Why Corporate Advisory and ESG Activism are Inexorably Intertwined

ADVISORY OVERVIEW 

 Investors are calling on public companies to enhance their performance and disclosures on environmental, social, and governance (ESG) matters. In response, activists are incorporating ESG criticisms into campaign narratives and campaigns focusing on ESG objectives have increased in recent years. 

THE CURRENT STATE OF ESG ACTIVISM 

Activism can take a variety of forms, from proxy contests to shareholder proposals to opposing management proposals (including director nominees). ESG performance directly relates to business resilience, competitiveness, and financial performance. 

Activists argue that ESG factors can reduce risk to company operations, make businesses more sustainable, and creates opportunities for long-term value creation. 

ESG, CLIMATE CHANGE, AND INVESTORS 

Institutional investors have intensified engagement with public companies around ESG matters and have updated their proxy voting policies to address ESG issues. They are also examining how boards and management teams oversee ESG performance and whether boards have sufficient ESG expertise. 

Climate Change and Diversity are emerging as central ESG issues for activists. Investors expect companies to articulate their commitment to human rights, supply chain, and cybersecurity security concerns. Investors are also calling on companies to disclose plans to reduce greenhouse gas (GHG) emissions and they expect companies to disclose actions required to achieve both climate goals. 

Investors expect ESG to be a key component of strategic decision-making and for boards and management teams to identify key ESG risks and opportunities. As global focus on the environment, social justice, and corporate governance continue to grow, this is a trend that is not likely to shift anytime soon. 

To meet the needs of their shareholders and activists, companies should continuously improve ESG initiatives, oversight, and disclosures to meet these activism and investor targets to ensure they are not lagging peers and/or investor expectations. 

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