Stock market reactions to a sovereign wealth fund's broad-based public sustainability engagement

European evidence

Bibliographic Data

ID7991529
AuthorsFlorian Habermann (0000-0003-1982-6796, University of Lausanne, corresponding author), Tobias Steindl (0000-0003-0767-6970, University of Regensburg)
Year2025
Volume231
Pages106915-106915
Publication date2025-02-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueJournal of Economic Behavior & Organization (JOURNAL)
Journal identifiersISSN: 0167-2681 • E-ISSN: 1879-1751
PublisherElsevier BV (PUBLISHER)
DOI10.1016/j.jebo.2025.106915
OpenAlexW4407053214
LanguageEN
References cited64

This study examines investor reactions to a broad-based public engagement by the world's largest sovereign wealth fund (SWF). We use the SWF's announcement to vote against firms with insufficient sustainability performance in an event study comprising 1,169 portfolio firms headquartered in Europe. The results show an average negative reaction of USD 39.99 million to the announcement. The negative effect is concentrated in portfolio firms with low sustainability performance measured by Refinitiv's environmental, social, and governance (ESG) score. Focusing on the SWF's voting share, we find that firms with low sustainability performance and a high voting share experience the most negative market reaction. Notably, the moderating effect of ESG score uncertainty becomes apparent, as firms with both low sustainability performance and low ESG score uncertainty experience more pronounced negative stock market reactions. In contrast, firms with low performance and high uncertainty show no statistically significant effect. Several robustness tests—including a regression discontinuity in time design—confirm our results. Overall, our findings reveal that broad-based public sustainability engagement can exert pressure on European portfolio firms, suggesting that this form of indirect engagement complements direct engagement strategies in their objective to enhance firms’ sustainability performance. Our findings have valuable implications for researchers, practitioners, and policymakers interested in understanding the evolving landscape of investor-firm interactions

Business · Economics · Financial economics · Financial system · Geography · Market economy · Sovereign wealth fund · Stock (firearms · Stock exchange · Stock market · Sustainability · Market Dynamics and Volatility · State Capitalism and Financial Governance · Sustainable Finance and Green Bonds · Finance

Tools

Open DOIOpen Access