engine no one

<div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">=</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">may 2022</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman"><a href="https://insideclimatenews.org/news/17052022/charlie-penner-engine-no-1-exxonmobil/">https://insideclimatenews.org/news/17052022/charlie-penner-engine-no-1-exxonmobil/</a></font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">
</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px;"><font size="4" face="Times New Roman" style="background-color: rgb(255, 255, 102);">a year ago this month, a small hedge fund <a href="https://insideclimatenews.org/news/26052021/exxonmobil-shareholders-climate-change/" style="box-sizing: inherit; text-decoration-line: none;">won an unlikely victory against ExxonMobil</a>, gaining support from a majority of the company’s shareholders to replace three of its directors, against management’s wishes. The fund, called Engine No. 1, had argued that Exxon was failing to plan for a transition away from fossil fuels, and as a result was jeopardizing its long-term business prospects.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman"><b>While Engine No. 1 held only a tiny number of shares, it <a href="https://reenergizexom.com/" style="box-sizing: inherit; background-color: transparent; text-decoration-line: none;">waged a six-month campaign</a> and convinced large investors like BlackRock and State Street that Exxon needed fresh faces on its board of directors.</b> Even before the vote, Exxon responded to the pressure by <a href="https://insideclimatenews.org/news/03022021/the-chess-game-continues-exxon-under-pressure-says-it-will-take-more-steps-to-cut-emissions-investors-are-not-impressed/" style="box-sizing: inherit; background-color: transparent; text-decoration-line: none;">announcing a new low-carbon business line</a> and more ambitious plans to reduce its own direct greenhouse gas emissions.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">This month, Inside Climate News talked with Charlie Penner, who was head of active engagement for Engine No. 1, to take stock of what, if anything, has changed. Penner has since left the fund, and he declined to comment on what comes next.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">This interview has been edited for length and clarity.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><span style="box-sizing: inherit; font-weight: 700;"><font size="4" face="Times New Roman">What was Engine No. 1’s campaign really about, and what was it trying to achieve?</font></span></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px;"><font size="4" face="Times New Roman" style=""><span style="background-color: rgb(255, 255, 102);">In a nutshell, it was about short-term versus long-term thinking.</span><span style="background-color: rgb(247, 247, 247);"> If you looked at Exxon’s strategy before the campaign started, it was to be the most aggressive spender in the industry on really long-term oil and gas projects that were dependent on the idea that demand for oil and gas won’t change for decades to come. And obviously, that’s important from a climate perspective because it locks into place infrastructure that the oil and gas companies are incentivized to keep going for decades to come, even as other sources of energy become more feasible and cheaper over time.</span></font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">but it’s also important just from a basic shareholder perspective. Even for a shareholder who doesn’t care about the energy transition, and doesn’t care much about climate change, they do care about bad capital allocation. A lot of what I worked on in my old job as just a straightforward traditional activist was about companies that have poor capital allocation histories. The idea was to basically meld those two things, which is to say that if you’re a company that over the past 10 years, even before Covid, had done a really bad job allocating capital, and been an undisciplined spender, that challenge is only going to get more difficult in the face of, hopefully, a growing energy transition.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><span style="box-sizing: inherit; font-weight: 700;"><font size="4" face="Times New Roman">One year out, how would you gauge the success of the campaign?</font></span></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px;"><font size="4" face="Times New Roman" style="background-color: rgb(255, 255, 102);">I think it’s too soon to say. I think we were pretty clear in the campaign that any transformation is going to take a long time.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">In terms of what you can actually judge, I think there are near-term things, which I would categorize as low-hanging fruit, in terms of increased disclosure about scope 3 emissions [the emissions generated when Exxon’s products are burned], which they did during the campaign; promises to reduce scope 1 and 2 emissions [Exxon’s direct emissions] to a greater extent than they have and set more ambitious targets, which, again, is pretty low-hanging fruit in the industry; spending more on low-carbon solutions.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">Now, it depends on what that actually translates to. It’s good that they’ve said that they will allocate more capital to these things, but it’s only good if they allocate it to things that actually make sense and can push the energy transition forward.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">The good news, going back to the people on the board, is new people like Kaisa [Hietala] and Andy [Karsner], who’ve actually built profitable energy transition type businesses and companies, can now be in that boardroom and say, “Wait a minute, is this something real, or is this just an advertisement.”</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">So, I think that’s one of those things where even though you can’t really say right now where that spending is going to go, there’s a better chance that goes into something that could actually turn the tide.