Published 9 August 2021 by Audra Walton
Neil Doyle is Senior Managing Director at FTI, one of the largest financial advisory firms in the world. It consistently ranks as one of the top global management consultancies and has more than 6,000 staff in 28 countries. Neil’s extensive global
corporate, financial PR and investor relations experience has been gained on some of the most well-known and complex client engagements, making him an obvious choice for insights on two of the capital markets’ hottest topics: ESG and shareholder activism.
We met on a sweltering London day for a late breakfast at the Wren café, a hidden gem within the cathedral of St. Nicks Cole Abbey on Queen Victoria Street. He arrived calm and collected despite having finished a two-hour pitch only minutes before.
St Nicholas Cole Abbey, 114 Queen Victoria St, London EC4V 4BJ
Neil – Almond croissant and flat white
CMi2i interviewer – Yogurt and berry compote and flat white with oat milk
The timing for this conversation was apt—shortly after the Engine No. 1’s campaign against Exxon—and I had been wondering what his thoughts were on the role of the media in influencing ESG activism campaigns like that one. We order our coffees and breakfast, and sit down at a corner table in the cafe.
“How important do you feel public opinion and media coverage are in ESG shareholder activism situations?” I ask. “Do you think they influence key stakeholders, and ultimately the way shareholders vote?”
“The media can be enormously important for any activism campaign, but particularly for those that become public. ESG activists are especially aware of this and will often invest significantly in social media and PR activities,” he tells me.
“Could you give an example?” I ask.
“Elliot has been communicating through the media, as well as directly with their investee companies, from the beginning, and have invested a lot in pioneering the social media strategies they use in their activist situations. If you look specifically at the ESG activists, you will see that they are also leveraging those channels in conjunction with the conversations they are having behind the scenes,” he explains.
He continues, “There are also some fantastic examples if we think beyond the traditional financially motivated activists and look at some of the NGO-type organisations like ShareAction. They spend a lot of time and energy briefing the media on the situations they are involved in. Before they get to that, they spend considerable time convening large groups of institutional and retail investors and engaging with the corporates directly.”
“Coalitions seem to be the name of the game these days,” I offer, thinking about all the news I have read recently about coalitions pressuring companies for change.
He nods, “These big investor coalitions are increasingly important. We saw it with ShareAction against HSBC in March, in their tabling of an AGM resolution to accelerate their exit from coal. We saw it also with Engine No 1; investor coalitions were critically important to them too. They had a very small stake in Exxon, but the reason they managed to add two people to the Board was because they spent a lot of time behind the scenes engaging and building investor coalitions to back them. And then handling very well the communication with media and other audiences to make sure it was landing appropriately.”
“If you think about the competitive advantage that that gives them, particularly in ESG and climate related issues, it gives them the benefit of public opinion – which is very difficult to wrestle against. Once you have established that, it is a tough to reverse.”
“But what are the real drivers for the ESG activism in the first place? I ask him. “It can’t be that all activist funds have big hearts and are primarily motivated by wanting to improve E, S or G metrics.”
“I came across an entirely activist-focused fund last year, looking at ESG opportunities and companies that have underweight ESG capabilities,” he replies. “They wanted to help them improve because they believe there is a discount to companies that have poorer ESG ratings from MSCI and Sustainalytics and others. For them it is about helping them to address that discount and turn it into a premium,” he tells me.
It makes sense. What used to be activists’ unlocking of potential through financial-engineering, spin-offs and restructurings, is now the unlocking of potential through ESG progression. It reminded me of a FT article I read that morning about the FTSE4Good threatening to remove 208 companies in the index that didn’t meet new ESG standards. They would be good targets for ESG progression-oriented activists I thought. Ironically, one of the main points of the article was that the new evaluation process for inclusion in the index, while stricter than before, involves a comparison against peers, rather than singular benchmarks all companies must meet. They don’t want to exclude certain sectors because they felt then there would be no focus on the sector, no transparency and no pressure would be applied to them for change. I relay this to him and ask his thoughts.
“Yes, that is an interesting point,” he says. “Let’s say you’ve got 1300+ constituents of an index. If 200 of them are being reviewed for not managing to meet certain ESG standards, a good portion will likely be removed from the index. There will then be a consequent outflow of capital from those stocks, and we will see a declining value. The end result? Those companies will be under pressure to increase value quickly, which may actually be at the expense of E, S, and G. On the flip side of that, one client of ours, a financial institution, had an upgrade from an A to an AA in its ESG ranking from MSCI, and saw around $500million in in-flows just from that one ratings uptick.”
I mention that is probably an exceptional example in that his client is now likely considered best-in-class. It is unlikely that a company that goes from CCC to B would see the same kind of increased investment. Nevertheless, his point is very valid: indices inclusion, ratings, external benchmarks – they matter.
