(ProMarket) As financial markets take on societal challenges like climate change, new research from Robin Döttling, Doron Levit, Nadya Malenko and Magdalena Rola-Janicka explores how shareholder democracy interacts with the political process to impact public goods provisions. The authors investigate the potential of investor-driven governance to supplement the shortfalls of the regulatory system, highlighting both benefits and risks posed by wealth inequality and ESG backlash.
Concerns that public policy and regulation have been ineffective in addressing societal challenges such as climate change, due in part to political system shortcomings, have led financial markets to become more involved. Investor activism promoting socially responsible corporate practices, the rise in environmental and social (E&S) shareholder proposals, and the expansion of impact investing, all demonstrate how “shareholder democracy” is pushing companies to consider broader societal interests alongside profit maximization.
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