Traditionally, the "activist" in "activist investor" simply means "an investor who is actively pushing for specific policies," generally to increase the return on their investment.
"Financial activists" like Carl Icahn or Starboard frequently take > 5% stakes in order to pressure companies to sell themselves to competitors, break themselves apart in order to shed lower-performing divisions, funnel cash to shareholders through dividends or stock buybacks, or reverse policies they see as injurious to the bottom line
CEOs naturally hate this, and activist investors have a reputation -- arguably often well-deserved -- for improving the profitability of their portfolios at the cost of the companies they target. Sometimes this can force companies to walk away from suboptimal strategies -- did AOL really think Patch was going to be a market maker? -- but in many cases their activism simply results in the company's acquisition, aggressive offshoring or deindustrialization, or just straight-up bankruptcy. Icahn, for example, took a heavy position in Blockbuster and was instrumental in forcing them to reinstate late fees and drop plans to enter the streaming market, which left them exceedingly vulnerable when Netflix introduced streaming (the dueling HBR articles on this are well worth reading).
Over the past few decades "social activist investors" have become more common, especially amongst large public sector and union pension plans who have both financial throw-weight and a need to answer to causes somewhat beyond their immediate bottom lines, but in general they are much smaller, and less effective, groups than the usual hedge fund suspects. For example, an organization of decarbonization activists have been trying for years to force ExxonMobil to diversify its energy base beyond hydrocarbons (as other petrochemical firms have done), but they've had notably zero effect on XOM's strategy, despite having an argument based on economics as much as ecology.
