The rejection of
The movement to transform Exxon’s board of directors was led by a previously little-known hedge fund called Engine No. 1, which has just a 0.02% stake in Exxon and no history of activism in oil and gas. The firm gained at least two board seats at Exxon’s annual shareholder meeting Wednesday and promised to push the crude driller to diversify beyond oil. Engine No. 1 was backed by two of the largest U.S. pension funds and some of the world’s biggest asset management firms, including
The Exxon vote sends an important message not only to Exxon and the other big oil companies, but “also to ESG investors at large,” said Bloomberg Intelligence analyst
The $255 billion New York State Common Retirement Fund and the $300 billion California State Teachers’ Retirement System have been promoting climate-friendly corporate policies and environmental, social and governance investment principles for years now, and both got behind Engine No. 1’s Exxon push. So did the Church Commissioners for England and BlackRock, which has been criticized for its uneven track record on supporting environmental-related shareholder resolutions.
ESG advocates said the rebuke of Exxon is going to make it much easier for sustainability investors. “Just a few years ago we were ignored, but now companies know that they have to pick up the phone and speak with ESG investors,” said Kristin Hull, founder of Nia Impact Capital in San Francisco.
‘Make or Break’
“ESG is now core to investment processes and decisions,” said Kalina Lazarova, a London-based director in BMO Global Asset Management’s responsible-investment team. “Environmental and social issues can now make or break directors in a way that wasn’t previously possible.”
Engine No. 1, though a tiny company, was successful because “it tapped into broadly held discontent among investors who are ever more sensitive to climate and broader ESG topics,” Lazarova said.
“For years we were told by large institutional investors that behind closed doors they were getting there with companies in the oil and gas sector, but they have delivered so little,” Howarth said. Meantime, Engine No. 1 is “really moving the field,” she said.
BlackRock, the second-largest holder of Exxon, with a 6.6% stake, voted for three of the new directors nominated by Engine No. 1, according to a vote bulletin published Wednesday. But the investment giant also backed Chief Executive Officer
BlackRock said in its bulletin that it was “concerned about Exxon’s strategic direction” and that the company could benefit from the addition of the new directors who would “bring the fresh perspectives” to Exxon’s board.
Exxon’s failure to act on previous investor demands to tackle climate change led to the company’s loss, said New York Comptroller
CalSTRS called the Exxon vote “historic.” It represents a tipping point for companies unprepared for the global energy transition, the pension fund said. While the Exxon board election is the first of a large U.S. company to focus on the global energy transition, it won’t be the last, according to the statement.
Chevron Corp., another oil giant,
These decisions send “a strong signal that ESG is mainstream,” said Timothy Smith, director of ESG shareowner engagement at Boston Trust Walden. “Corporations are realizing that these issues aren’t fringe anymore.”
Climate-focused investors “built the intellectual scaffolding that enabled Engine No. 1 to get two of its nominees on the board,” said Jonas Kron, chief advocacy officer at Trillium Asset Management. “ESG investors have told companies for years to think honestly and transparently about climate change risk management. The market has now caught up.”
(Adds comments from ESG investors in fifth and 16th paragraphs.)
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Tasneem Hanfi Brögger, Daniel Taub
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