Can Investor Coalitions Regulate Corporate Climate Action?

This paper investigates the effectiveness of collective investor engagement in regulating corporate climate action. Empirically, I focus on Climate Action 100+ (CA100+), the world’s largest investor coalition on climate change. To address common measurement issues in previous research, I conduct a multidimensional assessment of companies’ climate action. In particular, I collect new primary data on climate-related disclosure using a Natural Language Processing model and augment time series data on the ambition of carbon emission reduction targets. To isolate the causal impact of CA100+, I employ a binned Difference-in-differences (DiD) analysis and a combination of matching with DiD methodology. The findings suggest that CA100+ has had no significant effect on companies’ disclosures, reductions in carbon emissions, or short-term targets. However, I find a heterogeneous impact on companies’ medium- and long-term targets, significant only for companies potentially selected based on prior investor knowledge. Overall, this study sounds a note of caution on the effectiveness of collective engagement. It raises questions about the selectivity of investor action and highlights the risk of companies backloading their decarbonisation efforts.