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">The other big thing is, during the campaign, they went from saying, “We’re gonna grow production by 25 percent,” to now saying they’re holding it steady. But the real report card is going to be 10, 20, 30 years down the road, are they still spending as if things are never going to change.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><span style="box-sizing: inherit; font-weight: 700;"><font size="4" face="Times New Roman">I hear executives, and people outside of the industry sometimes, saying “We are responding to demand, and if we produce less oil or gas, someone else is just going to produce more.” It raises the question of what impact the investments or lobbying of an individual company, even if it’s an Exxon or a Shell, can have in terms of driving or hindering a transition. </font></span></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px;"><font size="4" face="Times New Roman" style="background-color: rgb(255, 255, 102);">It’s a question of distinguishing between current activity, and very long-range spending and planning. People are not wrong when they say, “Hey, if you just stop producing as much oil and gas today, then others will pick up the slack, or prices will just go through the roof.” The issue, though, is that nobody on the campaign, and I don’t think smart advocates are saying, “Just turn off the pipes today.”</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman"><b>Those debates are not about current production. They’re about what your spending is on production capacity that wouldn’t come online for decades, and would keep producing for decades.</b> If you’ve got a $30 billion project that is dependent on a certain level of demand for decades to come, you’re going to fight like hell to make sure that demand is still there.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">Now, there is a real debate to be had about whether the world will ever change. But it’s kind of this very fluid thing, because it also partially depends on whether or not oil and gas companies create the incentives for themselves to make sure that the world never changes, even if there are ways that the world could change that are cheaper for consumers, obviously better for the climate and a whole hell of a lot less volatile than the current energy market today.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><span style="box-sizing: inherit; font-weight: 700;"><font size="4" face="Times New Roman">If you could snap your fingers and map out how an oil and gas company should be behaving or allocating its investments today, what would that look like?</font></span></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px;"><font size="4" face="Times New Roman" style="background-color: rgb(255, 255, 102);">It would be on short-lived projects that can come online relatively quickly, that generate really high rates of return. We said during the campaign, Exxon’s Permian investments [in Texas], most of them actually look pretty good.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px;"><font size="4" face="Times New Roman" style="background-color: rgb(255, 255, 102);">But other things, particularly in the developing world, if you look at, for example, the Mozambique LNG project… That’s basically their gateway to India. The more people are locking in LNG as the transition for places like India from coal to renewables, that’s not a short-term bridge, that’s a 30 or 40 year-lived project. And if the developing world doesn’t go from coal to renewables,<b> but goes from coal and has a three or four decade layover in liquid natural gas or other fossil fuels, and delays them getting there, that has a massive impact on energy transition.</b></font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><span style="box-sizing: inherit; font-weight: 700;"><font size="4" face="Times New Roman">One thing you didn’t touch on there was lobbying. How do you see that fitting in?</font></span></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px;"><font size="4" face="Times New Roman" style="background-color: rgb(255, 153, 0);">I thought it was pretty interesting that right after the campaign, that <a href="https://www.cnn.com/2021/07/01/business/exxon-tape-video-keith-mccoy/index.html" style="box-sizing: inherit; text-decoration-line: none;">lobbyist came out and basically talked</a> about members of Congress as if they were kind of staff members of the company. That’s pretty depressing.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">We pointed out that the lobbying arguments they were making didn’t make a whole lot of sense. They had the whole thing about, well, you know, “We support a carbon tax.” But, we pointed out that you wouldn’t be <a href="https://www.axios.com/2019/03/07/exxonmobil-spending-resource-development-south-america" style="box-sizing: inherit; background-color: transparent; text-decoration-line: none;">spending $30 [billion] or $35 billion a year</a> on new oil and gas spending, which was their plan before the campaign, if you actually wanted the carbon tax to pass.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">So it was nice a lobbyist kind of came out and said, like, “Yeah, it’s just a talking point.” But even before that, we just looked at the basic economics of it, it didn’t make sense. Unfortunately it’s kind of been baked into the corporate cake that lobbying can be incredibly short-term focused and incredibly destructive, even for your long-term interest.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><span style="box-sizing: inherit; font-weight: 700;"><font size="4" face="Times New Roman">We’re in shareholder advocacy season now. What do you think shareholder resolutions can achieve on all of this? What role can they play?</font></span></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">This whole thing is about scaffolding. A lot of the work that we did at Engine on the Exxon thing was building on the work of people at CalPERS, and CalSTRS [two California public pension funds] and the Church of England.