ESG Investor Collaborations Growth Accelerates, A Strong Message to Companies in 2020 and Beyond
Investor collaborations play an important role in influencing businesses to address ESG issues and sustainability. Leaders Arena’s second investor collaborations study has found growing support for these collaborations and a rise in the number and size of investors joining these initiatives. Companies can leverage these insights to anticipate evolving investor demands.
Investor collaborations have grown exponentially with an increase in assets following by nearly 75% between 2018 and 2020.
This increase is the result of a combination of factors: the growing number and size of investors supporting existing collaborations including high-profile investors such as BlackRock and new initiatives launched. Meanwhile, global equity markets grew 4.2% during this period.
Environmental collaborations represent nearly 60% of the total assets in these collaborations.
Since 2018 the growth in social collaborations outpaced the growth in environmental and governance initiatives.
Of the eight new collaborations formed since 2018, six were created to influence corporate behaviour on social topics including Covid-19 and the 2019 Brazil tailings dam disaster.
Environmental collaborations dominate but social drives growth
Environmental-focused coalitions, primarily focused on climate goals such as Climate Action 100+, continue to dominate the list of top coalitions by assets (Figure 1) and represent nearly 60% of total AuM supporting collaborations (Figure 2).
However, in relative terms, the percentage of investor assets supporting environmental collaborations declined in 2020 compared with 2018. The relative decline was the result of investor collaborations focused on the social aspect of ESG gaining greater traction in recent years. For example, of the eight new collaborations formed since 2018, six were created to influence corporate behaviour on social topics including Covid-19 and the 2019 Brazil tailings dam disaster. Social collaborations now represent one in four dollars of the total AuM across all ESG collaborations studied in 2020.
Figure 1: Top collaborations are focused primarily on climate goals. (Source: Leaders Arena)
Figure 2: Environmental initiatives continue to garner the largest share of investor support (Source: Leaders Arena)
Governance-themed collaborations represented just 9% of the total support in terms of AuM in 2020 with the remaining 7% following collaborations on other ESG topics. While there are only a few governance collaborations, the Investor Stewardship Group was still among the top five collaborations by investor AuM following.
Impact of collaborations
Although an assessment of the impact of these collaborations was outside the scope of the study, there have been some notable outcomes stemming from collaborative ESG engagement. For example, the Climate Action 100+ group had a significant influence on the rising number of net-zero emissions “ambitions” of European oil and gas companies since the end of 2019, including those of BP, Eni, Repsol, Shell, and Total.
Similarly, the Investor Mining and Tailings Safety Initiative successfully pushed for a review of a new independent international standard for tailings dams and increased disclosure from mining companies.
In addition, the Thirty Percent Coalition’s “adopt a company” campaign has helped increase the gender diversity of US boards, providing positive governance outcomes from this collaboration.
Investor collaborations are clearly gaining traction and could be pivotal for influencing corporate behaviour on key issues such as climate change and human capital. They facilitate investor-company dialogue and provide a platform for communicating investor priorities and concerns.
Opportunity for companies
Given their increased importance and influence, it is important that companies track the evolution of these collaborations to anticipate investor demands. By following these initiatives, companies will be able to more effectively prioritise their time and resources to address issues that are of concern to some of their key investors. CLICK HERE TO DOWNLOAD THE FULL STUDY WITH ADDITIONAL INSIGHTS.