Research group on Corporate Stewardship and Sustainability

Introduction to the Research Group

This research group extends and expands doctoral research on proxy voting by Dr Ian Robertson that identified differences in support for shareholder proposals on environmental, social, and governance (ESG) issues according to investor type, size, and geography. It investigates institutional investors’ proxy voting on ESG proposals and examines the nature of the proposals themselves. Data for the research is drawn from many sources including OxProx, an Oxford University Innovation social venture spinoff founded by Dr Robertson and sponsored by Kellogg College.

Scope of the research

Research on proxy voting helps us understand how asset owners and asset managers consider ESG issues and provides insight into the best ways to nudge investee companies to better ESG outcomes in pursuit of the United Nations Sustainable Development Goals (SDGs). The exercise of ownership rights has long attracted research attention as an agency issue, beginning with Adam Smith (1776) and extending through Berle and Means (1932), and Jensen and Meckling (1976). It has historically been associated with a shareholder orientation and the optimisation of financial outcomes. Stakeholders have a more expansive view of desired outcomes, and ESG issues can provide areas of common interest with shareholders. New research identifying these areas of common interest will enhance and expedite better environmental and social outcomes.

From an investor perspective, shareholder proposals seeking better ESG outcomes can be categorized into three groups: improve financial returns (based on SASB issue classification); are immaterial to financial returns; or reduce financial returns. All investors should vote for proposals that fall in the first category. Most should vote for those that fall in the second category, though this may not be practical for some (smaller) investors and some issues may centre on personal morals rather than true public good outcomes. Most investors – unless they are willing to sacrifice some investment returns – will not be willing to support the third category of proposals.

Practical implications of the research

The group’s research has important practical implications:

1. Preferential access to the OxProx database (and its classification of proposals under SASB) aligns research and analysis with the settled financial theory and practice rather than the well-intentioned but subjective approaches that often underpin consideration of voting on environmental and social issues.
2. Analysis of shareholder proposal categories – and how they change over time and space – shows where investors can improve ESG outcomes directly through proxy voting and where efforts will be better spent outside the financial system, for example advocating for government or regulator policy changes.
3. The research supports the development of new practical tools such as proxy voting benchmarks that identify where investor support for ESG proposals differs from an optimal level (like the benchmarks used to measure risk-adjusted investment performance).