Society Research
Interim report of the CSS Working Group "Corporate Social Responsbility"
25 January 2021, by CSS
Photo: Dominik Vanyi on unsplash
In January 2020, the Center for Sustainable Society Research (CSS) approved the establishment of the Working Group "Corporate Social Responsibility" (CSR). The Working Group CSR strives to analyze how capital market participants affect companies’ CSR activities and how these activities conversely affect the capital market. A special focus are institutional investors, such as large asset managers or banks.
What has been achieved so far? What turned out to be particularly exciting findings?
In 2020, the Working Group published two peer-reviewed research articles. The first one deals with agency conflicts between creditors and shareholders and their effect on CSR activities (Journal of Sustainable Finance and Investment, Link). While the overall relationship between institutional investors and CSR is well established, existing studies mainly focus on institutional investors as either shareholder or creditor. Using a quasi-natural experiment, the Working Group finds that the presence of an investor holding both debt and equity stakes in a company is significantly related to higher CSR performance of that company.
The most interesting finding of the Working Group relates to their second publication (Finance Research Letters, Link). The Working Group analyzed how the announcement of divestment from thermal coal by a large asset manager affected capital markets. While the results of the first hypothesis are straightforward, large coal mining companies generally saw a drop in their share price after the announcement, subsequent analysis offers important implications for capital markets. The Working Group finds that on the day of the announcement, the share price of the divesting asset manager increased to a greater extent than can be explained by traditional asset pricing models. This implies that the capital market overall acknowledges divestment to be value creating for asset managers. These results could encourage further asset managers to engage in divestment activities and accelerate the path to a sustainable society.
What are the next steps for the Working Group?
For the coming months, the Working Group wants to focus their research interest on less researched topics within the realms of CSR and ESG. While the members of the Working Group think that the current focus of sustainable finance, climate change, is of great importance, there are yet many other areas in need of investigation.
Literature:
Kerstin Lopatta, Alexander Bassen, Thomas Kaspereit, Sebastian A. Tideman & Daniel Buchholz (2020) The effect of institutional dual holdings on CSR performance, Journal of Sustainable Finance & Investment, DOI: 10.1080/20430795.2020.1776535
Alexander Bassen, Thomas Kaspareit & Daniel Buchholz (2020) The Capital Market Impact of Blackrock's Thermal Coald Divestment Announcement, Finance Research Letters, DOI: 10.1016/j.frl.2020.101874