VICTORIA GEDDES, Executive Director.
Australia’s experience of challenging companies about ESG issues, when compared to the rest of the world, has always been that of the late or slow adopter. Since 2013 when it wasn’t on the radar at all, activity has picked up every year, peaking in 2022 at 28% and briefly catching up with Europe and Japan. In that whole time, however, it was consistently the country with ESG as the lowest proportion of activism and has remained so in the past 2 years at 18-20%.
While ESG activism in the US (47%), Japan (28%) and Europe (23%) has remained at a relatively consistent percentage of total activism over the past ten years, Canada (blue) and Korea (green) are both growing but are also highly volatile, as the chart below shows. ESG activism is now in the 30-40% range for both countries compared to 20-30% the year before.
Source: Diligent, FIRST Advisers
ESG means something different to each country
Governance is the standout area of focus for all countries, occupying the greatest amount of attention (16-28%) in activist circles relative to Social and Environment. Australia is the exception (9%) where Governance and Environment are broadly equal in importance.
Social matters more to the US (16% of total activism) than any of the other countries where activism on social issues was between 1% and 5% of the total.
Environmental activism is not something that features in Europe, Japan and Korea compared to Australia, the US and Canada (7-12%).
Source: Diligent, FIRST Advisers
What are Activists Most Upset About?
In Australia, seeking changes in personnel either through adding people to the board or removing board members/the CEO (or both) is largely the only game in town. Twelve years ago this represented 93% of activism, but in the last 5 years has fallen to an average of 63% and is largely responsible for the overall decline in activism during that time.
Changes to the board are a feature of activism globally but only in Europe and Korea do they assume primary importance alongside Australia. No other country comes close however to Australia’s dominance of this type of activism
In North America the emphasis is on ESG (40-48%) while in Australia, Europe, Japan and Korea ESG represents 20-30% of all demands, half that of North America.
Japan, Korea and Europe stand apart with their focus on return of cash as the 3rd most active type of demand (13-22%) while M&A activism ranks 3rd for Australia, US and Canada with each sitting around 8-11%.
Source: Diligent, FIRST Advisers
While the data might provide some comfort to companies concerned that the level of ESG activism in Australia is poised to replicate that in the US, the fact remains that activism generally is ever present. FIRST Advisers has been providing specialist activism support to companies and activists since 2010 and while activity levels have retreated from the heady days of 2017-2020, there are still 70-90 campaigns a year that are not ESG related. We will take a deeper look at how these are trending in our next newsletter.