(Bloomberg) —

Investor activism both in and out of the boardroom is poised to reach new heights in 2022.

Last year, shareholder activists teamed up with environmental and socially-minded investors in record numbers. The most successful campaign was arguably hedge fund Engine No. 1’s push to add three climate-conscious directors to the board of fossil-fuel behemoth Exxon Mobil Corp. Other notable initiatives included investorDan Loeb’s attempt to break up Royal Dutch Shell Plc and Bluebell Capital Partners’s push for a management shakeup at GlaxoSmithKline Plc.

This year, the expectation is that activism will accelerate further, said Rob Du Boff, senior ESG analyst at Bloomberg Intelligence. More than nine campaigns based on environmental or social issues are currently underway, impacting companies such as Unilever Plc and TotalEnergies SE.

The efforts are getting more aggressive with investors pressing big companies to do everything from reallocate capital and shrink carbon footprints to overhaul management teams. That’s a long way from two years ago, when investors were only requesting more detailed climate-related disclosures.

Last week, a majority of of Costco Wholesale Corp. shareholders backed a proposal calling on the giant retailer to set science-based emissions reduction targets across its business lines to ensure the company achieves net-zero emissions by 2050 or sooner.

Costco has been a laggard, according to Green Century Capital Management President Leslie Samuelrich, who said the vote demonstrates investors expect the company to “align with its peers by accelerating work to reduce the climate impact of its supply chains.” Green Century, which oversees about $1 billion in. assets, has a $5.9 million stake in Costco.

Officials at Costco haven’t returned calls to discuss results of the shareholder vote.

In a filing before the Jan. 20 annual meeting, Costco said it’s committed to a yearly 2% reduction target for Scope 1 and 2 CO2 emissions, and if the company achieves this goal, it will cut its cumulative Scope 1 and 2 emissions 20% by 2030 and 45% by 2035. Costco added that it is exploring options for “even greater reductions.”

Du Boff said shareholder activists are increasingly focused on bigger companies, indicating greater support from large asset managers that hold sizable positions in giants like Exxon, Costco and Unilever.

Aviva Investors, which oversees about $350 billion, warned 1,500 corporations spread across roughly 30 countries in a letter this week that it will hold boards and individual directors accountable if they don’t address climate, biodiversity and human rights issues with “sufficient urgency.”

In 2021, the number of shareholder campaigns against companies with market values of more than $1 billion climbed 21%, to 221, according to data compiled by Bloomberg. Investors also are increasing their efforts in Europe, particularly in the U.K., as well as Japan, where 96 shareholder-led initiatives were announced last year, up 45% from 2020.

But even with this growing pressure, corporate boards opposed to proposals that they accelerate sustainability have for the most part been able to brush them aside. In 2021, activists could claim victory—or at least a partial victory—on just 39% of the fights that went all the way to a proxy vote, Du Boff said. Shareholders often face an uphill battle as companies generally employ high-powered investment bankers and lawyers to defeat initiatives aimed at environmental, social and governance reforms, he said.

The leading company advisers last year were Goldman Sachs Group Inc. and JPMorgan Chase & Co. and law firms such as Vinson & Elkins LLP and Sidley Austin LLP, Bloomberg data show.

Still, 2021 marked a breakthrough for activism on several levels. For one, the world’s largest asset managers led by BlackRock Inc. and Vanguard Group supported Engine No. 1’s push to shake up Exxon’s board, something they’ve rarely done in the past as they more often than not side with management.

And then there’s the U.S. Securities Exchange Commission. The SEC has proposed a plan to reverse Trump-era moves that would have made it harder for activist investors to push for changes in C-suite strategies. If finalized, the rule would be a loss for executives hoping to stave off shareholder sustainability initiatives.

“The paradox is that activists often can’t get anything done without the voting support of passive owners,” Du Boff said. “With the rise of ESG, they now have another tool to win that support to unlock value from underperforming companies.”

Sustainable finance in brief

• Larry Fink’s annual letter draws fresh backlash, this time from Texas politicians looking to prop up fossil fuel giants.
• Engine No. 1 lays its cards on the table for its next proxy targets.
• Citigroup says it won’t drop companies in its push for sustainability, including oil and gas clients, unless it’s a last resort.
• Blackstone starts a renewable-energy lending strategy as part of its promise to invest $100 billion in green projects.
• McKinsey says it will cost $9.2 trillion a year to meet international  goals aimed at staving off a climate catastrophe.

Bloomberg Green publishes Good Business every week, providing unique insights on ESG and climate-conscious investing.

To contact the author of this story:
Tim Quinson in New York at standards@bloomberg.net

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