TY - JOUR

T1 - Do sustainable institutional investors contribute to firms’ environmental performance? Empirical evidence from Europe

AU - Kordsachia, Othar

AU - Focke, Maximilian

AU - Velte, Patrick

N1 - Publisher Copyright: © 2021, The Author(s).

PY - 2022/7/1

Y1 - 2022/7/1

N2 - In light of current climate change discussions, this paper analyzes the effect of ownership structure on a firm’s environmental performance with a subsequent focus on corporate emission reduction. Based on a cross-national European sample consisting of 7384 firm-year observations between 2008 and 2017, this study explores the relationship between sustainable institutional investors and environmental performance. In line with prior research and embedded in an agency theoretical framework, the nature of institutional investors may act as a stimulating driver towards green business practices. Sustainable institutional investors are defined based on their signatory status to the UN Principles for Responsible Investment and their (long-term) investment horizons. The first classification stems from a content-driven sustainability perspective, while the second is derived from temporal sustainability. The results indicate that sustainable institutional ownership is positively associated with a firm’s environmental performance. Further investigations reveal that sustainable institutional investor ownership is also positively associated with firms’ willingness to respond to the Carbon Disclosure Project. These results indicate a higher carbon-risk awareness in firms with greater sustainable institutional investor ownership. Our paper significantly contributes to prior empirical research on institutional ownership and environmental performance and offers useful theoretical and practical implications. It focusses on a still-underdeveloped research area, namely organizations and their relationships with the natural environment, including institutional equity ownership as a driver towards greener practices on a corporate level.

AB - In light of current climate change discussions, this paper analyzes the effect of ownership structure on a firm’s environmental performance with a subsequent focus on corporate emission reduction. Based on a cross-national European sample consisting of 7384 firm-year observations between 2008 and 2017, this study explores the relationship between sustainable institutional investors and environmental performance. In line with prior research and embedded in an agency theoretical framework, the nature of institutional investors may act as a stimulating driver towards green business practices. Sustainable institutional investors are defined based on their signatory status to the UN Principles for Responsible Investment and their (long-term) investment horizons. The first classification stems from a content-driven sustainability perspective, while the second is derived from temporal sustainability. The results indicate that sustainable institutional ownership is positively associated with a firm’s environmental performance. Further investigations reveal that sustainable institutional investor ownership is also positively associated with firms’ willingness to respond to the Carbon Disclosure Project. These results indicate a higher carbon-risk awareness in firms with greater sustainable institutional investor ownership. Our paper significantly contributes to prior empirical research on institutional ownership and environmental performance and offers useful theoretical and practical implications. It focusses on a still-underdeveloped research area, namely organizations and their relationships with the natural environment, including institutional equity ownership as a driver towards greener practices on a corporate level.

KW - Management studies

KW - Sustainability Science

KW - sustainable investors

KW - institutional investors

KW - investment horizon

KW - corporate social responsibility

KW - environmental performance

UR - http://www.scopus.com/inward/record.url?scp=85111653248&partnerID=8YFLogxK

UR - https://www.mendeley.com/catalogue/292a67cc-a7b9-3b4d-8070-3070d24e5ab1/

U2 - 10.1007/s11846-021-00484-7

DO - 10.1007/s11846-021-00484-7

M3 - Journal articles

VL - 16

SP - 1409

EP - 1436

JO - Review of Managerial Science

JF - Review of Managerial Science

SN - 1863-6683

IS - 5

ER -