But ultimately, I think to myself, what really matters is the vote—how investors vote at the AGM or EGM on the ESG resolution put forward. And if an issuer has any chance of influencing that then they first and foremost need a very accurate shareholder list. I ask him what his view is on the importance of this kind of intelligence—the type that CMi2i provide, where we identify shareholders that actually hold the voting mandate.
“If you have a very accurate, fund-level shareholder list, that details who can actually vote, how they have voted previously at peers, how many votes they have, who their PAA is, etc, then a company can put together a very targeted campaign in which to build their own coalition of support. An issuer that tries to defend against an ESG activist campaign without this is at a disadvantage, particularly if they are up against the media and the public as we mentioned earlier. It may be that one or two shareholders that no one knew about, or engaged with, hold enough votes to make the difference—and that is a risk no company needs to take,” he explains.
I nod in agreement and begin thinking about the power companies have in being proactive and taking control of the circumstances dealt to them.
“We hear all day long about the challenges of the times, from increased debt due to Covid, to increased shareholder activism, to increased scrutiny on ESG,” I say. “But there is less focus on the potential opportunities that exist in this current climate. What opportunities do you see for today’s large corporation?”
Neil considers his answer, “I suppose there are three parts to that. The first of which relates to asset management. Clearly there is an absolutely huge wall of capital going into sustainable and ESG strategies, both from retail and institutional investors (sovereign wealth funds, pensions, insurance companies) so the product development in sustainable asset management is currently enormous and driving a significant sum of flows for asset managers. So that’s one opportunity.”
“Secondly,” he continues, “there is an opportunity from an investment point of view, whether that is asset managers investing in listed companies, or private equity, or issuers looking to diversify their portfolio into opportunities which are positive for sustainability and ESG. For example, renewable energy, and other lower carbon emitting technologies offer a big opportunity for organisations that position themselves in those spaces.”
An excellent point. And one that underscores some of the key propositions in Bill Gates’ book How to Avoid a Climate Disaster. While many of the new sustainable technologies and innovations are unproven, many will succeed rather than fail, and the opportunity is immeasurable given the truly global requirement.
He continues, “The third opportunity I see is business model innovation for any company anywhere, that has a business model that which could be improved by reducing emissions or changing the way they sell to their customers. For example, switching away from car ownership to car leasing as we experience the evolution and innovation in self-driving cars and all-electric cars. A further shift towards business models that reduce the need for people to own things, and for example, not drive motorised vehicles and use fossil fuels, is going to lead to lots of opportunity. All these business model innovations are really interesting and it’s an open door for any business in any sector.”
We are nearly out of time, and I had yet to ask him any fun questions yet.
“If you could play any role in the world of ESG and ESG Activism—the activist fund, the coalition, the shareholders that support the activist, or the issuer, etc—which actor would you choose to be?” I say.
“You forgot one.”
I know. It was a trick question.
“The media,” he replies. “I would choose to be the media. Even though the news outlets and public can’t vote on an ESG activist resolution at an AGM, the energy and support they are able to rally is incredibly powerful. Equally powerful is the debate they incite. They bring all of these ESG resolutions and shareholder proposals into the light of day where other stakeholders can see and evaluate them.”
We only have a few minutes left, but I am curious to know a bit about FTI’s evolution before we go.
“You’ve been FTI for more than 10 years. The world has changed a lot in that time, how different is the FTI we see today from the FTI you joined a decade ago?” I ask.
He thinks for a second. “I think the main change is that FTI has become much more integrated geographically and across its areas of expertise. Thanks to technology we are able to use the most knowledgeable expert for the assignment regardless of location. Also, the nature of our projects has evolved. We are involved in many more complex assignments, and any given project may draw upon two or three different divisions of FTI working together in different markets.”
“And lastly, the most important question of all,” I say, smiling. “What do you do in your free time?”
“I really enjoy cycling, music and travelling – which hopefully I’ll be able to do more of soon as restrictions are eased.”
And with that, we are out of time. I thank him for being my first face-to-face CMi2i breakfast interview and shake his hand—a novelty in this era of elbow tapping and physical contact avoidance—and can’t help to notice how cool it is. The rest of the café, myself included, are all roasting on this unnaturally hot London morning, but if Neil is, you wouldn’t know it. He looks cool and relaxed, yet totally focused—as I now realise, he has been throughout the entire interview. It dawns on me that the high-level management consultant may be a different breed of human to the rest of us. But as he smiles warmly and says goodbye, I can’t help but feel he isn’t a different breed, but simply the kind you want on your side, should you find yourself in a complex situation.
Written by Audra Walton
CMi2i provides strategic capital markets intelligence and guidance to corporates, C-suites, Boards and their advisors. The firm specialises in the world’s most accurate equity & debtholder identification services, and delivers critical intelligence and insights for investor relations, M&A, activist defence, ESG investment, capital issuance & restructuring, corporate transactions and proxy solicitation. The CMi2i team has supported numerous corporate transactions and general meetings, and serves over 500 of the largest listed corporates globally.