Financialization of corporate ownership and implications for the potential for climate action

Abstract

Purpose – To investigate whether investor interest in climate issues affects the carbon behavior of the corporations in which they may invest (target corporations).

Methodology/approach – We developed the Finance and Climate Database, merging data on ownership, carbon disclosure, and investor climate interest from several sources, with 30,840 shareholder unit observations. We supplemented analysis of this with interviews.

Findings – Climate-interested investors (CIIs) account for well over a third of the ownership of the world’s very large corporations. More activist CIIs may make a difference to carbon behavior of target corporations where their shareholdings are large enough to enable them to exert power, at or above around 1.5 percent of a target company’s shares. Share price volatility also strongly affects carbon behavior, and the balance of power in investment presently favors the short term over the long term.

Research limitations/implications – More precise proxies for carbon interest and carbon behavior would benefit future research.

Social implications – There is potential for far greater influence by individual CIIs. The most important factor in shifting the balance of power from the short term to the long term would be global agreement on a carbon pricing system.

Originality/value of chapter – This is the first time such a database has been developed or used for this purpose.

Citation

Peetz, D. and Murray, G. (2013), "Financialization of corporate ownership and implications for the potential for climate action", Institutional Investors’ Power to Change Corporate Behavior: International Perspectives (Critical Studies on Corporate Responsibility, Governance and Sustainability, Vol. 5), Emerald Group Publishing Limited, Leeds, pp. 99-125. https://doi.org/10.1108/S2043-9059(2013)0000005013