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">I don’t think there’s any knockout punch in any of this. Unfortunately, a lot of people in the initial excitement over the Exxon vote thought it was a knockout punch. But there is no knockout punch. There’s not some giant button on [Exxon CEO] Darren Woods’ desk that says “renewables” that he can hit. And even if every oil major all of a sudden made every decision perfectly, they’re still only 15 percent of the world’s supply. So, you know, a lot of things have to go right over a long time.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><span style="box-sizing: inherit; font-weight: 700;"><font size="4" face="Times New Roman">The cynic in me is often skeptical of profit-driven efforts to address climate change. One of the successes of your campaign was that the profit and climate interests aligned, but you can’t guarantee they’re always aligned. What happens when they’re not?</font></span></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">I think that’s really fair. And I’m probably more often skeptical than not when I see advertising and stuff about that. I think one of the misimpressions maybe, though, is that what I’m trying to do, or what other people are trying to do, is somehow meant to crowd out what other people are doing, or meant to serve as a replacement for government, well-functioning government, smart regulation. I think that it’s really only meant to be an expression that, “Hey, we are a part of this system. And we can be making smarter decisions.”</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">It is fair to say that you can, as an investor say, “Hey, a lot of the stuff that’s happening here is very short-term focused, and doesn’t make sense for any of us over the long term.” And I think you can do what needs to be done here, which is appeal to people’s self interest. It’s a very small number of people, and I think zero number of kids, who benefit from the very worst climate change outcomes.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><span style="box-sizing: inherit; font-weight: 700;"><font size="4" face="Times New Roman">Some people argue for a government-led wind-down of the industry. Do you think an investor-driven oil and gas industry can get to where it needs to be?</font></span></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman">If there were no game clock here, and it’s more like a shot clock given the current timetable, yeah, probably at some point it would get there just based on the falling cost curve for renewables, based on the technological development that’s happening. But I think when you see things that have been successful, it’s been because good regulation paved the way for good business decision making, and good business decision making showed how you could sensibly regulate a system.</font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px;"><font size="4" face="Times New Roman" style=""><span style="background-color: rgb(255, 255, 102);">I don’t think the problem is necessarily capitalism as a concept. There’s just as many capitalists, if not more, that I know of, that are focused on trying to push the energy transition forward. But they’re not the ones who are currently in the driver’s seat, because they don’t have the scale. So if you’re a U.S. senator, and get a call from the CEO of an oil major, and you get a call from the CEO of a solar company, right now a lot of them are saying, well, this is the current power balance, and this is who we’re gonna listen to. </span><span style="background-color: rgb(247, 247, 247);">And that’s not really a problem with capitalism; both of those parties are driven by the goals of efficiency and profitability. It’s a problem of a pretty disgusting and anti-democratic system.</span></font></p><p style="box-sizing: inherit; overflow-wrap: break-word; margin-bottom: 0.75rem; grid-column: 4 / span 6; word-break: break-word; z-index: 1; margin-top: 0px; background-color: rgb(247, 247, 247);"><font size="4" face="Times New Roman"><b>All I know is that there are certain tools that are sitting on the table that people can try to use to bend the curve a little bit, and those happen to be the tools of capitalism. And if government wants to get in the game, too, that’d be awesome.</b>  </font><a href="https://insideclimatenews.org/profile/nicholas-kusnetz/" style="background-color: transparent; box-sizing: inherit; text-decoration-line: none;"><font size="4" face="Times New Roman" color="#000000">Nicholas Kusnetz</font></a></p></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><div style="background-color: rgb(255, 255, 255);"><font size="4" face="Times New Roman">=</font></div><div><font size="4" face="Times New Roman" /><div style="background-color: rgb(255, 255, 255);"><font size="4" face="Times New Roman"><font size="4" face="Times New Roman"><font size="4" face="Times New Roman"><font size="4" face="Times New Roman">no lnx  https://www.nytimes.com/2021/06/01/opinion/exxon-mobil-board.html</font></font></font></font></div><div style="background-color: rgb(255, 255, 255);">OPINION</div><div style="background-color: rgb(255, 255, 255);">THOMAS L. FRIEDMAN</div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">The ‘Mean Greens’ Are Forcing Exxon to Clean Up Its Act</div><div style="background-color: rgb(255, 255, 255);">June 1, 2021</div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">Opinion Columnist</div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">Since the 1990s, the wisest oil-producing countries and companies have regularly reminded themselves of the oil patch adage that the Stone Age did not end because we ran out of stones; it ended because we invented bronze tools. When we did, stone tools became worthless — even though there were still plenty on the ground.</div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">And so it will be with oil: The petroleum age will end because we invent superior technology that coexists harmoniously with nature. When we do, there will be plenty of oil left in the ground.</div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">So be careful, wise producers tell themselves, don’t bet the vitality of your company, community or country on the assumption that oil will be like Maxwell House Coffee — “Good to the last drop” — and pumped from every last well. Remember Kodak? It underestimated the speed at which digital photography would make film obsolete. It didn’t go well for Kodak or Kodachrome.</div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">Alas, though, not every oil company got the memo.</div><div style="background-color: rgb(255, 255, 255);">
