Tsunami arrives in Silicon Valley – TechCrunch

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With the increase In the attention paid to environmental, social and governance (ESG) issues over the past few years, it’s easy for companies to assume that we have reached the top of the ESG wave. However, we are still in the early stages – an ESG tsunami is heading towards Silicon Valley.

The increased attention to ESG issues has spread across a much broader spectrum than just companies in the tech sector. This was largely driven by broader societal trends, such as the focus on climate change. However, the ESG wave in businesses, especially state-owned enterprises, is being accelerated by demands from various categories of investors (including pension funds as well as a younger generation of individual investors) to grant more money. pay attention to these questions.

Therefore, institutions trying to attract capital from these investors, such as mutual funds, venture capital funds and hedge funds, need to focus more on the ESG dimension to remain competitive.

Although the focus on ESG has been gradual in recent years, the level of investor influence on ESG issues has increased with successful campaigns led by shareholder activists in energy companies in the spring of 2021, in especially a leading proxy contest. driven by engine n ° 1.

For the first time, investor pressure linked to an ESG issue (in this case, climate change) directly led to a significant turnover within the board of directors of a public company. Activist shareholders are harnessing new and powerful ESG themes as leverage in their activist campaigns to change the control and strategy of SOEs.

Is the tech sector next?

Historically, the model of investor pressure on governance issues (the “G” in ESG) in public companies consists of successively tackling problem after problem, winning on one problem and then moving on to the next. A good example of this is the migration of state-owned enterprises to hold annual elections for all directors for a one-year term rather than staggered elections of some of the directors for a three-year term – a so-called ” classified advice ”.

An institutional investor who neglects an ESG-themed activism campaign may risk criticism for ignoring client priorities and even losing future investments from ESG-focused investors.

In 2007, 55% of US public companies incorporated in the S&P 1500 had a ranked board of directors. In 2021, after years of shareholder-led governance campaigns, that figure had been reduced to 26% of S&P 1500 companies, with the board nearly extinct in the largest public companies which account for a larger percentage of the total. investor portfolio. So from an investor perspective, the pressure to get boards elected each year is almost entirely resolved and the investor spotlight shifts to focus on other issues.

We expect the same scenario to happen again here. At a recent conference, Aeisha Mastagni, portfolio manager at CalSTRS and one of the architects of Engine No. 1’s proxy contest this spring, said she hoped the contest would serve as a wake-up call for all. companies in all sectors, not just energy companies. So, if targeting climate change in the energy sector was an obvious first choice, the question now becomes “Who’s next?” “


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