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Semenova, N. & Hassel, L. G. (2019). Private engagement by nordic institutional investors on environmental, social, and governance risks in global companies. Corporate governance: An International Review, 27(2), 144-161
Open this publication in new window or tab >>Private engagement by nordic institutional investors on environmental, social, and governance risks in global companies
2019 (English)In: Corporate governance: An International Review, ISSN 0964-8410, E-ISSN 1467-8683, Vol. 27, no 2, p. 144-161Article in journal (Refereed) Published
Abstract [en]

Research question/issue

The paper examines private engagements related to environmental, social, and governance (ESG) incidents as a corporate governance mechanism used by Nordic institutional investors to influence MSCI World companies. The questions addressed are how an agent‐led collaborative engagement is carried out, what are the characteristics of the target companies selected, and if the successful engagements can improve ESG performance compared with pre‐engagement and incomplete cases.

Research findings/insights

A unique data set of 355 private engagements of a professional agent on behalf of its Nordic clients is studied on environment, human and labor rights, and corruption risks between 2005 and 2013. An engagement process of the agent is described with focus on sequence and duration of actions of private engagement dialogues before filing a resolution. Successful private engagements, when target companies adopt the proposed ESG changes, are 27.6%. The incident‐driven private engagements target companies rated with high market values and ESG performance. ESG performance and transparency increase for succeeded engagements in the postengagement period and relative to incomplete engagements.

Theoretical/academic implications

The paper provides empirical support for a social movement‐based influence of private engagements on target companies and adds to the broad‐scale empirical literature on investor activism. In the Nordic governance setting, an agent‐coordinated private engagement is seen as a social movement that supports targeting companies with a potential for change.

Practical/policy implications

Insights are offered to actors in the value chain in financial markets by demonstrating that successful ESG engagements have the potential to change portfolio company ESG practices.

Place, publisher, year, edition, pages
John Wiley & Sons, 2019
Keywords
corporate governance, active ownership, environmental, social, and governance (ESG) risks, institutional investors, private engagement
National Category
Economics and Business
Research subject
Business Studies
Identifiers
urn:nbn:se:umu:diva-161676 (URN)10.1111/corg.12267 (DOI)
Available from: 2019-07-23 Created: 2019-07-23 Last updated: 2019-07-24Bibliographically approved
Identifiers
ORCID iD: ORCID iD iconorcid.org/0000-0002-5595-3832

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