</div><div><span style="background-color: rgb(255, 255, 102);">One that most glaringly did not is the one that in 2013 was the biggest public company in the world! It’s ExxonMobil. Today, it is no longer the biggest. As a result of its head-in-the-oil-sands-drill-baby-drill-we-are-still-not-at-peak-oil business model, Exxon lost over $20 billion last year, suffered a credit rating downgrade, might have to borrow billions just to pay its dividend, has seen its share price over the last decade produce a minus-30 percent return and was booted from the Dow Jones industrial average.</span></div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);"><b>But last week — finally — Exxon got the memo, in the form of a shareholder revolt in what was one of the most consequential weeks in the history of the oil and gas industry and shareholder capitalism.</b></div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">I’ve long argued that if environmentalists want to have an impact on the climate they can’t be “nice greens.” They have to be “mean greens.” They have to be as mean and tough, as diligent and vigilant, as the industry they’re trying to change.</div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">Well, last week a little hedge fund called Engine No. 1 delivered an unprecedented master class in mean green using the tools of democratic capitalism. A plucky, purpose-driven investment fund, Engine No. 1 set out to force Exxon to improve its financial returns by getting much more serious about gradually transitioning — through innovation and acquisitions — into being an energy company, not just an oil and gas company.</div><div style="background-color: rgb(255, 255, 255);">
</div><div><span style="background-color: rgb(255, 255, 255);"><b>At Exxon’s annual meeting, Engine No. 1 offered up a slate for four new members of Exxon’s 12-member board.</b> The four represent deep energy expertise and climate solutions</span><span style="background-color: rgb(255, 255, 102);">. The slate committed to push the oil giant to a net-zero emissions strategy by 2050, more investments in clean energy systems and more transparency about Exxon’s energy transition, with metrics and milestones, as well as disclosure of its lobbying payments and partners, suspected of undermining the science around climate change.</span></div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);"><b>And darn if half the slate — Gregory Goff and Kaisa Hietala — wasn’t immediately elected by wide margins</b>, and at least one other member might be as well when ExxonMobil finishes counting the votes from its very, very bad day.</div><div style="background-color: rgb(255, 255, 255);">
</div><div><span style="background-color: rgb(255, 255, 102);">Engine No. 1 was successful because it got three of the four biggest pension funds in America — fed up with Exxon’s relentless value destruction — to vote for its nominees. We’re talking about the California Public Employees’ Retirement System, the California State Teachers’ Retirement System and the New York State Common Retirement Fund. Also, three of the world’s biggest fund managers, Vanguard, State Street and Black Rock, which together own more than one-fifth of all Exxon stock, each voted for part of the dissident slate.</span></div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">[OPINION CONVERSATION</div><div style="background-color: rgb(255, 255, 255);">The climate, and the world, are changing. What challenges will the future bring, and how should we respond to them?</div><div style="background-color: rgb(255, 255, 255);">What does climate change look like around the world?</div><div style="background-color: rgb(255, 255, 255);">From “Postcards From a World on Fire,” these 193 stories show how climate change is reshaping reality.</div><div style="background-color: rgb(255, 255, 255);">What should our leaders be doing?</div><div style="background-color: rgb(255, 255, 255);">Al Gore, the 45th vice president of the United States, finds reasons for optimism in the Biden presidency.</div><div style="background-color: rgb(255, 255, 255);">What are the worst climate risks in your country?</div><div style="background-color: rgb(255, 255, 255);">Select a country, and we'll break down the climate hazards it faces.</div><div style="background-color: rgb(255, 255, 255);">Where are Americans suffering most?</div><div style="background-color: rgb(255, 255, 255);"><b>Our maps, developed with experts, show where extreme heat is causing the most deaths in the U.S</b>.]</div><div style="background-color: rgb(255, 255, 255);">
</div><div><span style="background-color: rgb(255, 255, 255);">And if you are keeping score at home — on your Stone-Age-ending-before-we-run-out-of-stones scorecard — on the same day that Engine No. 1 landed at least two energy/climate experts on the Exxon board, Barron’s reported: “</span><span style="background-color: rgb(255, 255, 102);">A Dutch court ordered European energy giant Royal Dutch Shell to slash its carbon emissions by a net 45 percent by 2030. And, at Chevron’s annual meeting, shareholders supported a nonbinding proposal to ask the company to cut carbon emissions generated by the use of its products.”</span></div><div style="background-color: rgb(255, 255, 255);">
</div><div><b><span style="background-color: rgb(255, 255, 255);">Engine No. 1 and its allies are not playing around, and for good reason. As CNN reported a few days earlier, citing a n</span><span style="background-color: rgb(255, 255, 102);">ewly published Harvard study</span><span style="background-color: rgb(255, 255, 255);">, “For decades, ExxonMobil has deployed Big Tobacco-like propaganda to downplay the gravity of the climate crisis.”</span></b></div><div style="background-color: rgb(255, 255, 255);">
