What is the major constraint on collective engagement approaches?

The key constraint on collective engagement approaches is the rules around "acting in concert." These rules are designed to prevent parties from coordinating their actions without appropriate regulatory oversight, which is particularly relevant in the context of shareholder engagement. When multiple investors come together to influence corporate behavior, they may inadvertently trigger regulatory scrutiny or become subject to additional compliance requirements if viewed as acting in concert. This can limit the effectiveness of collective engagement strategies, as investors may need to tread carefully to avoid breaching these regulations while trying to exert their influence.

Understanding this constraint is essential for institutional investors and stakeholders who wish to engage collaboratively on ESG issues, as the legal implications can significantly impact their strategies and ability to advocate for change effectively. The other potential constraints, while relevant in broader discussions about investor engagement, do not influence the logistical and regulatory challenges presented by collective actions to the same extent.