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October 05, 2012
2012 Moskowitz Prize Awarded to Paper Linking Improved Corporate Performance with Successful Shareowner Engagement
by Robert Kropp
Entitled Active Ownership, this year's winning paper analyzed shareowner engagements on
environmental, social, and corporate governance issues, and found that successful engagement led to
abnormal positive returns of 4.4%.
Every year since 1996, the Moskowitz Prize for Socially Responsible Investing, the only global
prize awarded for outstanding quantitative research in sustainable investing, is announced at the
annual SRI Conference on Sustainable,
Responsible, Impact Investing, which was held this year at the Mohegan Sun Conference Center in
This year's winning paper emphasizes the importance of shareowner
engagement with corporations, one of the cornerstones of sustainable investment. Entitled Active
Ownership, the paper was authored by Elroy Dimson, Oguzhan Karakas, and Xi Li.
paper serves to quantify what sustainable investors have always believed, that through shareowner
engagement "Target firms experience improvements in operating performance, profitability,
efficiency, and governance indices after successful engagements," as the authors concluded.
Moreover, the study—which analyzes 2,152 engagements on environmental, social, and corporate
governance (ESG) issues, with 613 US-based corporations between 1999 and 2009—found that successful
engagement led to abnormal positive returns of 4.4%. Overall, abnormal returns averaged 1.8%, and
no positive market returns were discerned from unsuccessful engagement. Engagements leading to the
most pronounced outperformance focused on corporate governance and climate change.
results, the authors noted, were in line with those of engagements by hedge funds. However,
"Traditional shareholder activism and hedge fund activism typically focus on issues related to the
interests of shareholders only, whereas CSR (corporate social responsibility) activism focuses on
issues related to the interests of a broader range of stakeholders." Moreover, hedge fund activism
typically targets medium-sized companies, while sustainable investors generally focus on large and
The paper confirms previous studies that found companies with the most
pronounced reputational risks—for instance, those in consumer-oriented industries with higher
advertising intensity—to be likely targets for engagement on ESG issues. Furthermore, such
companies are more likely to respond to engagement by making positive changes in corporate
governance, as through necessity they have more robust CSR programs.
In concluding that
target firms experience improvements following successful engagement, the authors describe their
findings as "consistent with arguments that CSR activities attract socially conscious customers and
"There is an increasing focus on Responsible Investing, especially among large
institutions," Dimson, an Emeritus Professor of Finance at the London Business School, said upon receiving
the award. "For major investors, engagement is an important part of their strategy, and it is
important to understand its impact."
Lloyd Kurtz, the Program Administrator of the Prize,
said, "We had a very competitive year in 2012, with nine judges reviewing over 40 studies in
detail, so the winning team can take credit for a very strong showing, and a very strong research
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