</div><div><span style="background-color: rgb(255, 255, 102);">“The study used machine learning and algorithms to uncover trends in more than 200 public and internal Exxon documents between 1972 and 2019,” according to CNN, which quoted this statement from the study: “These patterns mimic the tobacco industry’s documented strategy of shifting responsibility away from corporations — which knowingly sold a deadly product while denying its harms — and onto consumers.”</span></div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">Exxon’s existing board was noteworthy for one thing: Other than the C.E.O., it had one member — appointed only this year — who I would call an energy expert, and none steeped in climate expertise that could help the company adapt.</div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">The two new directors will definitely help, but getting the third —<b> conservationist Andy Karsner </b>— would really shake things up. Exxon says the voting results are too close to call, and it needs more time to certify if Karsner won a seat.</div><div style="background-color: rgb(255, 255, 255);">
</div><div><span style="background-color: rgb(255, 255, 102);">Bloomberg reported: “Exxon telephoned investors the morning of the ballot — and even during an unscheduled, hourlong pause during the virtual meeting — asking them to reconsider their votes, according to several of those who received calls. Some said they found the last-ditch outreach and halt to the meeting unorthodox and troubling.</span><span style="background-color: rgb(255, 255, 255);">”</span></div><div style="background-color: rgb(255, 255, 255);">
</div><div><span style="background-color: rgb(255, 255, 255);">I first got to know and respect Karsner watching him in action in 2007, when he was an assistant secretary of energy for George W. Bush. He oversaw the U.S.’s National Laboratories’ applied science programs and <b>negotiated America’s re-entry into the U.N.’s Convention on Climate Change at the Bali conference, </b>which laid the pathway for the Paris global climate deal.</span><span style="background-color: rgb(255, 255, 102);"> Before that, Karsner built [FF?] power plants in Pakistan and solar plants in Morocco.</span></div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">He has been a longtime member of the board of <b>Conservation International, as was my wife</b>. In full disclosure, Karsner and I are now friends, but it’s his experience and outlook that recommend him here. If there were a picture in the encyclopedia of a “mean green,” it would be Karsner: tough as nails and green as grass.</div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">Karsner, the other Engine No. 1 nominees and Engine No. 1 itself are out to strengthen Exxon, not destroy it. They view it as one of the world’s greatest collections of scientific and engineering talent.<b> They welcome Exxon’s sudden enthusiasm for the idea of creating a $100 billion public-private carbon-capture facility along the Houston Ship Channel to sequester planet-warming carbon dioxide</b>. They also know that demand for oil and gas for transportation, power generation and plastics is not disappearing overnight. Wisely managed money will be made there.</div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">But in a world where Ford just unveiled an all-electric version of its F-150 full-size pickup truck, one of its top-selling vehicles, and says that it envisages electric cars and trucks making up 40 percent of its production by the end of the decade, they think Exxon has got to stop betting that the good ole days of oil and gas profits will return — and start becoming a more diversified energy company. That means not only investing more in future carbon capture, batteries and other renewables, but also using its engineering prowess to invent that future — while it still has an income stream from oil and gas.</div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">Everyone knows it won’t be easy. Making the kind of profits that Exxon once piled up from oil and gas will be very, very hard as a more diversified energy company. But it beats becoming a corporate fossil by betting the house on increasingly unprofitable, increasingly obsolete, increasingly unhealthy fossil fuels.</div><div style="background-color: rgb(255, 255, 255);">
</div><div style="background-color: rgb(255, 255, 255);">The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.</div><div style="background-color: rgb(255, 255, 255);">
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</div><div style="background-color: rgb(255, 255, 255);">Thomas L. Friedman is the foreign affairs Op-Ed columnist. He joined the paper in 1981, and has won three Pulitzer Prizes. He is the author of seven books, including “From Beirut to Jerusalem,” which won the National Book Award. @tomfriedman • Facebook</div></div><div style="background-color: rgb(255, 255, 255);"><font size="4" face="Times New Roman">=</font></div></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">=</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">
</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">FF ceo:</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">
</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><span style="text-align: justify; background-color: rgb(255, 255, 255);"><font size="4" face="Times New Roman">June 3, 2021, ExxonMobil Board announced that, Engine No. 1 nominee <b>Alexander Karsner </b>will join fellow candidates Gregory Goff and Kaisa Hietala on the board of ExxonMobil.</font></span></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">=</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">gizmodo</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">
</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><div style="font-family: " times="Times" new="New" roman="Roman" font-size="font-size" large="large" background-color="background-color" rgb="rgb"><font size="4" face="Times New Roman">The other two Engine No. 1 board members are good news only because Exxon has been so bad at managing its finances and making any strides at all towards thinking about a low-carbon future. While you may hear “activist investor” and conjure up a certain Greenpeace-y image, both the other new picks,<span style="background-color: rgb(255, 255, 102);"> Gregory Goff and Kaisa Hietala, mostly have experience working with oil and gas companies. (Goff, in particular, seems staunchly in the camp of keeping the fossil fuel status quo and once apparently announced “<b>I am the best oil executive in the world” to a bunch of Wall Street types gathered at a steakhouse.)</b></span></font></div><div style="font-family: " times="Times" new="New" roman="Roman" font-size="font-size" large="large" background-color="background-color" rgb="rgb"><font size="4" face="Times New Roman">
