A review of the market performance of hundreds of publicly traded U.S. companies that faced shareholder resolutions on climate change or reported their climate policies to the CDP, formerly the Carbon Disclosure Project, since 2013 finds those activities had no clear material impact on the corporations' stock prices.
The National Association of Manufacturers, or NAM, commissioned the report by the economic consulting firm Compass Lexecon to test the argument that investors and major asset managers need companies' climate change-related information to make informed decisions about their financial holdings.
NAM hypothesized that if disclosure of those risks is as material as some investors claim, then "the release of those reports should have material effects on the share price." But the report found "the adoption of such shareholder resolutions has no statistically significant impact on company returns one way or the other."
NAM, the nation's largest manufacturing industrial trade association, is a founding member of the recently formed Main Street Investors Coalition, which is pushing back against the rising tide of environmental, social and governance resolutions shareholders are proposing during annual meetings, particularly actions by BlackRock Inc. and Vanguard Group backing some resolutions. The coalition is particularly concerned that ESG measures, and dealing with related resolutions, force companies to spend time and money unnecessarily and serve as a deterrent to smaller private companies going public.
NAM contends the activist investors have political or self-promotional goals in mind rather than purely financial concerns about the companies they are pushing to adopt ESG measures. If the motivations are political, NAM suggested, investors are pushing for businesses to advance environmental and global climate change fighting goals in lieu of federal action by the Trump administration.
The report examined the value of a $100 investment made in seven companies six months before shareholders filed proposed climate resolutions compared to 6 months after the shareholders voted on the measure. It examined the following companies: CF Industries Holdings Inc., Occidental Petroleum Corp., PPL Corp., Exxon Mobil Corp., ESCO Technologies Inc., Gilead Sciences Inc. and BioMarin Pharmaceutical Inc.
Only one price point was statistically lower but even in that case, the company, ESCO Technologies, had released an earnings announcement on the same day as its shareholder vote. The NAM report's authors said it was not possible to distinguish between the effect of the "disappointing earnings announcement" and the climate change-related proposal.
And while the report acknowledged the difficulty in determining that factors that affect a stock price, it said prior studies have reached conclusions similar to NAM's.
The report also updated a 2011 study published in the peer-reviewed B.E. Journal of Economic Analysis and Policy. The NAM report's authors used the methodology from the 2011 study to look at more than 700 publicly traded companies that since 2013 have answered the annual questionnaires by CDP on the companies' activities on climate change, water, supply chains and deforestation. CDP grades companies' understanding of risks and opportunities related to climate change and the group also issues reports focusing on key risks or regional trends. More than 6,300 companies responded to the last survey, CDP said on its website.
The NAM findings were similar to those of the 2011 study. "There is no statistically significant relationship between disclosure in 2013 and longer-term investor returns," the report said. The authors also ran the model only on energy companies "since disclosure of climate-related information may be more salient to investors for those companies."
"Again, we found no evidence that disclosing companies experience greater long-term performance in any statistically significant sense," the report said.
