European investors make more ESG-related demands of company boards than their US counterparts and take a more “dogmatic” approach to company chairs being independent, according to new research.

The differences are revealed in research by AQTION, the shareholder relationship platform, and illustrate the divergence between European and US investors.

That European directors more or less insist on independent board chairs may come as no great surprise. But continental investors also lead their US counterparts in making ESG-themed demands.

Among investors based this side of the Atlantic, 71% communicate a position on “ESG criteria in pay” against 56% in the US; 81% of European investors publish expectations on environmental and social topics versus 72% in the US; and 52% of investors in Europe make public expectations on biodiversity, compared with 44% among US colleagues.

Support for key environmental initiatives also varies. While 95% of investors in Europe back the Climate Action 100+ and the Institutional Investors Group on Climate Change campaigns, this is only the case with 68% of US investors.

There is also a little more support for Taskforce for Climate-related Financial Disclosures among Europeans: 91% against 88% in the US.

Hinters of discontent

When it comes to shareholder activism, the differences reverse. A hefty 88% of US investors disclose their approach to “evaluating contested situations”. Only 19% of Europeans do likewise.

However, in Europe, investors are more likely to make public their “discontent” with managers, while only 24% of US investors do the same. AQTION concludes the findings show investors will maintain a focus on key topics.

Writing for the Harvard governance blog, AQTION’s George Cowlrick says: “The study finds that investors are continuing to vocalise their expectations on extra-financial topics with a growing level of transparency and the low barriers to implement activist tactics by investors, such as commenting to media, suggest that pressure will remain on corporate boards to be pro-active in responding to investor demands, and to present a compelling ‘equity story’ that incorporates mega-trend sustainability topics, but crucially, that is grounded in a robust governance structure.”

Many observers believe investors have returned to a “business as usual” mindset after the Covid years with an intense focus on executive pay.

Meanwhile, others worried that increased regulation combined with growing pressure from investors risks pushing board directors into “reactive mode” so that they are no longer fully in control of company strategy.

In the US, there is a concern that some investors view the “vitriolic” political environment as a systemic risk akin to climate change.

Whatever the change in view, investors have a big influence, perhaps more significant now than it has ever been. Insight into their thinking is critical for boards.