The successful board challenge against Exxon Mobil Corp (XOM.N) highlights two recently launched sustainability-focused investment firms that have taken opposite sides in the high-stakes battle: Engine No. 1 and Inclusive Capital Partners.
The No.1 engine sparked the spark in January when it formally appointed four directors to Exxon’s board, accusing it of not moving fast enough to diversify away from fossil fuels. Inclusive Capital Partners sided with Exxon after founder Jeffrey Ubben joined the energy giant’s board in March, and argued he was already working with the company to improve its technology in areas such as carbon capture.
Both funds were launched less than a year ago. Their rapid rise to the board of Exxon underscores how Wall Street’s new focus on environmental, social and corporate governance (ESG) opens the doors for activist hedge funds in some of the world’s largest companies.
Engine # 1 was launched by hedge fund veteran Chris James in December 2020. Charles Penner, head of active engagement for Engine # 1, has spent much of his career at activist hedge fund Jana Partners, where he supported a campaign to get iPhone maker Apple Inc (AAPL.O) to create tools for parents to track and limit children’s smartphone use.
From the start, the team had support from the US pension fund CalSTRS, which provides benefits to teachers in California.
“We have called for change at ExxonMobil, and a record number of shareholders, including many of the world’s largest investors, have voted to hold the company accountable,” the pension fund said in a statement after the vote. Wednesday.
The No.1 engine reported at the end of March that it held 917,400 Exxon shares valued at $ 51 million – an amount that traditionally would barely receive a phone call from a company like Exxon, whose current market capitalization is around $ 250 billion. dollars. Yet thanks to the backing of some of Wall Street’s biggest fund managers such as BlackRock, he won at least two seats on Exxon’s board. Read more
Lawyers and industry analysts who worked with Penner said he had spent years researching how to tackle the oil giant and talk to other Exxon shareholders. Read more
The No.1 Engine “has done an effective job of championing its cause, and it looks like investors are saying it with their votes,” said Tim Youmans, engagement manager for EOS at Federated Hermes, who advises clients on how to vote.
Ubben founded Inclusive Capital in June of last year after leaving ValueAct Capital, the activist hedge fund he launched in 2000. He had a reputation for pushing change out of the limelight and working more collaboratively. with leadership than many other activists.
He described Inclusive Capital as a performance-driven environmental and social activist and raised concerns about the sustainable products sold by large index funds. In a recent regulatory filing, the company said it owns 1.6 million shares of Exxon, valued at $ 93.6 million.
Ubben defended Exxon against criticism of the No.1 engine, and as of Wednesday morning, Ubben was still calling on major Exxon investors to champion the company’s cause, according to people familiar with the matter. Although the result is a setback for Ubben, he manages to keep a seat on the board of Exxon that he might not have won if the oil major did not seek to defend himself against Engine No. 1 first.
Representatives of Ubben did not immediately comment on this article.
A spokesperson for the No.1 Engine referred to Penner’s statement at Wednesday’s annual meeting in which he said the firm had “learned that change can happen anywhere.” It will always be a long shot, but it will always be worth it ”.
In a statement posted on its website Wednesday, one of Exxon’s top investors, BlackRock Inc, said it supports three of the four dissenting candidates.
These directors, “along with Mr. Ubben, bring to the Board fresh perspectives and relevant transformative energy experience that will help the company position itself competitively to face the risks and opportunities presented by the energy transition,” said BlackRock.
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