Shifts in the investor landscape over EY’s decade of investor dialogue
The investor landscape has undergone major changes in recent years, spurred by crises as well as opportunities. Some of the most dramatic shifts we have observed in 10 years of ongoing conversations with investors include the rise in company‑shareholder engagement, which was emerging in response to mandatory say‑on‑pay proposals as we began our investor outreach in 2011 and has since become a defining governance trend of the past decade.
ETF and index fund managers who used to be labeled "passive" have become much more vocal, becoming active stewardship leaders and driving engagement campaigns that help define the board agenda. Along with these developments, investors have been steadily increasing transparency around their stewardship priorities and proxy voting, which is expanding opportunities for companies to educate themselves on individual investors’ perspectives.
And most recently, ESG has gone mainstream. While a decade ago investors raising environmental and social topics with us were predominantly socially responsible investors (SRIs), ESG is now fundamentally reshaping investment and stewardship, dominating our conversations across all investor types and revealing SRIs as harbingers of current investment trends.
Heading into 2021 and beyond we are attuned to new shifts underway that could continue to alter the investor landscape, including how stakeholder capitalism is implemented and governed, potential growth in investors using proxy votes to communicate their views and drive change, and the potential impacts of consolidation in the asset management industry on investor stewardship and ESG trends.
The past year has stress tested the social contract and expanded opportunities for companies to lead on global challenges. In response, board members will need to take on more of a leadership role in focusing their companies on long-term-value creation, and from what we’ re hearing, investors expect them to do so. Heading into proxy season 2021, investors seek to hold boards accountable for how companies are charting a course through recovery and continued disruption to long-term-value creation and acting as responsible stewards of natural and human capital. Investors are also communicating an increased willingness to vote against board members, and in favor of shareholder proposals, to express their views on environmental and social topics — and are doing so as sustainable investment trends continue to accelerate and the political context and regulatory framework around ESG continue to evolve.