</font></div><div style="font-family: " times="Times" new="New" roman="Roman" font-size="font-size" large="large" background-color="background-color" rgb="rgb"><font size="4" face="Times New Roman">Compared to these two, Karsner definitely has bona fides that make us feel a little more hopeful about Exxon’s future. While being a “Space Cowboy” (<b>“Senior Strategist” appears to be his official title at X)</b> is one of his current gigs, Karsner worked as the assistant secretary for Energy Efficiency and Renewable Energy during the last years of George W. Bush administration. He went on to work on a bunch of Silicon Valley and energy world-adjacent ventures, including forming the energy group at<b> Emerson Collective, Laurene Powell Jobs’s half-nonprofit, half-venture capital engine.</b> <span style="background-color: rgb(255, 153, 0);">Karsner was a principal negotiator at international climate talks in Bali in 2007</span> and served on the board of the National Renewable Energy Laboratory as well as the board of Conservation International. T<b>homas Friedman</b>, the New York Times columnist who is a Big Climate Guy, apparently knows Karsner, and wrote some glowing praise of him in his column on the Exxon vote, calling him ”tough as nails and green as grass.” All sounds great!</font></div><div style="font-family: " times="Times" new="New" roman="Roman" font-size="font-size" large="large" background-color="background-color" rgb="rgb"><font size="4" face="Times New Roman">
</font></div><div style="font-family: " times="Times" new="New" roman="Roman" font-size="font-size" large="large" background-color="background-color" rgb="rgb"><font size="4" face="Times New Roman">Per Karsner’s LinkedIn (which is impressively, and appropriately, exhausting), he was also a director and member of the board at the<span style="background-color: rgb(255, 153, 0);"> Gas Technology Institute for eight years; he also was a member of the National Petroleum Institute between 2009 and 2018.</span> It’s clear Karsner has spent a lot of time working with oil and gas companies. Since he’s joining the board of Exxon, this is admittedly a good point to have on a resume, but it’s also a sign he’s not getting invited to an Extinction Rebellion meeting anytime soon.</font></div></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">=</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">
</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman"><a href="https://gizmodo.com/what-happens-to-exxon-now-1846984417">https://gizmodo.com/what-happens-to-exxon-now-1846984417</a></font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">
</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman" /><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman"><font size="4" face="Times New Roman"><font size="4" face="Times New Roman"><font size="4" face="Times New Roman"><font size="4" face="Times New Roman"><font size="4" face="Times New Roman"><font size="4" face="Times New Roman">no lnx</font></font></font></font></font></font></font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">What Happens to Exxon Now?</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">ByMolly Taft</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">5/27/21 </div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">An activist investor that staged a coup at Exxon on Wednesday over the company’s mishandling of climate change and got two new board members elected has generated headlines around the world.</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">But that coup is a little more complex than it seems at first glance. Wednesday’s win was, in part, a victory because of just how terrible Exxon has been up until now at planning for its future, and demonstrates how far we have to go in terms of making real change at the world’s major fossil fuel companies.</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">First, there’s the issue of who, exactly, investors chose to put on the board from the list of four candidates proposed by activist investor Engine No. 1. Reading the new board members’ bios may make any climate activist’s eyebrows shoot up—ecosocialists, they definitely are not. <span style="background-color: rgb(255, 255, 102);">Gregory Goff is a former vice president at Marathon Petroleum, while Kaisa Hietala transitioned from upstream oil gas exploration to biofuels at oil refining giant Neste. Both Goff and Hietala, in fact, have lots of experience in oil refining, and perhaps not coincidentally, Exxon posted a $1.1 billion loss last year in its refined products division. Goff in particular, one analyst told Reuters, will be “far more concerned with Exxon Mobil’s management structure and lack of entrepreneurship than some misguided attempt to target net-zero.”</span></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">Even the big investors who made yesterday’s coup possible don’t really deserve green kudos; they basically did the absolute bare minimum to keep Exxon functioning in a modern business landscape<b>. It’s notable that the only Engine No. 1 board candidate BlackRock didn’t decide to vote for was Anders Runevad, the former CEO of Vestas Wind System and the only board candidate with renewable energy experience. </b>BlackRock also voted against a separate motion that would have mandated Exxon provide a report to its shareholders on the environmental and health impacts of their products. Writing in its guide for how shareholders should vote, BlackRock said it “believes that efforts already undertaken by Exxon to protect public health and the environment have been genuine and produced actual benefits to shareholders and to society.” (Sure, Jan.)