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Green Glossary: Activist investors

These investors take no BS when it comes to sustainability.

By Sarah Drumm

Mauro Ujetto / Shutterstock.com

The Green Glossary features in Sifted’s weekly Sustain newsletter. We take a sustainability term or phrase and give a brief explanation on what it means, and how startups are connected to it. This week — activist investors, the phrase that keeps CEOs awake at night.

What are activist investors up to? These are shareholders that use their equity stake to put pressure on businesses to make changes — like ousting a CEO or forcing a bit of the business to be sold off.

They sound scary. Lots of CEOs would agree! Some studies have also shown that they tend to target firms that rank highly when it comes to corporate social responsibility measure. But it’s not all bad news: some activist investors are also stepping up their demands when it comes to sustainability, with ESG reportedly “top of mind” for execs at the three largest asset managers in the world (BlackRock, Vanguard and State Street).

How can we get more of those green activist investors? Researchers in the US reckon that getting pension funds — who have a long-term interest in the success of a company — to take on a more activist role could push companies to achieve their environmental goals more quickly. Meanwhile, startups like Tulipshare and Tumelo, mentioned above, are creating tech solutions that help pension holders (that’s you) to have a say in how their asset managers vote on board issues.

Where can I read more? Harvard Business Review interviewed a bunch of asset managers about their views on ESG. The Economist recently profiled Engine No. 1, the activist fund that recently installed three directors on ExxonMobil’s board, arguing that it was not doing enough to transition away from fossil fuels.