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Successful Shareowner Engagements Improve Company Performance
By Steve Schueth

Three leading academics have tied positive market performance to corporate social responsibility (CSR) activities at major publicly traded U.S. companies.  Their research netted them the Moskowitz Prize at the 23rd annual SRI Conference.

This year's prize-winning paper, Active Ownership, was authored by Elroy Dimson, emeritus professor of finance, London Business School; Oğuzhan Karakaş, assistant professor, Carroll School of Management, Boston College; and Xi Li, assistant professor, Fox School of Business, Temple University.

Dimson, Karakaş, and Li examined privately compiled data on environmental, social, and governance engagements between 1999 to 2009.  Their findings provide new evidence of the value of shareowner engagement on CSR issues.  Targeted firms experienced improvements in operating performance, profitability, efficiency, and governance indices after successful engagements.

The authors analyzed 2,152 engagements on environmental, social, and corporate governance (ESG) issues, with 613 U.S.-based corporations.  It found that successful engagement led to abnormal positive returns of 4.4% (also known as excess returns, or “alpha”).  Overall, abnormal returns averaged 1.8%; no positive market returns were discerned from unsuccessful engagements.  The positive returns documented were most pronounced for engagements on the themes of corporate governance and climate change.

The Moskowitz Prize encourages and recognizes outstanding academic research on matters germane to the field of responsible investing.  Awarded annually at The SRI Conference, produced by First Affirmative Financial Network, it’s the only global academic prize recognizing outstanding quantitative research in the field of sustainable, responsible, impact (SRI) investing.

Posted: October 11, 2012