Regulating shareholders to stimulate sustainable corporate behavior
Sustainability is vital to our society’s future, but it is becoming increasingly clear that many sustainability initiatives are deficient. Large corporations need stimuli to use their major potential for ensuring sustainability. Shareholders, with their controlling powers, can play an important role here. Whereas several regulatory initiatives focus on shareholder stewardship and sustainable investment, actual shareholder motives and impact are often unclear and controversial. This research project aims to investigate whether and how shareholder actions can really impact corporate sustainability in the Netherlands.
Introduction
In recent years, the pressure on companies to behave as responsible corporate citizens has increased significantly. In the (European) legislative developments to foster corporate sustainability, the focus has shifted from shareholder rights to shareholder obligations, with institutional investors as key players. Examples include the Revised Shareholder Rights Directive (SRD II), various national stewardship codes and the Sustainable Finance Disclosure Regulation (SFDR). The European premise is that sustainable finance is crucial for a sustainable economy and society. The financial sector must be able to allocate capital to sustainable investments and, moreover, the involvement of institutional investors would stimulate sustainable business. In this context, the European Taxonomy Regulation and the proposed Corporate Sustainability Reporting Directive (CSRD) provide the necessary reliable, comparable and verifiable sustainability information that enables investors to make more sustainable decisions.
Embryonic evidence
But whether and to what extent institutional investors can actually contribute to sustainable business is far from clear. While some authors argue for "investor-led sustainability" as the driving force to move the entire market toward sustainability, concerns about greenwashing practices by investors and companies in particular resonate. For example, signatories to the Principles for Responsible Investment (PRI) are not always committed to sustainability, and green investment funds are often indistinguishable from traditional funds.
Some research suggests shareholders can be prosocial, refuting the prevalent belief that shareholders are only interested in financial gains, but this is still embryonic evidence. Moreover, the emerging but small literature is primarily US-centered, neglecting European shareholder rights.
Research question
Therefore, major steps in research are needed to enrich the current literature by investigating the direct impact of formal and informal shareholder actions on corporate sustainability in the Netherlands. This project takes up this challenge using a rigorous multi-method approach to answer the research main question:
How and to what extent can shareholder actions increase corporate sustainability and which regulatory initiatives can stimulate these actions?
In addition, as many (European) corporate sustainability initiatives were introduced after the award of this project, but before the start of this project, it also includes the latest developments in this area, including the proposal for the Corporate Sustainability Due Diligence Directive from early 2022.
Researcher
Funding
NWO Talent Program Veni
Latest project developments
- Paper on the Corporate Sustainability Due Diligence Directive with Bas Rombouts: Towards Mandatory Human Rights Due Diligence: Assessing its Impact on Fundamental Labour Standards in Global Value Chains (European Journal of Risk Regulation)
- Research paper: Do Institutional Investors Vote Responsibly?
- Presentation about the proposed Corporate Sustainability Due Diligence Directive at ECGI
- Together with colleagues in Amsterdam Lafarre organized this ECGI conference (June 2022)