The latest A&M Activist Alert report suggests poor ESG scores are an early warning sign that a company could be targeted by activists.

The A&M Activist Alert is an analysis and predictor of shareholder activism in Europe.  A&M used ESG ratings by Refinitiv of 1,300 European companies to segregate them into a ranking of four quartiles. Going back to 2017, A&M looked at each quartile to determine how many of its companies faced an activist attack.

A&M: The lower your ESG, the higher the risk of activist attack

A total of 62% of activist targets across Europe since 2017 fall into the bottom two ESG quartiles, observed the study. Moreover, companies in these groups are, on average, 24% more likely to face an activist campaign.

“As the focus on ESG grows in the minds of investors and the wider public, ESG performance has now clearly entered the sights of activist investors,” said Malcolm McKenzie. He is Managing Director and Head of European Corporate Transformation Services at A&M.

Further, “this compelling link between ESG ratings and the likelihood of activist targeting should serve as a wakeup call to boards across Europe. Those who have overlooked ESG issues risk activist wolf packs closing in,” he said.

Other findings of AAA

Activism gathers momentum in Europe as ESG interest flares.

However, the UK’s position as a hotbed of activist action is eroding as activism across Continental Europe gathers momentum.

Countrywise activism risk by number of companies:

• UK 54
• Germany 25
• France 24

Sector-wise activism risk by number of companies:

• Industrials 52
• Technology 24
• Consumer 32

Note that out of the activist target companies predicted in A&M Activist Alert in April, 33 did actually meet with activist action.

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