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 22(1), pages 1-12, January.
    16. Lyon, Thomas & Lu, Yao & Shi, Xinzheng & Yin, Qie, 2013. "How do investors respond to Green Company Awards in China?," Ecological Economics, Elsevier, vol. 94(C), pages 1-8.
    17. Federica Gasbarro & Francesco Rizzi & Marco Frey, 2016. "Adaptation Measures of Energy and Utility Companies to Cope with Water Scarcity Induced by Climate Change," Business Strategy and the Environment, Wiley Blackwell, vol. 25(1), pages 54-72, January.
    18. Lily Hsueh, 2019. "Opening up the firm: What explains participation and effort in voluntary carbon disclosure by global businesses? An analysis of internal firm factors and dynamics," Business Strategy and the Environment, Wiley Blackwell, vol. 28(7), pages 1302-1322, November.
    19. Daniel C. Matisoff & Douglas S. Noonan & John J. O'Brien, 2013. "Convergence in Environmental Reporting: Assessing the Carbon Disclosure Project," Business Strategy and the Environment, Wiley Blackwell, vol. 22(5), pages 285-305, July.
    20. Luo, Le & Tang, Qingliang, 2016. "Determinants of the Quality of Corporate Carbon Management Systems: An International Study," The International Journal of Accounting, Elsevier, vol. 51(2), pages 275-305.
    21. Leyla Orudzheva & Manjula S. Salimath & Robert Pavur, 2020. "Vortex of Corruption: Longitudinal Analysis of Normative Pressures in Top Global Companies," Journal of Business Ethics, Springer, vol. 163(3), pages 529-551, May.
    22. Chonnikarn (Fern) Jira & Michael W. Toffel, 2013. "Engaging Supply Chains in Climate Change," Manufacturing & Service Operations Management, INFORMS, vol. 15(4), pages 559-577, October.
    23. Melsa Ararat & Borhan Sayedy, 2019. "Gender and Climate Change Disclosure: An Interdimensional Policy Approach," Sustainability, MDPI, Open Access Journal, vol. 11(24), pages 1-19, December.
    24. Yang Stephanie Liu & Xiaoyan Zhou & Jessica Yang & Andreas Hoepner, 2016. "Corporate Carbon Emission and Financial Performance: Does Carbon Disclosure Mediate the Relationship in the UK?," ICMA Centre Discussion Papers in Finance icma-dp2016-03, Henley Business School, Reading University.

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