Developing a coordinated global response plan is more crucial than ever as environmental and financial activism enters a new stage, and campaigners cooperate across the world
The energy & resources (E&R) sector is at the forefront of activist campaigns and public scrutiny, making it a prime target for growing pressure from investors, regulators and society at large.
Activists are launching more frequent and sophisticated campaigns, setting their sights on larger companies and employing bold tactics to push for change. Over the past two years, E&R companies have suffered from disruptive activist campaigns, creating growing concern about where the next activist event might arise.
In response to the marked uptick in activism, Brunswick conducted an in-depth study of more than 200 cases of strategic activism – coordinated efforts by investors, shareholder advocacy groups and civic organizations to influence corporate behavior and demand changes to operations, strategy or leadership. The research analyzed companies across oil and gas, metals and mining, and agricultural commodities.
E&R companies are grappling with a surge in reputation-threatening activism. From 2019 to 2023, cases of strategic activism targeting E&R companies increased annually by an average of 32%. Even though there are indications that campaigns are moderating in 2024, they jumped 73% in the U.S. last year, climbed 26% across the Asia-Pacific (excluding China) and rose 24% in the UK and Europe.
Brunswick’s study also shows that more activists are jumping into the fray and making increasingly substantive demands. Last year, the number of activists launching their first campaign against E&R majors rose 50%, and the volume of cases with moderate- to high-impact demands to change a company’s strategy, operations or leadership increased 57%. This escalation highlights that activism is a growing risk that business leaders can no longer afford to ignore.
The nature of activism varies across the Asia-Pacific, the U.S. and Europe, reflecting distinct regional differences and diverse company pressure points. This variation underscores the necessity for companies to craft an international, coordinated response strategy, says Brunswick Partner Peter Zysk, who led the research into activism trends from Beijing. Leaders must tailor their approaches to the specific forms of activism in different parts of the world, recognizing that strategies effective in one region may not necessarily apply to another.
Creating an effective response to diverse activist campaigns is crucial. Given the range of trends and issues, a one-size-fits-all narrative is insufficient. Executives must be well-versed in the wide spectrum of activist campaign tactics they might face and be prepared to respond appropriately, understanding that no single narrative encompasses all aspects of activism.
Regional trends require a global perspective
Executives can no longer risk viewing the activism landscape solely within their home region because of the global nature of the sector and collaboration among non-governmental organizations (NGOs).
The international footprint of most E&R companies leaves them vulnerable to attacks from multiple activists with tactics adapted to each jurisdiction.
For instance, a company headquartered in Australia with operations in Europe can expect to face shareholder activism from institutional investors based in the UK, Europe or the U.S., and public demonstrations or legal action from activists in Europe where there is a groundswell of support and stronger legal precedents.
Activists have also evolved – they are not just influencing campaigns regionally through on-the-ground networks and affiliate organizations. They are now using tactics to directly reach other stakeholders such as institutional investors and organizations like the Council on Ethics, which have a greater influence over company leadership. Activists will engage with media publications to draw global attention to a regional issue, or commission proprietary research and white papers to elevate their concerns.
While shareholder resolutions continue to be the main tool for activist investors and shareholder advocacy groups, the sharp rise in NGO activism is exposing companies to a broader range of pressure tactics. Instances of lawsuits, investigations, public disruptions and regulatory complaints surged last year.
Activists set different priorities across the world
Despite idiosyncratic differences in major regions of the world, climate change is the dominant global issue for activists, accounting for half of campaigns launched in 2023. It’s the area in which we are seeing the most alignment of interests across NGOs, shareholder advocacy groups and institutional investors. Companies are getting pressure from all three groups on emissions targets, transition strategies and disclosures.
Elsewhere, human rights and biodiversity issues made up a third of cases, with civic organizations driving most of the activity. Governance and business strategy represented the remaining 17% of campaigns, with these being led almost entirely by investors.
Still, activists are pressing for change by vying for local public and political support, and by navigating shrewdly in the unique regulatory and legal infrastructure in each jurisdiction.
Here’s how trends are playing out around the world:
Asia-Pacific (excluding China)
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Global NGOs are exerting pressure through their local activist chapters or partnerships with more locally connected organizations that can deliver on-the-ground research and campaign support.
