When Engine No. 1 scored a coup by winning a proxy vote and getting three environmentally minded members elected to Exxon Mobil’s board of directors in 2021, it sent shockwaves through the investment industry about the power of shareholder advocacy. It was framed as a David vs. Goliath story in which the relatively small hedge fund beat the oil giant. In reality, most shareholder advocacy isn’t contentious, which is why those stories aren’t told.
In most instances, shareholder advocacy happens when a portfolio manager reaches out to a company’s investor relations department and speaks with an executive or a specialist in an area the portfolio manager wants to address, says Julie Gorte, senior vice president of sustainable investing at Impax Asset Management. That’s a common first step for active fund managers, whether they work for a traditional asset manager or a sustainability focused firm, she says. Those conversations are how managers become more familiar with the company and gain entry to making recommendations for change. “(If) you see something you think would make a company a better investment … it’s in your interest as an investor to at least convey that to them,” Gorte says.Building relationships Engagement builds relationships, says …