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ESG Issues Fuelling Shareholder Activism Growth

Nine out of ten U.S. institutional investors think shareholder activism will surge in importance as environmental issues drive increased levels of engagement, new research shows.

A CoreData Research study of 150 U.S. institutional investors carried out in November and December found 91% expect shareholder activism to grow in importance over the next three years. This is higher than the proportion (81%) who say shareholder activism has increased in importance over the last three years – indicating growing momentum toward activism.

U.S. investors see environmental issues as the area they can most influence. Three-quarters believe they can be somewhat or very influential in environmental protection (74%) and renewable energy (73%) and two-thirds think they can be influential on clean technology (68%), energy and climate (67%) and delivering social / environmental benefits (65%). Investors see themselves as having less influence on issues including gender equity (51%), health and wellbeing (54%) and education (56%), however.

The issues which investors think they can most influence are also the areas they engage on most. The highest level of engagement is on issues relating to renewable energy and clean technology, where 43% of investors engage either always, often or sometimes. This is followed by environmental protection and delivering social and environmental benefits (42%).

“These findings strongly indicate that U.S. institutional investors are becoming more active as shareholders and that issues around the environment, and particularly climate change, will see shareholder activism become increasingly important over the next few years,” said Andrew Inwood, Founder and Principal of CoreData.

Investors also assign themselves a high degree of responsibility when it comes to bringing about change in the companies they invest in. Two-thirds (66%) think their own organization is either partly or completely responsible for advocating for change, while 84% believe other institutional investors bear responsibility. But the largest proportion (87%) think asset managers have partial or complete responsibility for bringing about change in investee companies.

“Investors expect asset managers to fulfil their responsibilities to push for positive change,” added Inwood. “Managers need to demonstrate they are good stewards and owners of companies.”

In terms of the pandemic, nearly seven in ten (68%) respondents say there has been increased investor scrutiny of how businesses are handling Covid-19. But a quarter (24%) of investors agree the pandemic has resulted in fewer proxy fights in the companies they invest in over the last 6 months, with just 5% disagreeing and 71% neutral.

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