Nearly all institutional investors would stand behind a “reputable” activist, according to a new study from communications marketing firm Edelman.
In a survey of 101 investors managing more than $1 trillion combined, 87 percent said they would support the activist campaign of a well-regarded investor if they believed change was necessary at the company in question. According to Edelman, many of the investors view themselves as change makers, with roughly half saying their firms can meaningfully influence a company’s corporate governance.
“The institutional investor community buys into activism,” said Lex Suvanto, global managing director of Edelman Financial Communications. “There’s been some questions over whether shareholder activists represented the views of the broader investment community, but the survey shows that not only do they support activists, they view themselves as agents of change.”
Institutional investors also see themselves as having the advantage in proxy battles: 80 percent said most companies were not prepared to handle activist campaigns.
“A company that’s vulnerable to activism is one that’s not fulfilling investor expectations,” Suvanto said. “Those companies are viewed as not having a clear enough strategy to persuade investors they’re on the right path, and they’re viewed as not equipped to respond to the criticism and the onslaught that activists would bring.”
[II Deep Dive: What Makes a Firm a Target for Activists?]
Roughly three-quarters of the respondents said they believed public companies should take a stand on issues like the environment and free trade. While more than a third said their firm had changed its voting or engagement policy to be more attentive to environmental, social and governance risks, only 28 percent said ESG was important in considering which companies to invest in.
Less than half of investors had a positive view of the current investing environment, and only 28 percent viewed the next 12 months positively due to concerns about the economic and political climate. More than three-quarters said the current political climate posed risks to companies they invest in – and almost half said companies don’t do enough to protect against those risks.
Overall, investors preferred to focus on the long-term, with 86 percent of respondents saying that companies focused on short-term results do not benefit their investment strategy.