Stakeholder Engagement Through Environmental Shareholder Proposals and Green Innovation

ABSTRACT This paper examines whether shareholder activism spurs environmental innovation and the development of green technologies among firms. Using a sample of 1473 environmental shareholder proposals filed at 458 publicly listed U.S. firms between 2009 and 2020, and employing panel‐matching difference‐in‐differences and two‐stage least squares designs, we find no robust evidence that environmental shareholder proposals increase firms' green innovation. Across specifications, the point estimates are small and often slightly negative, consistent with at most a modest reduction in green patenting, and in most cases are not statistically distinguishable from zero. These patterns are similar when we distinguish proposals by environmental materiality and by whether the proposals are filed by institutional investors. Overall, our evidence suggests that, in their current form, environmental shareholder proposals do not reliably spur long‐term, substantive changes in firms' green innovation during the transition to a low‐carbon economy.