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To maximize their influence and pressure on companies, NGOs have increasingly targeted institutional investors, regulators and influential stakeholders by using letters of concern or proprietary research reports.
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Activists are focusing on identifying gaps in communication and strategy between local divisions of multinational companies, targeting the behavior of operators that might be beyond the direct control of the parent company.
U.S.
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Activists have primarily focused on shareholder activism but have had less success in persuading institutional investors to push for material strategic change lately as ESG has fallen out of favor.
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Despite this, the pressure remains for additional disclosures and greater transparency in communication, especially around carbon and methane emissions, mining tailings and waste management, and medium-term decarbonization investment plans.
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Activists demonstrate staying power; if one tactic fails, they adapt and change course, targeting the company in a different way in another jurisdiction through a separate set of stakeholders.
UK & Europe
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As the difficulty of the energy transition becomes clearer, relations between activists and companies are likely to become more fraught.
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E&R companies are facing quiet pressure from shareholder activists to increase production, potentially creating friction with green-energy activists.
Activism across the Asia-Pacific is increasingly driven by civic groups and non-governmental organizations, championing causes from environmental sustainability to social justice, explains Brunswick Partner Ayesha Khan, who is based in Singapore. Shareholder activism is a relatively new threat while investigations and exposés ramp up.
In the U.S., where shareholder activism benefits from a well-established regulatory framework, investor activists frequently lead the charge by exerting influence over energy & resources companies, and pushing for changes in governance and environmental policies, according to Dallas-based Partner Steve Power, who leads Brunswick’s Energy & Resources group in the United States. As shareholder activists strengthen their hand, the specter of legal action is rising.
Europe presents a dynamic and evolving activism landscape. Will Medvei, a Brunswick Partner and European lead for the Energy & Resources sector based in London, notes that both traditional and activist shareholders are exerting subtle, yet firm, pressure on corporate executives to adopt more responsible and sustainable business practices while at the same time generating more value for shareholders in the form of market returns and sustained dividends. As a result, companies are at risk of being caught out, as it’s unclear which of the twin goals they ought to prioritize. The problem is compounded by the fact that legal action has rebounded after cooling off.
Corporate responses must be multifaceted
The complexity of possible responses to activist campaigns puts an end to the previous binary decision of accepting and responding to criticism or rejecting and fighting it. Some companies have found that working alongside activists boosts their credibility, as they are seen as part of the solution.
While activism in the Asia-Pacific is still in its infancy compared with the U.S. and Europe, local groups are quickly realizing they can leverage the reputation, funding and reach of global NGOs to influence corporate behavior, Khan says. “Local NGOs in Asia are getting more sophisticated. They’re partnering much more consciously with flagship global NGOs,” she says.
Meanwhile, Australia is also increasingly witnessing a new trend among activists: directly targeting board members or executives in personal campaigns, making a coordinated response more difficult. “There is a lot of nervousness around this, not just because investors might divest, but because there’s a reputational and personal liability risk, particularly for multi-jurisdictional companies, which might not have as much control over their local assets,” Khan says.
E&R companies in the U.S. are facing fewer campaigns by shareholder activists, Power notes. “Shareholder activism around climate and ESG is still an issue, but it’s just not as acute as it once was,” he says.
That could change quickly, he cautions. “Activism is going to increase as extreme weather becomes more common and the issue of climate change becomes harder for people in all walks of life to ignore,” he says. “There could be a renewed effort on both shareholder and civic activism in the U.S. if we have a new administration next year that is seen as not responsive on climate issues.”
In a counterintuitive twist, some investors in Europe – not only activists but long-term institutional investors too – are pushing E&R companies behind the scenes to ease back on environmental commitments and ramp up production. Although the direction of travel is clear – achieving net zero by 2050 – “the question in Europe now is, have you all gone a little bit too far, at least in the short-term?” Medvei says.
Relationships with climate activists that were once constructive are also changing, Medvei says. As it becomes clear how difficult the transition to net zero will be, the risk is that activists’ demands are viewed as unrealistic. “Then the NGOs and the shareholder groups no longer think the energy companies are good-faith partners, so you begin to get that communication breakdown,” he says.
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