FeaturedGreen firms secretly donate more Money to support anti-climate...

Green firms secretly donate more Money to support anti-climate Politicians


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Corporations that presumably support green initiatives have been revealed to be actively working to derail pro-environment laws through political campaign contributions to climate-unfriendly lawmakers, according to a new study from the Rotterdam School of Management Erasmus University (RSM).

The research, undertaken by Dr Guosong Xu at RSM and Dr Eliezer Fich at Drexel University, sought to understand the political implications of corporate environmental engagement and how climate-related political activism affects firm value.

Dr Xu says;

“Companies today are more politically active than they were some decades ago. This trend coincides with increasing public scrutiny over their sustainability performance. The prevailing view on corporate political engagement is that ‘brown’ firms are likely to back politicians who obstruct pro-climate policies, and that environmentally proactive firms will support climate-friendly politicians.”

Surprisingly, Dr Xu’s and Dr Fich’s study find the opposite.

“We find that, over the past two decades, greener firms directed more money towards environmental obstructionists through their Political Action Committees (PACs).” Dr Xu says.

Gas Storage Facilities

The research examined over 1200 firms in the Morgan Stanley Capital International index that made political contributions through their corporate PACs from 1995 to 2018. In addition, the researchers analysed over 450,000 voting records of U.S. Senators and House Representatives on climate-related bills from 1970.

Based on the voting records, the researchers identified a set of lawmakers as salient environmental obstructionists. On average, obstructionists were found to support only 7% of the bills introduced to tackle environmental issues. By doing this, the researchers say, they are able to map corporate PAC contributions to the obstructionist politicians and yield some key findings.

Most strikingly, firms with excellent environmental scores were found to donate more to anti-climate politicians. On average, a firm with a top MSCI environmental rating gifted 19% more than a median firm to an obstructionist. On the contrary, there was no evidence that firms increased their support for pro-climate politicians when their environmental performance improved.

The study also found that political affiliations (such as Democrat versus Republican firms), general policy preferences and other firm characteristics such as industry, size and profitability cannot explain the findings documented above. According to the researchers, the most likely explanation is the one based on economic costs – green firms face the highest regulatory burden.

Dr Xu says,

“Their environmental records are widely publicised, but there is no disclosure requirement for political activities in the US. This enables the climate leaders to engage in hypocrisy, with respect to the environment.”

The study also identified a key channel that drove such corporate hypocrisy – “brown” institutional investors. The researchers collected all PAC contributions made by institutional shareholders in each MSCI company and found that firms with the highest brown ownership, namely investors who supported obstructionists, were the ones that exhibited the most hypocritical climate behaviour. Green investors (such as ESG funds), however, failed to counteract with donations to climate-friendly politicians.


Lastly, the study revealed that corporate hypocrisy on the climate pays. Upon the passing of anti-environment bills in Congress, hypocritic firms experienced a jump in their market value. On average the return on political donations was large; for US$1 of contribution, hypocritic firms saw a more than $900 increase in their market value when an anti-climate bill passed. In addition, when an obstructionist supported by a hypocritic firm won an election, the green firm’s market capitalization increased by about $103 million.

The researchers say the study holds important implications at all levels of industry when it comes to making a tangible positive impact on the environment; for investors that seek green firms in their portfolios, for government agencies that grant benefits to firms based on the environmental scores, and to policymakers that attempt to deliver effective regulations to combat the climate change.

The research paper “Why Do Green Firms Support Anti-Climate Legislators?” is available to be read via SSRN.

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