An Insightia interview with Dr Murad M. Daghles and Dr Thyl Haßler, partners, White & Case.
What demands were made of German companies by activists in 2022 and early 2023?
Dr Murad Daghles (MD): In 2022, there were a number of high-profile campaigns mainly targeting blue-chip companies. Demands ranged from calls for a change in leadership to urging companies to split and/or divest business units to maximize shareholder value.
Bayer faced demands from large investors calling for the CEO to be replaced and for a vote of no confidence in the managing board's 2021 performance by refusing to ratify the conduct of the board. These demands were not ultimately successful at the drug manufacturer's 2022 annual meeting.
In January 2023, Inclusive Capital Partners and Bluebell Capital Partners continued to call for a change in Bayer's leadership and for a separation of the company's pharmaceutical and agricultural businesses. This ongoing market pressure ultimately led to Bayer's CEO being replaced.
Another campaign of note is Primestone Capital's public call for market leading chemical distributor Brenntag to end takeover talks with its U.S. rival Univar Solutions, citing financial and operational risks and antitrust concerns. Activist investor Engine Capital joined the campaign in early 2023 and requested a seat on Brenntag's supervisory board and a split of Brenntag. In March 2023, Brenntag announced a share buy-back of up to €750 million ($808 million) and a 37% increase to its 2022 dividend. In April 2023, PrimeStone Capital claimed a seat on Brenntag's supervisory board and a split of the group.
Did 2022 bring forth any notable developments in ESG-related activism in Germany?
Dr Thyl Haßler: Two landmark campaigns are noteworthy for their ties to ESG. Enkraft Capital's engagement with energy company RWE involved an ESG-related demand which was unprecedented for a German shareholder meeting. Enkraft (with a shareholding of 0.03%) demanded a vote to accelerate the spinoff of RWE's brown coal business; the company's most emissionsintensive unit. Enkraft argued that the move would realise around €16 billion ($17.2 billion) in value and turn RWE into a "greener" company.
Ultimately, this motion and Enkraft's demand for a seat on the supervisory board both failed but demonstrate the ESG-driven pressures traditional industry players can expect to face in the future. Similarly, at Volkswagen, various Scandinavian pension funds and the Church of England Pension Board challenged the lack of transparency around Volkswagen's lobbying on climate rules. Volkswagen refused to include on its 2022 proxy ballot a proposal to enhance the board's reporting obligations in relation to lobbying.
The investors have since taken legal action against the company to test whether it has the right to refuse to include an item on the annual meeting agenda. This is one of the first high-profile examples in Europe of shareholders pursuing litigation regarding a climate-related matter.
Did the Russian invasion in Ukraine impact investor campaigns in Germany?
MD: Many large German companies reacted with official statements reporting a withdrawal from business activities with Russia or Russian entities which helped avoid activist campaigns that used ties to Russia as a tool to push for demands. At the 2022 shareholder meetings of several large blue-chip companies, investors challenged exposure to Russia: Henkel sold its Russian business after DSW (among others) claimed reputational harm and Beiersdorf shareholders criticized its ties to Russia (although Beiersdorf already ceased certain parts of its business activities in Russia).
Notwithstanding the landmark developments described above, the current geopolitical landscape appears to have temporarily diverted investor attention away from environmental and social concerns to a certain extent. However, with the war in Ukraine being described as a "historic turning point" in how European countries source their energy, it is anticipated that ESG-focused campaigns will take center stage in coming years.
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