</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">Related Stories</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">Exxon and Chevron Got Their Teeth Kicked In, But Shareholders Won’t Finish the Job]</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">But Wednesday, still, was a big deal. It shows that investors are sick of losing money and view the prospect of rampant oil production is untenable financially in a world finally starting to get real about addressing climate change.</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">“This was a moment where investors decided they were fed up with Exxon digging its heels in and acting like they could ignore their stakeholders and society as a whole—they were acting like they were untouchable,” said Ben Cushing, the financial advocacy campaign manager at the Sierra Club. “This was a moment where investors flipped the table on them and said, ‘we’re done playing nice, we’re coming for actual leadership change.’”</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><b>Even though they have roots in managing oil and gas companies, Cushing said the the Engine No. 1 candidates “ran on a platform that the company’s attitude of ‘drill, baby, drill, forever’ is not going to cut it.”</b></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">To contextualize the symbolic importance of getting some people who have thought for two seconds about climate change on Exxon’s board, it’s worth reiterating just how miserably behind the eight ball Exxon is, even in oil and gas land. The company has no net zero commitment at all, which its competitors like BP, Shell, and Total have all at least put a little thought into. Unlike BP, which has aggressively upped its investments in renewable energy, Exxon has barely dipped a toe into renewables at all, instead pouring almost all of its investment into carbon capture and storage and biofuels. And Exxon has basically seemed to convince itself that, despite mounting evidence to the contrary, oil and gas is going to keep being a thing.</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">“Under most third-party scenarios that meet the objectives of the Paris Agreement, oil and natural gas continue to play a significant role for decades,” the company’s website reads. <b>Exxon’s vice president for Africa and Asia Pacific said as recently as March that continued oil and gas exploration was “very important” when considering a green energy future (sorry… what?)</b>.</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">It’s not hard to see how investors, who might still believe in the short-term profitability of oil and gas or in a long-term survival strategy for fossil fuel companies using aggressive carbon capture technology, are frustrated with Exxon. <b>A report published by Oil Change International last fall compares and contrasts details of the climate plans for eight major international oil companies. </b><span style="background-color: rgb(255, 153, 0);">While no one company scored high marks, Exxon was only one of two companies to get a “grossly insufficient” ranking in all categories. </span><span style="background-color: rgb(255, 255, 102);"><b>The other company that scored that low was Chevron</b>, which faced its own investor insurrection yesterday after two-thirds of its shareholders bucked the company’s wishes and voted to mandate it provide more thorough accounting for its downstream emissions.</span></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">So what’s next? An International Energy Agency report published earlier this month said oil and gas production should basically end ASAP to keep the world on track to reach Paris Agreement targets. It also makes it pretty clear what needs to happen at Exxon and its ilk.</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">“For starters, no new investment in oil and gas exploration projects,” said Cushing. “Then we can turn to the question of how to phase out existing projects in a timely manner.”</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">But that’s a tall order for such a drilling-addicted company. It may hinge on whether shareholders, especially the big investors like BlackRock and Vanguard who have made net zero commitments for their investment portfolios, will keep up the pressure on the company.</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">“Let’s be clear: Exxon is still Exxon,” said Cushing. “There’s certainly hope that the new board members who get in there will be able to lay down new markers and have more conversations about change. I think we will see fig-leaf commitments from Exxon. They’re definitely going to come out with, ‘oh we’re going to set some targets, that kind of stuff’ because not doing that would invite shareholder backlash. The question now for investors is, are you looking for symbolic leadership change or are you looking for concrete changes that align with the long-term targets you want to hit?”</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><b>
</b></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><b>Ultimately, yesterday’s other one-two punches—along with the Chevron vote, Shell got its ass handed to it in court in the Netherlands after a judge mandated it needed to cut emissions 45% by 2030—may create a narrative that is more powerful than the board election alone.</b> Two lone board members added to the leadership of an oil company can’t do too much, but Wednesday was a dark day for oil and gas companies (and a bright one for the climate). Big Oil should take what happened as a warning that major change is needed.</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">
</div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large">“It’s a huge narrative win and a symbolic victory,” said Cushing. “Time will tell how much of a material impact it actually makes on Exxon’s business plan.”</div></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">=</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">
</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman"><a href="https://www.politico.com/newsletters/the-long-game/2021/05/25/david-offers-goliath-a-hand-492996">https://www.politico.com/newsletters/the-long-game<b>/2021/05/</b>25/david-offers-goliath-a-hand-492996</a></font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">
