The Big Three and corporate carbon emissions around the world

Azar, José; Duro, Miguel; Kadach, Igor; Ormazábal, Gaizka

doi:10.1016/j.jfineco.2021.05.007

Cited by 359 publications

(111 citation statements)

References 33 publications

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“…Most of the ESG literature focuses on the causes and effects of ESG performance. For instance, one strand of the literature examines the cross-sectional differences in observed levels of ESG performance ratings and the wealth effects of ESG practices and policies, with a particular emphasis on the positive impacts provided by institutional investors (e.g., Azar et al, 2021;Dimson et al, 2015;Hoepner et al, 2021). Specifically, Dimson et al (2015) analyze a proprietary database of ESG engagements with U.S. public firms and find that firms with socially conscious institutional investors and inferior governance are more likely to be engaged and that successful ESG engagements are followed by positive abnormal returns.…”

Section: The Esg Literature On Reits and Non-reit Firmsmentioning

confidence: 99%

“…After successful engagements, firms experience improved accounting performance and increased institutional ownership. Azar et al (2021) study the role of the "Big Three" (i.e., BlackRock, Vanguard, and State Street Global Advisors) on the reduction of corporate carbon emissions. They document that the Big Three increase their engagement efforts on firms with high carbon emissions, and subsequently those firms reduce their carbon emissions.…”

Section: The Esg Literature On Reits and Non-reit Firmsmentioning

confidence: 99%

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ESG Disclosure, REIT Debt Financing and Firm Value

Feng

2021

J Real Estate Finan Econ

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Section: The Esg Literature On Reits and Non-reit Firmsmentioning

confidence: 99%

Section: The Esg Literature On Reits and Non-reit Firmsmentioning

confidence: 99%

ESG Disclosure, REIT Debt Financing and Firm Value

Feng

2021

J Real Estate Finan Econ

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“…In 2018, the firms included in the MSCI World index produced 56% of CO 2 . Institutional investors own collectively 45% of the capital of these MSCI firms, whereas the Big Three hold on average 4.8% [24]. Because these firms are established and operate in different jurisdictions, in contrast to governments, institutional investors can influence CO 2 abatement on a worldwide rather than on a national basis.…”

Section: The Law and Economics Of Sustainable Corporate Governancementioning

confidence: 99%

“…Institutional investors, particularly large conventional index funds, have been able to do more than greenwashing focusing on climate change. A recent study [24] found that the Big Three have engaged with some of the world's largest contributors to GHGs, in which they hold large stakes, on CO 2 emissions. Apparently, this engagement was effective.…”

Section: The Law and Economics Of Sustainable Corporate Governancementioning

confidence: 99%

“…Moreover, global institutional ownership, of which more than one-third is indexed [1], correlates positively with several ESG scores, and this seems attributable to voice [44]. Finally, to dissipate greenwashing concerns, significant ownership by the Big Three correlates with more environmental engagements with portfolio companies and lower CO 2 emissions [24].…”

Section: Institutional Investors: Exit or Voice?mentioning

confidence: 99%

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Will the EU Taxonomy Regulation Foster Sustainable Corporate Governance?

Pacces

2021

Sustainability

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EU securities regulation has established a taxonomy of environmentally sustainable activities. This article discusses, from a law and economics standpoint, the potential of this taxonomy to support sustainable corporate governance. Corporate governance can be an efficient way to channel investor preferences towards sustainability because the concentration of institutional shareholding has lowered the transaction costs of shareholder action. However, there is a principal-agent problem between institutional investors and their beneficiaries, which depends on greenwashing and undermines sustainable corporate governance. This article argues that introducing environmental sustainability into EU mandatory disclosure aligns the institutional investors’ incentives with the interest of their beneficiaries and may foster the efficient inclusion of sustainability in corporate governance. The argument is threefold. Firstly, the EU Taxonomy may curb greenwashing by standardizing the disclosure of environmental sustainability. Secondly, this information may become salient for the beneficiaries as the same standards define the sustainability preferences to be considered in recommending and marketing financial products. Thirdly, sustainability disclosure prompts institutional investors to compete for sustainability-minded beneficiaries. Being unable to avoid unsustainable companies altogether, institutional investors are expected to cater to beneficiaries’ preferences for environmental sustainability using voice instead of exit.

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Sustainable development for private equity: Integrating environment, social, and governance factors into partnership valuation

et al. 2022

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General partners (GPs) of private equity (PE) are facing increasing pressure from limited partners (LPs) to make investments that meet environmental, social, and governance (ESG) targets. We develop a tractable model to analyze an LP's valuation of participating in PE investment when the ESG factors are objectives. Integrating the ESG factors makes the LP commit to investing capital in ESG demand spending and choosing sustainable PE, which has an inverted U‐shaped effect on the LP's certainty‐equivalent wealth. At the optimal ESG demand spending, the LP tends to choose more consumption but less public equity investment due to his or her positive expectation about higher certainty‐equivalent wealth from PE investment. However, an endogenous risk‐aversion attitude and exogenous idiosyncratic risk will have an adverse effect and make the LP less eager to integrate the ESG factors for sustainable development. Thus, the optimal ESG demand decreases, and the LP requires a higher break‐even excess return. Our analysis provides new theoretical insights for both PE partners and regulators when integrating ESG factors and sustainable concepts into PE valuation and management.

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The Big Three and corporate carbon emissions around the world

Cited by 359 publications

References 33 publications

ESG Disclosure, REIT Debt Financing and Firm Value

ESG Disclosure, REIT Debt Financing and Firm Value

Will the EU Taxonomy Regulation Foster Sustainable Corporate Governance?

Sustainable development for private equity: Integrating environment, social, and governance factors into partnership valuation

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