Activist Investing Evolution: From Financial to Human Values

Arjuna Capital was among the companies that discovered the benefits of sustainable investing amid pandemic. Natasha Lamb, Managing Partner and Co-Founder at Arjuna Capital, said that the company had what she’d now call “a perfect corona portfolio”—no fossil fuel, cruise liner, casino or airline companies in it enabled the firm to stay afloat as the market was sinking.

In the same period, over the three years of the pandemic, the S&P 500 ESG index performance left behind the regular S&P 500 index. 

Both cases might be snapshots of sustainability investing manifesting its growth. And as it grows, it takes many forms. One of them is activist investing, which itself has been redefined and currently expands into both Fintech and the global financial market. In our article, we explore the journey of activist investing, from the beginning to the possible future destinations.

The growing importance of ESG and sustainability

Having gained momentum in recent years, sustainable investing puts positive social change before financial returns. Whereas environmental, social, and governance (ESG) investors consider climate change, racial equality, and corruption issues but strive towards keeping their returns the same as with a standard investment approach. ESG investing appeared as a more balanced approach and alternative to sustainable investing.
Both approaches are major drivers behind the activist investing transformation, which we discuss below.

Activist investing: from financial value to human value

It’s all about value in activist investing. 

In a more traditional sense, the approach consists in investing in companies that have been long lagging behind on the market and is aimed at improving their performance. An activist investor in this case acts not as deus ex machina—a divine power that saves the day. Rather, after taking a non-controlling stake and assessing the company’s state, they provide recommendation and nudge company management to pull their business out of the mire of low shareholder value themselves. In other words, an activist investor provides strategic, financial, operational or organizational advice to trigger the value growth in the company’s shares. 

What motivates activist advisors is bringing the company’s true value to the surface. Once they increase the stock value, it will pay off their investment in the company.

Now activist investing circles back (or spirals up?) to the first meaning that jumps to your mind when you hear the word “activist”—a person who advocates for a cause. And becoming a shareholder is a new way to make change. Amid the surging popularity of sustainable investing, holding a share in a company that has a perfect gender pay balance or has reduced its negative impact on the environment to minimum is one option. There’s also another: owning shares to make a meaningful impact on the company politics through shareholder proposals. This way environmental and social issues might get from the doorstep to the management meeting room in any company that has been reluctant to address them.

Fintech innovations that empower new activist investors 

Technology among other things has made this turn in activist investing possible. 

Tulipshare platform allows one to become a shareholder advocating for change with investment as little as £1. By bringing such investors together in campaigns addressing Apple, Amazon, and other market giants, the platform promotes and tries to achieve ethical change within companies listed on the NYSE and NASDAQ.

Making investing accessible, Robinhood also wants proxy voting to be a simpler process for its customers. To allow investors have their say in the matters of the company they own shares in, the mobile-first brokerage acquired Say Technologies, a proxy voting service and Q&A platform. Now value-driven shareholders at Robinhood have the opportunity to become a modern breed of activist investors.

However, activist investing, as well as sustainable and ESG investing, should not necessarily be confined within specific platforms. Up-to-date solutions for investors, financial advisors, and wealth managers offer enough automation to leave space for the pursuit of true value that is beyond finances only.

Mirador and AdvisorEngine are examples of such solutions. Mirador offers award-winning wealth management and financial advising services to individuals, families, institutions and businesses of significant wealth. AdvisorEngine was “the first company to integrate private-label robo-advice within a full enterprise B2B digital wealth management technology platform.” Now its clients enjoy a complete wealth management platform with an impressive array of tools. A technology partner of both companies, INSART can create a tailor-cut solution for a wide range of investment and wealth management needs.

Sustainable and responsible investment is future

Value is a much-repeated word in this article but it’s central to the concept of activist investing brought up here. And today we see the possible start of the future where financial value is not opposed to human values, but where the two form a bond that keeps both sustained.

Responsible and sustainable investment form such a bond between investors, companies, and clients, and prove that operating business in a vacuum is impossible. Just as economic sanctions against one country reverberate across the globe and force companies to take a stand, the pressing need to address social and environmental issues is pervading offices too. We could see the change-driving activist investing grow into a major market force in years to come.

As Fintech is largely reliant on fossil fuel investments and is a massive energy consumer, it qualifies for falling under scrutiny of activist investors. However, as we’ve shown above, the industry is already embracing the need for transformation and, what’s equally important, driving this change itself.