The Real Effects of Environmental Activist Investing
Open accessAbstract
We study the real effects of environmental activist investing. Using plant-chemical-level data, we find that targeted firms reduce their production-related emissions. Air quality improvements in the vicinity of targeted plants suggest potentially significant externalities for local economies. Reductions come from increased abatement expenditures and on-site source reduction initiatives, which negatively affect the financial performance of targeted firms. We rule out alternative explanations, including declines in production and plant closures, and provide evidence that firms respond to the specific demands of activists. Our findings suggest that environmental activism is an effective tool for long-term shareholders to address climate change risks.
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- Authors
- Naaraayanan, S. L., Sachdeva, K., & Sharma, V.
- Affiliations
- Center for Economic and Policy Research (US)
- University of Michigan (US)
- Nanyang Technological University (SG)
- Corresponding author
- Naaraayanan, S Lakshmi
- Venue
- The Review of Financial Studies
- Publisher
- Oxford University Press (OUP)
- Published
- 2026-08-14
- ISSN
- 0893-9454 (ISSN-L)
- 1465-7368
- OpenAlex
- W2998578910
- Cited by
- 84
- References
- 14
- Citations by year
- 2026: 3 · 2025: 8 · 2024: 17 · 2023: 23 · 2022: 9 · 2021: 16 · 2020: 6 · 2018: 1 · 2016: 1
- FWCI
- 11.92
- Type
- journal article
- Language
- en
- Open access
- hybrid
- doi.org
- Licence
- Locations
- Review of Financial Studies (publishedVersion, cc-by-nc-nd)
- SSRN Electronic Journal (publishedVersion)
- Funders
- University of California, San Diego
- Topics
- Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Social Responsibility Reporting
- Social Sciences › Economics, Econometrics and Finance › Finance › Sustainable Finance and Green Bonds
- Social Sciences › Business, Management and Accounting › Accounting › Corporate Finance and Governance
- Keywords
- shareholder activism, air quality, pollution prevention, firm financial performance, climate risk, long-term shareholders, externalities
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