“Materiality” matters during shareholder engagements on ESG

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Here’s a note from Rob Bauer about his working paper entitled “Private Shareholder Engagements on Material ESG Issues”:

We study a large global sample of private ESG engagements from BMO Global Asset Management EMEA and its responsible engagement overlay (reo®️) service. Using frameworks by SASB and MSCI, we examine the financial materiality of these engagements.

Main findings:
– Material engagements are more likely to reach a milestone than immaterial engagements.
– Targets of successful material engagements significantly outperform their peers by 2.5% over the next 14 months (i.e., the median time until a milestone is recorded).
– Material engagements are more often significantly associated with improvements in profitability, sales, and cost ratios than immaterial engagements.
– Environmental engagements are associated with a decrease in CO2e intensity (emissions/sales) but not with a change in total CO2e emissions.

Our findings indicate that materiality matters when engaging on ESG issues.