Fund managers could become the new environmental activists
Are fund managers on the cusp of channelling their inner Thunberg?
I wrote a piece for this morning’s City AM based on analysis of UK markets data from Activist Insight. It found that conventional active fund managers launched 55 public demands in 2019 versus 35 in 2018 and just 13 five years ago.
Over the last 10 years, conventional active managers have launched more governance related campaigns (147) than their pure play activist counterparts (117). But they have given broadly equal preference to two other key demand groups identified: taking balance sheet action and changing the business strategy.
Activism has proven to be an effective strategy for active managers. Over the last five years, more than a third (37 percent) of their demands have been implemented by the companies in question. There is still room for improvement though: 57 percent of the demands made by pure play activists have been successful to date.
While this has become a clear trend, we shouldn’t expect a stampede as the strategy doesn’t make sense for many managers on organisational, cultural or cost levels. Activism can also present significant reputational risk which needs to be carefully considered.
Our analysis shows that the UK has yet to see a specific environmental or social activist demand – though this has started to happen in the US.
So, perhaps we’ll see the first of these in 2020. Numerous studies have shown that an Environmental Social Governance (ESG) approach drives long-term shareholder value. And active managers are putting ESG at the heart of their fundraising strategies. As I say in the piece: don’t be surprised if some start to put their mouths where their money is.