Edinburgh Research Explorer

The FTSE4Good Effect: Evidence of the Impact of Responsible Investment Indices on Environmental Management

Research output: Contribution to conferencePaper

Original languageEnglish
DOIs
Publication statusPublished - 2012
Event 5th. International CSR Conference - Berlin, Germany
Duration: 3 Oct 20126 Oct 2012

Conference

Conference 5th. International CSR Conference
CountryGermany
CityBerlin
Period3/10/126/10/12

Abstract

This paper provides results consistent with the proposition that engagement by and threat of deletion from a responsible investment index motivated persistent improvements to corporate environmental management practices, especially for firms where the threat of exclusion from the index was likely to be costly. We use the natural experiment provided by the FTSE4Good upgrade of their environmental management criteria in 2002 when they engaged with index member firms that would not meet the new requirements but did not engage with non-member firms that would similarly fail. By 2005 49% of the 388 large and internationally diverse firms that had received engagement and been threatened with exclusion from the FTSE4Good index had complied, as opposed to 23% of the 658 firms which were not subject to engagement or potential exclusion. This result is statistically significant even after controlling for environmental risk, industry, country, governance and financial performance. Further results indicate that the effect of FTSE engagement produces a difference in compliance which persists for at least five years.

Event

5th. International CSR Conference

3/10/126/10/12

Berlin, Germany

Event: Conference

ID: 8093671