Shareholder activism
Beyond influencing individual companies, many investors see engagement as being most effective if it is part of a broader movement. It is for this reason that in recent years several investor coalitions have been formed. These include the Net Zero Asset Managers initiative, Europe’s Institutional Investors Group on Climate Change, and Climate Action 100+, a group representing 700 investors with more than $68tn in assets. CA100+ pushes companies to cut emissions, strengthen governance and improve climate-related
financial disclosures.
However, while Engine No. 1’s Exxon campaign was hailed as a significant victory by the sustainability community, the results of collaborative engagements appear to be mixed. In the second round of its net zero company benchmark assessments, CA100+ found that just 17 per cent of its focus companies had set medium-term targets. The same percentage had quantifiable strategies in place to reach their net zero goals
May well particularly well with private equity
While private equity was once known as an industry where corporate raiders used a slash-and-burn approach to costs, its value creation model — based on improving the performance of portfolio companies away from the short-term pressures of public markets — is well suited to shareholder engagement.
- Engagement might work if combined with the threat of divestment.
- Takes a long time
May not work with factory farms:
- Bond-holders do not have any say over how the company is run.
- When it comes to shares, most industrial livestock companies are “closely held”, which means the majority of the company’s shares are owned by a few individuals, not publicly traded – so minority shareholders, even collectively, can have limited influence.