Establishing authority: shareholder engagement on climate change concerns

In this new Misum Academic Insight, Misum affiliated researcher Emma Sjöström and her co-authors Rieneke Slager and Jean-Pascal Gond delve into the process by which shareholders and their intermediaries establish authority in shareholder engagement which can, in turn, influence companies to improve their climate-related work.

The Academic Insight is based on the research article, funded by Vinnova and conducted in partnership with AP7: "Mirroring and switching authoritative personae: A ventriloquial analysis of shareholder engagement on carbon emissions" published in Human relations in 2023.

The involvement of shareholders in pressuring corporations to address environmental, social, and governance (ESG) concerns, within the broader context of challenges linked to climate change, has sparked extensive discussions. From one perspective, shareholders are portrayed as key actors in driving climate change by pressuring companies to prioritize short-term profits. However, there is a growing consensus among governments and institutional investors, such as pension funds, that shareholders possess substantial influence in steering capitalism toward a more sustainable trajectory. From this standpoint, shareholder engagement, a process in which shareholders via dialogue seek to influence corporate management to improve ESG performance, is viewed by many as a promising approach for redirecting corporate attention towards climate change issues. However, given the time- and resource-intensive nature of engagement, many investors outsource the work to intermediary organizations that represent their collective interests. This academic insight delves into the process by which shareholders and their intermediaries establish authority in shareholder engagement which can, in turn, influence companies to improve their climate-related work.

The analysis found that the engager assumed different roles in the dialogue, which could be distinguished based on the arguments invoked and the matters of concern that were raised. These roles were akin to different personae that the engager assumed to convince target corporations to act on reducing carbon emissions. The metaphor of ventriloquism is used here to signify the idea that the engager as well as the target corporations constantly animate, or are animated by, different figures to make their case.

As a diplomat, the engager aimed to represent institutional investors as ultimate owners of the corporation, and to mediate between the different interests of owners and management.
As an advocate, the engager tried to urge corporations to be in compliance with the spirit of carbon emission regulations, including the Paris agreement.
As a coach, the engager empowered target corporations to take real action on carbon reduction by providing knowledge and support.

Read the full Misum Academic Insight here.

Authors:

Rieneke Slager, Associate Professor, University of Groningen

Jean-Pascal Gond, Professor, City, University London

Emma Sjöström, Academic Researcher and Co-director of the Sustainable Finance Initiative, Misum