· research papers · 2 min read

The Impact of Climate Engagement: A Field Experiment

This summary highlights the experimental evidence from a study on how index provider engagement influences corporate commitment to science-based climate targets, marking a significant contribution to sustainable finance and corporate governance literature.

This summary highlights the experimental evidence from a study on how index provider engagement influences corporate commitment to science-based climate targets, marking a significant contribution to sustainable finance and corporate governance literature.

The Impact of Climate Engagement: A Field Experiment

The study, conducted by Florian Heeb and Julian F. Kölbel, investigates the effectiveness of index provider engagement on corporate climate policies through a pre-registered field experiment. It specifically examines whether such engagement can motivate companies to commit to setting science-based climate targets (SBTs).

Objectives and Expectations

The primary aim was to evaluate if and how the engagement from index providers influences international companies’ commitments to SBTs, a critical component in aligning corporate strategies with global climate goals.

Methodology

A randomized control trial was conducted involving 300 companies out of 1227, which received a letter from an index provider’s CEO. This letter encouraged them to commit to SBTs to remain part of climate transition benchmark indices.

Results and Findings

The experiment found that 21.0% of the engaged companies committed to SBTs, compared to 15.7% in the control group, demonstrating a statistically significant effect of index provider engagement on corporate climate policy commitment.

Comparison with Previous Research

This study advances previous research by employing a randomized methodology to eliminate selection bias, providing robust evidence of the causal impact of index provider engagement on SBT commitments.

Future Tasks

Future research could explore the long-term effects of such commitments on actual emissions reductions and the applicability of this engagement model across different sectors and geographies.

From a sceptic’s perspective, while the study presents compelling evidence of the immediate impact of index provider engagement, questions remain about the long-term effectiveness of such commitments and their actual contribution to emissions reductions. Further research is needed to assess whether these commitments translate into substantive environmental improvements.

Practical Takeaways

  • Index provider engagement is an effective tool to influence corporate climate policy.
  • The engagement strategy used shows potential for broader application in sustainable finance and corporate governance.
  • It highlights the importance of credible threats of exclusion from indices in motivating corporate action on climate change.

Sources and Facts

The study was published by the MIT Sloan School of Management and the University of St. Gallen, with significant contributions from experts in the field of sustainable finance and corporate governance. The research was supported by various institutions, including the Swiss Finance Institute and the Swiss National Science Foundation.

For those interested in delving deeper into the study, the full paper can be accessed here.