Investor activism on the rise says investor relations survey
Activism has increased during Covid-19, particularly around ESG issues, according to the 13th Annual Investor Relations survey by Citigate Dewe Rogerson.
Around one-in-five (21 per cent) of respondents report a rise in engagement with activist investors over the past year, with many citing ESG issues as the key driver of the trend. This heightened engagement is reflected in more challenging general meetings during the 2020/21 AGM season, with 27 per cent of companies experiencing an increase in the number of votes against AGM resolutions.
However, despite increased investor focus on social issues driven by the pandemic and greater scrutiny of net zero targets in the run up to the COP26 summit, CDR’s findings show that 72 per cent of boards still do not have social or environmental issues as a standing agenda item at their meetings.
This may be a consequence of many companies remaining light on relevant ESG experience at board level. Fewer than 50 per cent of respondents say that their boards include at least one member with experience of managing ESG issues, and only 8 per cent claim such experience in all board members.
Christen Thomson, CDR’s Head of Hedge Funds, says: “These results indicate that activism is on the rise again, after a decline during the first months of the pandemic. Companies have a clear choice – invest in and focus much more on ESG or face the potential for more activist interventions.”
The Survey also shows Covid-19 continuing to drive changes to financial reporting and investor engagement despite signs of recovery across the globe:
• While the number of boards with a dedicated Sustainability Committee has risen substantially from 37 per cent in 2020 to 46 per cent in 2021, 81 per cent of the 250 UK and international companies surveyed said their management teams have less than 10 per cent of their remuneration package linked to ESG metrics, while just 3 per cent link ESG performance to more than 25 per cent of remuneration.
• Altered approach to guidance: 31 per cent of respondents have changed their approach to guidance, and only 14 per cent intend to restore guidance to pre-pandemic levels by mid-2022.
• Investor focus shifting to longer term: Investor demands have moved beyond additional clarity and context around performance and future expectations, with companies increasingly being called upon to demonstrate their approach to navigating post-pandemic challenges, and longer-term strategies for recovery. This has prompted a wave of investment case reviews, which 31 per cent of companies plan to conduct by mid-2022, as well as new strategy announcements by 23 per cent of companies.
• More frequent investor engagement: Many report more frequent contact with investors, including with those outside key financial centres, with 64 per cent of respondents holding more ad hoc virtual meetings throughout the year and 32 per cent holding more virtual Capital Markets Days and other group events.
• Hybrid working patterns drive virtual engagement: 69 per cent of IROs have adopted a hybrid working model post-Covid, implying that virtual engagement will remain popular longer term.
• Accelerated integration of ESG into overall narrative: while dedicated sustainability reports are rising in popularity, with 51 per cent producing a separate sustainability report vs 42 per cent in 2020, there is evidence of the increasing integration of ESG narrative into ongoing newsflow and results reporting. 45 per cent of companies now include regular references to ESG in results materials vs 35 per cent in 2020.