Activist investors to shift focus in 2024; ESG campaigns prove less lucrative
Activist investors are anticipated to scale back on environmental and social campaigns this year, as revealed by business consulting firm Alvarez & Marsal Inc.
Their analysis demonstrated that campaigns focusing on operational or strategic changes consistently outperformed the market by an average of 9.4% over the past six years.
In contrast, initiatives centered around environmental and social issues exhibited the least favorable relative returns, with an average outperformance of just 0.2% during the same period, according to a report published on Tuesday.
“As investors focus more firmly on returns in 2024 in a challenging market, we expect to see a decline in ESG-related campaigns and a renewed focus on metrics such as margin growth, cash generation and return on capital,” said Andre Medeiros, a managing director of A&M.
Alvarez & Marsal’s examination relies on the evaluation of 550 public campaigns initiated by shareholder activists from the beginning of 2016 to October 31, 2021.
The targeted companies were headquartered in Europe and the US.
Subsequently, the firm assessed the total shareholder return for each company during the ensuing two years after the campaign launch, comparing this return to either Europe’s Stoxx 600 Index or the S&P 500 Index, depending on the company’s location.
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