Activist investors making more attempts, having less success in 2020 — report

Activist investor campaigns at public companies were up globally in the first half of 2020, but they have been less successful than in years past, a report Monday from CGLytics shows.

There were 797 campaigns in the first half of the year, 38% of which were unsuccessful or withdrawn and 9% of which were successful or settled, according to the report. The number of failed campaigns in 2020 stood at 283, up from 185 in 2019 and 132 in 2018.

In 2019, the number of campaigns increased to 893 from 655 the year prior, and 2020 could eclipse it, CGLytics said.

"In a year that has already been difficult enough for many businesses to navigate, the rise in activist investors in 2020 has created yet another area of disruption for many," said Aniel Mahabier, CEO of CGLytics, in a statement.

In the report, CGLytics said: "Whether activist campaigns are successful or not, it is important to note that any activist campaign brings negative publicity, takes time to arrange, and in many ways disrupts the activity of a business and its management."

While hedge funds and private equity firms are the traditional activist investors, the report said more institutional investors over the past decade have become active in seeking changes to companies' governance structures. "What we're seeing is traditional investors change their position rapidly from passive to active engagement; an approach that looks set to continue well into the future, particularly in (the second half) of 2020 given high share price volatility and the ongoing impact of COVID-19," Mr. Mahabier said.

Governance issues such as shareholder rights, board tenure, independence, diversity and expertise are attracting activist attention, CGLytics found.

A separate report from BNP Paribas Asset Management also on Monday found that nearly 1 in 4 (23%) investors said ESG has become "more of a focus/more important" as a result of the COVID-19 crisis.

The report, which is the result of a survey last month of 96 institutional investors and 33 intermediary distributors in the U.K., France, Germany, Italy, the Netherlands and Nordic countries, showed that 81% of respondents already take ESG considerations into account in all or part of their portfolios, with a further 16% planning to do so. The leading reasons were to positively impact society or the environment (80%), reduce risk (58%) and meet stakeholder needs (47%).

The importance of all three ESG factors has increased since the crisis began, most notably for social considerations, which 70% of respondents expect to become extremely or very important, up 20 percentage points from before the pandemic, the report found. Moreover, 79% of respondents expect social issues to have a positive long-term impact on both investment performance and risk management.

"The COVID-19 crisis has clearly prompted a shift in investor perception of social factors, which are now widely seen as having a critical and positive impact on long-term value creation and risk mitigation," said Frederic Janbon, CEO of BNPP AM, in a news release. "It has also highlighted the interconnection between the way in which companies approach social issues such as treatment of employees or addressing inequalities in their long-term sustainability strategy."

The report also found that environmental considerations have risen 11 percentage points, to 74%, and governance increased 4 percentage points, to 76%.