NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, January 19, 2018

On January 6, 2017, JANA Partners, a New York–based activist hedge fund, and the California State Teachers’ Retirement System (CalSTRS) sent a letter to Apple’s board of directors that may change the future of activist investing. Citing a substantial body of expert research, the letter stated, “We believe there is a clear need for Apple to offer parents more choices and tools to help them ensure that young consumers are using your products in an optimal manner.” Overuse of iPhones by children and teenagers, the letter pointed out, has been linked to lack of attention in the classroom, difficulty in empathizing with others, depression, sleep deprivation, and a higher risk of suicide.

Jana and CalSTRS together own $2 billion in Apple stock, so it’s no surprise that the letter received worldwide attention after it was publicized by the Wall Street Journal. What was surprising, however, was the unlikely partnership between JANA and CalSTRS. The term “activist hedge fund” connotes to many a “corporate raider” who creates short-term profits at the expense of other stakeholders and long-term investors. But CalSTRS is one of the world’s leading asset owners on the importance of integrating environmental, social, and governance (ESG) issues into investment decisions — investing as a way of maximizing returns while making the world a better place — so why would it be interested in partnering with an activist hedge fund?

The truth is that the worlds of activism and impact investing are converging much more swiftly than most people realize — and this union holds enormous promise for those who wish to see the creation of capital markets that support sustainable economic development. JANA is perhaps most public among activist investors about this shift, having recently announced that it is raising an impact fund to extend its Apple campaign to other companies with the help of an influential advisory board that includes Sister Patricia A. Daly, OP; Sting; Trudie Styler; and myself. But it is reportedly not alone.

Photo courtesy of Kārlis Dambrāns.