Institutional investor support for climate change resolutions: A new challenge to capitalism or co-opted activism?

Abstract

Purpose – Responsible investor (RI) engagement seeks to change corporate strategic priorities while balancing the financial imperative. This chapter uses an institutional theory framework to explore the tension between financial performance and environmental, social, and governance (ESG) issues in RI engagement.

Methodology – Discourse of the proponent, supporters and opponents of Australia’s first climate change shareholder resolution – a minority proposal, will be analyzed using framing analysis.

Findings – Framing indicated that the discourse emphasized the dominant financial performance logic while often omitting the ESG logic. One possible explanation is that the process of shareholder proposal nomination and the financial imperative of investment organizations effectively co-opted the engagement.

Research limitations – A case of responsible investment engagement is used to illustrate multiple logics in the investment field. Although there are significant limitations to drawing inferences from a single example, the discussion is relevant to RI support for engagement initiatives such as the UN Principles of Responsible Investment clearinghouse and Carbon Disclosure Project Carbon Action. This chapter argues that attempts to change corporate strategic actions on climate change by RI through engagement will be less effective while the financial performance logic provides relatively more legitimacy to investors.

Practical implications – Integrating the ESG logic with the financial logic is vulnerable to co-optation due to incommensurability. Operationalizing both logics requires establishing a boundary between ESG and financial logics to develop legitimacy.

Social implications – RI engagement on climate change has the potential to be an important part of the social response to the sustainability agenda.

Originality – In applying institutional theory to RI climate change activism this chapter presents original insights into the potential of engagement to effect change.

Citation

Jacobsen, B. (2013), "Institutional investor support for climate change resolutions: A new challenge to capitalism or co-opted activism?", 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. 279-308. https://doi.org/10.1108/S2043-9059(2013)0000005020