Socially responsible investors and corporate resistance to climate disruptions: agents of change or passive participants?

Abstract

Climate change is a global challenge with far-reaching implications for firms and capital markets. This study examines whether ownership by socially responsible investors (SRIs) enhances firms' resilience to climate shocks. Focusing on transition and physical climate risks, we analyse whether SRI ownership reduces firms' stock return sensitivity to climate events. Using a panel of listed European firms (2018–2022), we find that SRI ownership is associated with greater corporate capacity to manage climate disruptions. Further analyses show that SRIs are linked to firms' adoption of science-based climate targets, higher green revenue shares, and lower carbon emissions intensity. However, these effects are conditional. SRI stewardship is stronger when investors are domiciled in countries with stringent climate regulations, maintain longer investment horizons, and invest in firms with high climate change exposure and located in jurisdictions with strong climate performance. These findings highlight the role of SRIs as catalysts for corporate climate adaptation while emphasizing boundary conditions that shape their active ownership.