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As ESG becomes an increasingly popular and possibly lucrative investing tool, some activists are approaching the issues in a different manner, creating change without the weight of economic exposure.

In December, Activist Insight Online considered how ESG was fast becoming a primary tool for some activists like Jeff Ubben, Engine No.1, and Clearway Capital to lock in profits by pushing companies to do good, as companies with strong ESG credentials trade at higher multiples than their peers.

That is just one side of the coin of the ESG activism movement. Other activists are taking up the mantle of fighting for no immediate economic benefit.

All at once

The Children’s Investment Fund Management (TCI) is stepping up its climate-focused campaigns beyond its portfolio companies. Christopher Hohn’s fund plans to target 100 S&P Global 500 companies with ‘say on climate’ resolutions. The goal is to have these companies hold annual advisory votes on their greenhouse emissions and how they plan to reduce them.

The effort is designed as a means of implementing change at the largest number of companies possible in as short a time as possible.

Since announcing its collaborative effort to improve company carbon disclosures, 17 companies have voluntarily agreed to put climate change proposals to a shareholder vote, including Unilever, which said the issue of reaching net-zero emissions is one which “will require a greater and deeper level of engagement between companies and their investors.”

However, Hohn noted in a November presentation that some companies could fight back against enhanced disclosures or setting strategies to reduce their climate impact. Indeed, Spanish travel company Aena last year attempted to gain shareholder approval for climate disclosures that Hohn described as “weak.” This prompted TCI to propose a more aggressive proposal, urging Aena to introduce an action plan to make the company’s airports being carbon-neutral by 2025. The resolution was approved by 98.1% of the shares, according to Proxy Insight Online data.

Hohn also noted that directors on boards which vote against “say on climate” proposals should have their re-election opposed by shareholders. He noted that any “vote against the plan should be an automatic vote against the sustainability director,” or against the lead independent director of a company, adding that the “say on climate initiative provides the evidence and justification for voting against directors.”

Piece by piece

While TCI is looking to force change on a large scale, Bluebell Capital Partners is zeroing in on one company at a time. Bluebell takes a single share position in one company per year and pushes for change on a non-financial issue. The hedge fund debuted its so-called “one share initiative” in January, when it asked Belgian chemicals maker Solvay to halt its chemicals discharge practice in Italy until a review of the process has been completed.

Bluebell believes it can be more impactful by focusing on the ESG credentials of one company at a time. “We might be small but we prefer to be concrete,” Marco Taricco, Bluebell’s co-founder said in an interview with Activist Insight Online, adding that the one-share initiative is designed “to save the planet by doing a series of little things like convincing Solvay to clean up the shore where they pollute, than writing a letter with big words but continue to invest.”

By targeting a company like Solvay, which has high ESG scores on most ratings providers, Bluebell hopes to raise awareness about how many of these scores are misleading. Taricco argued ratings agencies provide ESG scores “without doing the detailed work that according to us is necessary to determine the real quality of rating from an ESG perspective.”

The fund approached its Solvay campaign in the same way it does so with any other investment, sifting through data on the company against various metrics, including up to 50 ESG measures, before comparing the company to its peer group. But it is wary of comparing ESG scores from rating agencies.

Talking it over

Bluebell Chief Operating Officer Matt Low noted that the non-economic angle of the one share initiative “knocks the perception of us being some sort of greedy hedge fund on the basis that we’re doing it for the right reasons,” paving the way for engagement with otherwise hesitant investors, including the likes of BlackRock and Vanguard.

Indeed, in a letter seen by Activist Insight Online, Bluebell said hedge funds, along with BlackRock, Vanguard, Fidelity, and State Street – all of which are invested in Solvay – are in a position to “put down a marker with the Solvay case,” by showing “that fund managers in their role as a company’s shareholder, governments and regulators will not ignore exceptionally poor environmental behaviours even when they come from an otherwise leading company.”

Taricco noted that Bluebell took inspiration from BlackRock CEO Larry Fink’s public speech at the start of the year, when he noted that “investors also have a meaningful role to play,” in improving ESG issues at companies. However, the hedge fund suggested that there is “still a high degree of ESG hypocrisy,” concerning what institutional investors say and how they invest.