ESG Causes Activist Campaigns to Heighten

ESG: The Bellwether of Future Financial Performance Causes Activist Campaigns to be Heightened

• According to New Shareholder Activism in Europe 2022 Report by Insightia, a Diligent brand
• With a near 10% YOY increase in the number of UK companies subjected to activist demands since 2021 (with a major increase at large-cap UK firms)
• Shows a 400% YOY increase in activist campaigns aimed at UK consumer defensive companies
• UK management teams are more likely to settle with activists than European counterparts.
• More than half of UK engagements for board seats concluded in settlements (2021)

ESG has totally altered the investor equation.  It is now seen as a bellwether of future financial performance, according to a new Shareholder Activism in Europe 2022 report launched by Insightia, a Diligent brand and provider of shareholder activism, shareholder voting, and corporate governance data. It shows activist investors focusing heavily on ESG as a core measurement of valuation.

The data shows an almost 10% YOY increase in the number of activist campaigns at UK companies year-to-date, compared to the same period in 2021. Of the 25 campaigns, 10 were at large-cap companies – twice as many as in the same period in 2021.  Diligent has also found a 400% YOY increase in activist campaigns aimed at UK consumer defensive companies during that same period (Jan – May 2022). It is clear the rise of ESG performance as a driver of a company’s broader value and good financial standing, is now more under the microscope than ever before, especially for investor prospects.

Interestingly, UK management teams are more likely to settle with their activists than their European counterparts and in 2021, more than half of UK engagements for board seats concluded in settlements. In comparison, in continental Europe, just around a quarter reached amicable resolutions, although this was an improvement over previous years. With the pandemic accelerating awareness of human capital management and supply chain issues, the report found climate change and a diverse array of social issues are now front of mind.  As European deal making ramped up in 2021, so has activist opposition to deals deemed detrimental to minority investors.