The Future of Activism Feels Like ESG
ESG activism has been moving from the fringes of shareholder activism landscape into the mainstream in recent years, as the strategy promises strong returns for first movers-
Companies with good ESG practices are experiencing growing demand for their shares, in many cases resulting in premium valuations. For activists, the opportunity is in targeting ESG laggards and pushing for improvements that close the sustainability gap between worst- and best-in-class companies, hoping for a bump in the share price in the process.
Energy companies are arguably an extreme example of the opportunity set in the ESG sector and one with higher risks. Gianluca Ferrari of Clearway Capital, a European activist fund, sees more openings at companies that do not have to change their entire business model to survive in an ESG economy.
“There is so much low-hanging fruit out there. We can find companies with strong business models and a low financial risk profile that are undervalued by the markets primarily because they are not taking sustainability as seriously as they should be,” says Ferrari.