No.1 engine’s Exxon Win gives ESG advocates a boost

(Bloomberg) – The rejection of the Exxon Mobil Corp. management team marks one of the most significant victories for shareholders to push for drastic action on climate change. The transformation movement of Exxon’s board of directors has been led by a – a well-known hedge fund called Engine No. 1, who only owns a 0.02% stake in Exxon and has no history of oil and gas activism. The company won at least two board seats at Exxon’s annual shareholders meeting on Wednesday and vowed to push the crude driller to diversify beyond oil. The # 1 engine was backed by two of the largest US pension funds and some of the largest asset management companies in the world, including BlackRock Inc. Exxon’s vote sends an important message not just to Exxon and others large oil companies, but “also to ESG investors at large,” said Rob Du Boff, analyst at Bloomberg Intelligence. “The fact that asset managers such as BlackRock have been influenced by the cause of engine # 1 is another sign that ESG issues, and climate change in particular, are now common.” The $ 255 billion New York State and $ 300 billion California State Pool Teachers’ Retirement System has been promoting climate-friendly corporate policies and investment principles for years environmental, social and governance issues, and both supported Exxon’s push from Engine No. 1. So have the Church Commissioners for England and BlackRock, who have been criticized for their uneven support for shareholder resolutions related to the environment. “Just a few years ago we were ignored, but now companies know they need to pick up the phone and talk to ESG investors,” said Kristin Hull, founder of Nia Impact Capital in San Francisco. now at the heart of investment processes and decisions, ”said Kalina Lazarova, London-based director in the responsible investment team at BMO Global Asset Management. “Environmental and social issues can now make or break directors in ways that were not possible before.” The No.1 engine, although tiny, succeeded because “it tapped into widespread investor dissatisfaction who are increasingly sensitive to climate and broader ESG topics,” Lazarova said. Catherine Howarth, CEO of ShareAction, a nonprofit focused on responsible investing, agrees. “Engine # 1 forced all these big investors to take sides,” she said. “For years, big institutional investors told us that behind closed doors they were getting there with companies in the oil and gas industry, but they held on. so little, ”Howarth said. In the meantime, the No.1 engine is “really shaking things up,” she said. BlackRock, the second largest owner of Exxon, with a 6.6% stake, voted for three of the new directors nominated by Engine No.1, according to a ballot released Wednesday. But the investment giant also backed CEO Darren Woods, who opposed investor demands for a change in the company’s approach to climate change – a move that prompted environmental groups who have called on the company to vote against them. he was “concerned about the strategic direction of Exxon” and that the company could benefit from the addition of new directors who “would bring new perspectives” to Exxon’s board of directors. the loss of the business, said New York Comptroller Thomas DiNapoli. “The fact that Exxon has not been responsive so far, in a way that they have set the stage for their own defeat,” he said Wednesday in an interview with Bloomberg TV. CalSTRS called Exxon’s vote “historic.” This represents a tipping point for companies unprepared for the global energy transition, the pension fund said. While the Exxon board election is the first by a large U.S. company to focus on the global energy transition, it will not be the last, the statement said. annual meeting Wednesday where investors voted for a proposal to force the company to reduce pollution from its customers. In addition, a Dutch court on Wednesday issued a ruling ordering Royal Dutch Shell Plc to reduce its net carbon emissions. These decisions send “a strong signal that ESG is common,” said Timothy Smith, director of ESG shareholder engagement at Boston Trust Walden. “Companies are realizing that these problems are no longer marginal.” The climate-focused investors “built the intellectual scaffolding that allowed No.1 Engine to get two of its board candidates,” said Jonas Kron, director of advocacy at Trillium Asset Management. “ESG investors have been asking companies for years to think honestly and transparently about managing climate change risks. The market has now caught up. (Add ESG investor comments in fifth and 16th paragraphs.) More articles like this are available at bloomberg.com Subscribe now to stay ahead of the most common source of business information. reliable. © 2021 Bloomberg LP

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