Publication Type

Working Paper

Version

publishedVersion

Publication Date

12-2025

Abstract

We examine when and why institutional investors engage portfolio firms on ESG issues using proprietary engagement records from a European asset manager. Salient negative incidents emerge as a powerful trigger—second only to firm size—because they heighten reputational accountability for investors and reveal new information about hidden ESG weaknesses, particularly at firms perceived as ESG leaders. Monitoring also extends along the supply chain: incidents at key suppliers prompt investor engagement with focal firms. Finally, engagement is associated with higher firm value, stronger ESG performance, and increased cash flows. Together, the findings illuminate the drivers and mechanisms of ESG engagement and underscore its role as an effective channel of external corporate governance

Keywords

Shareholder engagement, institutional investors, ESG incidents, ESG sentiments, firm value

Discipline

Business Law, Public Responsibility, and Ethics | Finance and Financial Management

Research Areas

Finance

Areas of Excellence

Sustainability

First Page

1

Last Page

48

Identifier

10.2139/ssrn.5728564

Publisher

ECGI Working Paper; Singapore Management University Lee Kong Chian School of Business Research Paper

City or Country

Singapore

Copyright Owner and License

Authors

External URL

https://fmaconferences.org/Taipei/TaipeiProgram.htm

Comments

Presented at Financial Management Association Asia/Pacific Conference 2025

Additional URL

https://doi.org/10.2139/ssrn.5728564

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