Being attuned to shareholder needs is the foundation of a successful investor relations campaign. But now, the need for stock surveillance has never been greater.
In an age when shareholder activism is growing in momentum, surveillance - partnered with strong ESG initiatives-can insulate corporations from hostile takeovers.
Through active surveillance, a corporation can adjust its course to reflect its shareholder needs better, a necessary trait to have now more than ever.
The Changing Landscape of Activism
To some, the phrase "ESG activism" might conjure images of public demonstrations, like the recent protests held at AIG's headquarters.
In December 2021, protesters met outside Water Street in New York to deliver a petition of 27,000 signatures along with a pile of coal. The move was to compel AIG to change its approach to climate change as one of the world's largest underwriters of dirty energy.
But these grassroots protests represent just one facet of ESG activism.
Shareholder activism applies pressure on corporations in the boardroom. Instead of a public protest, it involves mobilizing groups of activists who hold large portions of shares. They use their collective voting privileges to improve ESG initiatives from the top down.
How Successful is ESG Activism?
According to corporate governance software service Diligent Institute, ESG activism has risen year over year from 2020 to 2021. Diligent's report shows 13 percent of these campaigns were successful in the first eight months of 2021, whereas only nine percent were successful in 2020.
One of the biggest success stories for environmental activism happened in June 2021, when Exxon Mobil went up against the small hedge fund Engine No. 1 and lost.
Three of Exxon Mobil's biggest institutional investors BlackRock, Vanguard, and State Street backed Engine No. 1 during an election in a stunning move of corporate betrayal, earning the hedge fund three seats on Exxon's board of members. The move puts Engine No. 1 in possession of one-quarter of the board, which will likely push the oil giant to adopt greener policies faster.
Another successful campaign happened when 61 percent of Chevron shareholders supported the activist group Follow This in encouraging the US oil company to reduce its emissions.
The dramas playing out behind the closed doors of Exxon's and Chevron's board rooms reflect the average shareholder's interest in sustainable and responsible investing. There's been a tidal wave of support for environmental, social, and governance issues worldwide.
In early 2021, ESG funds outperformed S&P 500. Today, these assets are worth $30 trillion, with experts forecasting they'll reach more than $50 trillion in 2025. That will represent more than one-third of the $140.5 trillion in projected assets under global management.
Corporations with Poor ESG Initiatives Are Greater Targets
These stats provide a cautionary tale to corporations that haven't hammered out a solid ESG initiative.
Corporations that don't prioritize their ESG initiatives-or those that provide unimpressive or green washed reporting-stand to lose out on eco-minded investors. Worse yet, they're more vulnerable to activism attacks in the near future.
ESG has become a driving factor in investing decisions. Investors and activists alike expect to see transparent reporting with clear objectives and achievements shared on IR websites.
Stock Surveillance Taps into Shareholder Sentiments
A greater interest in environmental policies is clearly taking up more space in the market. However, it doesn't accurately describe the unique needs of every shareholder. An oil company like Exxon may have a greater responsibility for cleaner targets than a green IPO that already has firmly established ESG targets.
Stock surveillance is a valuable addition to any public company's IR toolkit to help identify its shareholders' unique expectations. That's according to the IR specialists at Q4, who provide tailored insights into shareholder behaviour as part of their Q4 Software Solutions.
Tailored surveillance monitors performance drivers, peer tracking, and activism to provide insights into the months ahead. It collates data so that IROs can identify patterns and predict behavior, so they're aware of what shareholders and potential investors want to see in their ESG reports.
At the very least, this data takes the shock out of an activist campaign. However, IROs can leverage real-time IR intelligence into an informed response, steering the corporation away from mutiny.
Real-time analytics act as a company health check. Through momentum trading, rumors, and other IR intelligence, surveillance shows whether a company's favorably perceived or not. And in today's landscape, a company's value hinges on its ESG policies.
At a time when ESG activism is on an upswing, corporations that keep a close watch on their shareholder base while cultivating strong ESG initiatives will avoid hostile takeovers.
Board members and senior management can use this timely surveillance data to build a proactive response. With the right changes, they can yield to market sentiments without conceding power like Exxon.