The Real Effects of Environmental Activist Investing

We study the real effects of environmental activist investing. Using plant-chemical-level data, we find that targeted firms reduce their production-related emissions. Air quality improvements in the vicinity of targeted plants suggest potentially significant externalities for local economies. Reductions come from increased abatement expenditures and on-site source reduction initiatives, which negatively affect the financial performance of targeted firms. We rule out alternative explanations, including declines in production and plant closures, and provide evidence that firms respond to the specific demands of activists. Our findings suggest that environmental activism is an effective tool for long-term shareholders to address climate change risks.