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  • April 22, 2021
  • Article
  • Harvard Business Review Digital Articles

Shareholders Are Pressing for Climate Risk Disclosures. That's Good for Everyone

By: Caroline Flammer, Michael W. Toffel and Kala Viswanathan
  • Format:Electronic
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Abstract

Does shareholder activism induce firms to voluntarily disclose climate change risks? And how do markets respond to these disclosures? New research finds that the extent of climate-risk disclosure increases by approximately 4.6% for each environment-related proposal that is submitted, and that the effect rises to 6.8% when environmental shareholder activism is initiated by institutional shareholders with a long-term holding horizon. It also found that the stock market responds favorably to such disclosures, with a disclosing firm’s stock price increasing by 1.21% on average in the days following a disclosure. This suggests that investors value higher transparency with respect to climate change risks and that disclosure tends to benefit disclosing companies.

Keywords

Reporting; Transparency; Activism; Shareholder Activism; Shareholder Engagement; Climate Change; Corporate Disclosure; Investment Activism; Business and Shareholder Relations

Citation

Flammer, Caroline, Michael W. Toffel, and Kala Viswanathan. "Shareholders Are Pressing for Climate Risk Disclosures. That's Good for Everyone." Harvard Business Review Digital Articles (April 22, 2021).
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About The Author

Michael W. Toffel

Technology and Operations Management
→More Publications

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More from the Authors
  • Arla Foods: Data-Driven Decarbonization By: Michael Parzen, Michael W. Toffel and Susan Pinckney
  • How Firms Respond to Worker Activism: Evidence from Global Supply Chains By: Yanhua Bird, Jodi L. Short and Michael W. Toffel
  • Calyx Global: Rating Carbon Credits By: Michael W. Toffel and Adam Chen
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