The record on engagement (so far): returns and impact?

ESG shareholder engagement has been an established way for institutional investors to promote sustainability. But given that engagement requires effort and costs, there is an ongoing interest in the question whether targeted companies are actually behaving or performing differently subsequently. In short, what is the impact of ESG engagement?

In a special Dutch report, the 2022 Preliminary Advice of the Royal Society for Political Economics, Jeroen Derwall and Koedijk summarize recent research on both the equity returns and ESG performance of companies after ESG engagement. Their summary shows that both returns and ESG performance of companies can improve after ESG engagement has taken place, but the evidence on the material impact improvement in companies is still lacking. To increase the impact with engagements, institutional investors benefit from a more coordinated collaboration. Read the article in Dutch here. (Use translate to read in English.)