Activist Investors Who are Shaking Up Public Markets

September 14, 2022

At a glance

  • Main takeaway: Activist investors are proving that environmental, social and governance initiatives can drive value and create long-term sustainable change.
  • Invest with confidence: While companies struggle with how to develop ESG strategies to satisfy investors, two hedge funds take on the automotive and oil industries to show them it can be done.
  • Next steps: Aprio’s ESG team can provide guidance and help you discover ESG opportunities that fit with your strategic goals.

Are you ready to build your social balance sheet? Contact our team for a free consultation.

The full story:

A “new” breed of investors are using a tried-and-true formula to make waves in the public market. Say hello to the ESG activist investor. Their sustainability-focused approach puts environmental, social and governance (ESG) criteria at the forefront of their investments as a method to evaluate businesses, engage management, drive value and create long-term systemic change.

When ESG activist investors purchase a large stake in a company, they often attempt to influence how the company is run, specifically advocating for sustainability-related objectives. By requiring ESG transparency from the companies they invest in, activist investors are attracting the driving forces behind ESG — large institutional investors, millennials and gen z.

The socioeconomic issues amplified by the pandemic has ignited established institutions, such as endowments, foundations, pensions and sovereign wealth funds as well as millennials and gen z to align their money with their values; activist investors are paying attention. Here are two examples of how ESG activist investors have used climate change and diversity, equity and inclusion (DEI) initiatives to raise the ESG stakes.

Women are an untapped demographic

Women account for half of the US population, and yet, they make up only 2% of all auto mechanics, according to the US Bureau of Labor Statistics.

This was something that hedge fund Impactive Capital took note of when they invested in Asbury Automotive Group. Asbury is a $16 billion revenue Georgia-based automotive dealer with over 155 locations nationally, and like many industries, has been impacted by the sweeping labor shortage. When Impactive came into the fold with Asbury, they identified an opportunity to address the labor shortage and increase their candidate pool by attracting women to the automotive industry.

With guidance from Impactive, Asbury became the first auto dealer to publicly offer paid parental leave. Taking it a step further, they also established two shifts to allow flexibility in scheduling for employees to balance work and childcare. The result is that same-location revenue for Parts & Service has grown 15% since 2019, despite Covid’s impact on driving. 

Climate activists take on big oil

The world has its eyes on the oil and gas industry, who are feeling the heat to reduce its carbon footprint. Engine No. 1, a relatively new-to-the-scene hedge fund, defeated the far-greater resourced industry giant Exxon Mobil in a proxy battle that ultimately won Engine No. 1 three seats on Exxon’s corporate board. This was a major coup for climate activists and a wake-up call for companies slacking on ESG.

After demonstrating how Exxon was simply not doing enough to mitigate long-term climate risk by exploring clean energy alternatives, Engine No. 1 unprecedently managed to receive the support from Exxon’s largest investors — BlackRock, Vanguard and State Street.

Exxon isn’t the only oil and gas giant with mounting pressure by investors to clean up their act and address environmental risks. Hedge fund Third Point purchased a $750 million stake in Royal Dutch Shell and called for Shell to break up into separate companies to increase market value and invest in decarbonization.

The bottom line

ESG activist investors are on a mission to push companies on a sustainable path that drives long-term value, economic growth and systemic change. While it’s hard for companies and stakeholders to ignore the benefits of ESG as a key value-creating opportunity, the first step into the world of ESG can be overwhelming. Aprio’s ESG team can provide guidance and help you discover sustainable opportunities that fit your company’s strategic goals.

To learn more about the ESG organization to action series, read Part I – The Growth of Impact Investing: From Pension Funds to Endowments Divesting Fossil Fuel Assets and Part II – A Force for Change: Limited Partners Want Top Executives Who Believe in ESG.

Are you ready to build your social balance sheet? Contact our team for a free consultation.

The Growth of Impact Investing: From Pension Funds to Endowments Divesting Fossil Fuel Assets
A Force for Change: Limited Partners Want Top Executives Who Believe in ESG
Private Markets: It’s Time to Embrace ESG if You Want to Attract Assets
About Aprio’s ESG Practice

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About the Author

Simeon Wallis

Chief Investment Officer At Aprio Wealth Management At Aprio Simeon is the Chief Investment Officer of Aprio Wealth Management and the Director of Aprio Family Office. Simeon brings two decades of professional investing experience in publicly traded and privately held companies, as well as senior-level operating and strategy consulting experiences.

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