Academics and regulators have given significant attention to the impact of institutional investors on the companies in which they invest. Some are concerned that institutional investors act as common owners. But in their active ownership policies institutional investors often say they are long-term shareholders, socially responsible investors, or stakeholder oriented. The evidence from the respective academic literatures seems to support both common ownership and the institutional investors’ claims. We suggest this could arise because the natural experiments in the respective literatures do not analyse situations or outcomes that differentiate between the various active ownership objectives listed above. We demonstrate one example by examining the nascent literature on the association between firm-level greenhouse gas emissions and institutional investor influence. Subject to assumptions about the significance of the damage from climate change, we find the negative association between GHG emissions and institutional ownership is consistent with many active ownership objectives. We then extend our models to consider firms that can mitigate or adapt to the damage from GHG emissions and find separating conditions for the various active ownership objectives under particular industry conditions.

However, the separating conditions for the socially responsible investor and common owner are only for high levels of common ownership. To explore how this issue may be addressed, we extend the model to include both final goods and intermediate goods provided by a monopolist supplier. We then explore refinements of the separating conditions using this model and present new equilibria of the model.