N°24-04: Index Provider Engagement and Climate Action: A Field Experiment

Can rules-based engagement by an index provider affect corporate climate action? We present a preregistered field experiment with a major index provider whose climate indices are designed to exclude firms without a science-based climate target. The provider’s CEO wrote to the board chairs of 300 firms, randomly drawn from 1,227 index constituents without such a target, reiterating the public exclusion rules. Receiving the letter raises the share of firms that commit to or set a climate target by 6.4 percentage points within two years. It also causes firms to reduce their reported carbon emissions by about 18% after four years. We do not detect an effect on firm value in either direction. Our results suggest that index provider engagement can spur corporate climate action by making existing exclusion rules salient.