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“Incident-Driven ESG Engagement”

With the Lunch Seminar series, the Department of Finance is bringing eminent and up-and-coming researchers from around the world to Luxembourg.

Abstract

Using proprietary engagement records from a large European asset manager, we study how ESG shocks shape institutional monitoring. We find that salient negative ESG incidents are a key trigger for engagement because they deteriorate public sentiment, heighten investors’ reputational concerns, and reveal information about previously hidden ESG weaknesses. Investors respond not only to incidents at focal firms but also to incidents at peer firms, consistent with both reactive monitoring following realized ESG failures and preemptive monitoring based on shared risk exposures within product markets. We further show that incident-driven engagement is more informed and more effective: it mitigates subsequent sentiment deterioration, reduces future ESG incidents, attenuates declines in institutional ownership, and is associated with higher firm value. More intensive engagement is also significantly more likely to succeed. Taken together, our findings speak to the fundamental question of what initiates institutional engagement and underscore its role as an important channel of external corporate governance.

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is a Professor of Finance.

Language

English.

This is a free event. Registration is mandatory.

Cold lunches are provided to registered participants only.

In collaboration with

Supported by the Luxembourg National Research Fund (RESCOM/2025/LE/19440690)