Tailor-to-Target: Configuring Collaborative Shareholder Engagements on Climate Change

Abstract

We study collaborative shareholder engagements on climate change issues. These engagements involve coalitions of investors pursuing behind-the-scenes dialogue to encourage target firms to adopt environmental sustainability practices. Drawing on a unique data set of 553 engagements coordinated by the United Nations–supported Principles for Responsible Investment—and an innovative mixed-methods approach integrating fuzzy-set qualitative comparative analysis with regression analysis and qualitative interviews—we investigate how four coalition composition levers (coalition size, shareholding stake, experience, local access) combine to enable or hinder engagement success. We find that successful coalitions use four configurations of coalition composition levers that are tailored to target firms’ financial capacity and environmental predispositions, that is, target firms’ receptivity. Unsuccessful configurations instead emphasize single levers at the expense of others. Drawing on qualitative interviews, we identify three mechanisms (synchronizing, contextualizing, overfocusing) that plausibly underly the identified configurations and provide investor coalitions with knowledge about target firms and their local contexts, thus enhancing communication and understanding between investor coalitions and target firms. Our study contributes an emerging “tailor-to-target” theory of collaborative shareholder engagement that extends the literature by showing the importance of designing investor coalitions for effective climate-related engagement and the value of conceiving coalitions as different configurations of the same levers that can fit a target firm’s receptivity. From a practical perspective, our study prompts investors to move beyond one-size-fits-all approaches to instead tailor their engagement strategies to target firms’ receptivity. This paper was accepted by Glen Dowell, Special Section of Management Science on Business and Climate Change. Funding: This work was supported by Principles for Responsible Investment (PRI Research Grant). Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4806 .