Insight
Passive investor ESG proposals are mostly value-neutral or value-destructive
“And they might have 10 or 15 ideas for ESG change. And, you know, of those, call it 10 ideas. Five might be value neutral. Three might be value destructive, a waste of time or a waste of capital without return. And two might be value accretive.”
Prediction Not checkable as stated
ESG will become a primary driver of activist investing profits
“We think that it will become increasingly one of the more important tools in the activist toolkit, and it will be a source of profits and value to drive, again, sustainable businesses in the long run.”
Assertion Supported
Higher corporate ESG disclosure leads to greater rating agency dispersion
“His name is George Seraphim, and he actually just put out research that demonstrated the more a company discloses about ESG factors, the greater the dispersion in ratings from folks like MSCI and Sustainalytics.”
Insight
Impactive advises companies to sacrifice near-term margins for long-term IRRs
“We are the rare activists that will say, you know what, you should make this investment that might diminish your margins in this quarter or the next
The next couple of quarters, because we have such high conviction in the longer term IRRs, and we have the capi…”
Insight
Allocator liquidity demands push activists toward short-term, growth-harming interventions
“I think there's an obsession with the short-term, and it's been created because there's so many allocators that need simply quarterly or monthly liquidity, but that's just insane. And I think for activists, it's even worse because it encourages activists to pu…”
Insight
Companies only take ESG seriously when tied to business rationale
“However, for any company to take ESG seriously, it's, the ESG change has to be linked to a business case and business rationale.”
Prediction Not checkable as stated
Attracting female mechanics could lift Asbury's enterprise value 15% to 20%
“If they can improve that utilization just 10% by attracting, retaining more mechanics, and particularly women, they have an opportunity to drive their enterprise value high double digits, so call it 15 to 20%.”
Insight
Good corporate governance is now considered basic corporate hygiene
“For most activists, it was really when you break apart the environmental, social, and governance change, it was always a governance conversation, and today I think good corporate governance is simply good corporate hygiene, and so management teams get that.”
Disclosure
Management teams reach out inbound to Impactive for ESG guidance
“We have a lot of management teams actually calling us for inbound requests on what can I do to improve my profile and what should I be focusing on?”
Prediction Not checkable as stated
ESG rating agencies will converge on standardized measurement metrics
“I think they will start to gel around the most important aspects of disclosing and tracking and setting goals around, for instance, carbon emissions, around waste, around air quality and water quality, around employee health and wellness and safety. And I thin…”
Assertion Contradicted
HDPE piping is 44 times less carbon intensive than concrete
“The HGPE pipes are about 44 times less carbon intensive than concrete, just to put a fine point on it.”
Prediction Not checkable as stated
Municipal green mandates will surge over next decade
“Over the next decade what I imagine is that municipalities and states and even commercial projects will demand More environmentally friendly products are used within the overall development of the project, and we believe that will drive massive tailwinds to th…”
Insight
Improving one company's ESG forces entire industries to follow suit
“Over the very long run, multi-decade period, not only have you changed a company, but you've changed an entire industry because all the competitors have to follow suit”
Insight
ESG allure will fade unless tied to business value
“You have to pursue it because it drives business value over the long run, and you have to be able to demonstrate the business value. And so if we're unable to demonstrate that business value, I think The allure of these products will definitely fall off.”
Disclosure
CalSTRS seeded Impactive Capital with six-year locked-up capital
“So just to take us a step back, Impacted was put in business by Blue Harbor's largest LPA, CalSTRS, and we were very lucky. They backed us with six-year capital, which is unusual in the public markets, and that really allowed us to pursue what I think is one o…”
Disclosure
Impactive Capital underwrites 20% IRRs across four pass-fail criteria
“So at Impacted, we have four key criteria that we look at in our investment strategy, They're all pass fail. So every one of the companies in our portfolio must pass this. It's quality, valuation, time, and activism. And so we just spoke a bit about quality. V…”
Assertion Supported
The hospitality industry spends $4B annually on energy
“If you take a step back, the hospitality industry spends roughly four billion dollars annually on energy. That's driven predominantly by lighting and HVAC systems, and energy For the average hotel, it costs about 2000 dollars per room.”
Assertion Supported
Wyndham franchisee energy retrofits deliver one-to-two year paybacks
“We put together a package of LED lighting, motion sensor detectors, smart HVAC systems, where the paybacks, and they disclose their paybacks, by the way, in their corporate social responsibility report, but the paybacks are usually one to two years. Doing that…”
Disclosure
Impactive holds 8 to 12 concentrated positions
“So our portfolio construction, we have about eight to 12 positions at any point in time, each eight to 12% of the AUM. And so today we have about 10 positions, almost half of which were put into the book between March and April of this year during the pandemic…”
Assertion Supported
Traditional equity lost $200B while ESG saw $70B inflows last year
“There was two hundred billion in capital outflows from the traditional equity funds and about seventy billion of inflows into ESG and sustainability funds.”
Disclosure
Vast majority of Impactive Capital is in three-year share classes
“The vast majority of our other capital is in a three-year share class”
Assertion Supported
Majority of Impactive's investment team are women and minorities
“At Impactive, the majority of our investment team are women and minority, and we're unique like that, but there's a long runway of opportunity for the industry, broadly speaking, to make some change.”
