Timing Sustainable Engagement in Real Asset Investments

authored by Bram van der Kroft (MIT), Juan Palacios (Maastricht University / ECCE), Roberto Rigobon (MIT) and Siqi Zheng (MIT).

This paper estimates the effect of sustainable shareholder engagement on firms' investments in the real estate industry, where investments are sporadic and occur following depreciation cycles. Using unique microdata tracking investments in all public US commercial real estate properties over the past two decades, we find that sustainable engagement effectively steers firms to initiate tangible and long-lasting sustainable retrofits. However, engagement is ineffective or impairs such investments when it does not coincide with reinvestment periods, or investors vote down the proposal.

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