</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><p style="box-sizing: border-box; margin: 0px 344.854px 1em 0px; font-family: Georgia, Times, " times="Times" new="New" roman="Roman" serif="serif" line-height="line-height" em="em" font-size="font-size" background-color="background-color" rgb="rgb"><font size="4" face="Times New Roman"><span style="box-sizing: border-box; font-weight: 700;">A TINY PLAYER TAKES ON BIG OIL —</span> Exxon Mobil Corp., once a global superpower that could bend governments to its will, is locked in a battle against an upstart investor who wants to shake up the oil giant’s board.</font></p><p style="box-sizing: border-box; margin: 0px 344.854px 1em 0px; font-family: Georgia, Times, " times="Times" new="New" roman="Roman" serif="serif" line-height="line-height" em="em" font-size="font-size" background-color="background-color" rgb="rgb"><font size="4" face="Times New Roman">Engine No. 1 launched last Dec. 1 and announced its first campaign — against Exxon Mobil — days later. In the five months since, it has rallied a critical mass of institutional support to do what decades of environmental and shareholder activism never could: put Exxon Mobil on defense.</font></p><p style="box-sizing: border-box; margin: 0px 344.854px 1em 0px; font-family: Georgia, Times, " times="Times" new="New" roman="Roman" serif="serif" line-height="line-height" em="em" font-size="font-size" background-color="background-color" rgb="rgb"><font size="4" face="Times New Roman">Shareholders on Wednesday will vote on whether to install Engine No. 1’s four dissident candidates on the 12-member Exxon Mobil board. The vote could be a defining moment in stakeholder capitalism in a year when nearly three dozen climate- and sustainability-related shareholder initiatives are on the table.</font></p><p style="box-sizing: border-box; margin: 0px 344.854px 1em 0px; font-family: Georgia, Times, " times="Times" new="New" roman="Roman" serif="serif" line-height="line-height" em="em" font-size="font-size" background-color="background-color" rgb="rgb"><font size="4" face="Times New Roman"><span style="box-sizing: border-box; font-weight: 700;">For decades, investor activism on climate was heavily ideological.</span> Do-good shareholders and activists could bring science and data to the table, but as long as sales were up and profits strong year over year, it was difficult to make a case that oil and gas companies were bad business. Financial results now dominate the debate as climate change roils balance sheets and consumers start voting with their pocketbooks.</font></p><p style="box-sizing: border-box; margin: 0px 344.854px 1em 0px; font-family: Georgia, Times, " times="Times" new="New" roman="Roman" serif="serif" line-height="line-height" em="em" font-size="font-size" background-color="background-color" rgb="rgb"><font size="4" face="Times New Roman"><span style="box-sizing: border-box; font-weight: 700;">Policymakers in Washington might be mired in old-school ideologies</span>, but modern stakeholder capitalism comes armed with questions about financial results and returns on investment, especially as governments work to eliminate the use of fossil fuels.</font></p><p style="box-sizing: border-box; margin: 0px 344.854px 1em 0px; font-family: Georgia, Times, " times="Times" new="New" roman="Roman" serif="serif" line-height="line-height" em="em" font-size="font-size" background-color="background-color" rgb="rgb"><font size="4" face="Times New Roman">“This debate should not be ideological,” Engine No. 1 founder <span style="box-sizing: border-box; font-weight: 700;">Chris James</span> said in an interview. “When companies think about their impacts, whether they are on communities or the environment, it brings a lot of common sense back to capitalism.”</font></p><p style="box-sizing: border-box; margin: 0px 344.854px 1em 0px; font-family: Georgia, Times, " times="Times" new="New" roman="Roman" serif="serif" line-height="line-height" em="em" font-size="font-size"><font size="4" face="Times New Roman"><span style="background-color: rgb(255, 255, 255); box-sizing: border-box; font-weight: 700;">These groups will be watched as they cast their ballots: </span><span style="background-color: rgb(255, 255, 102);">Vanguard, BlackRock and State Street, three of the world’s largest asset managers and Exxon Mobil’s biggest shareholders. The companies haven’t indicated how they’ll vote, but have drawn complaints before for failing to deliver on their own pledges to put a premium on environmental, social and governance, or ESG, metrics.</span></font></p><p style="box-sizing: border-box; margin: 0px 344.854px 1em 0px; font-family: Georgia, Times, " times="Times" new="New" roman="Roman" serif="serif" line-height="line-height" em="em" font-size="font-size"><font size="4" face="Times New Roman"><span style="background-color: rgb(255, 255, 255); box-sizing: border-box; font-weight: 700;">Those doubts remain, judging from the rhetoric we’ve heard. </span><span style="background-color: rgb(255, 255, 102);">Wisconsin state Treasurer Sarah Godlewski said she expects “sufficient explanations regarding the reasoning and justification for the votes BlackRock and Vanguard cast.”</span></font></p><p style="box-sizing: border-box; margin: 0px 344.854px 1em 0px; font-family: Georgia, Times, " times="Times" new="New" roman="Roman" serif="serif" line-height="line-height" em="em" font-size="font-size" background-color="background-color" rgb="rgb"><font size="4" face="Times New Roman">Exxon has named six new directors since longtime CEO Rex Tillerson left the company in 2017 to join the Trump administration. On Monday, in the heat of the campaign, it announced plans to add two more within the year.</font></p><p style="box-sizing: border-box; margin: 0px 344.854px 1em 0px; font-family: Georgia, Times, " times="Times" new="New" roman="Roman" serif="serif" line-height="line-height" em="em" font-size="font-size" background-color="background-color" rgb="rgb"><font size="4" face="Times New Roman">“The dissident nominees lack experience, expertise and knowledge required to lead a company of Exxon Mobil’s size and importance through the opportunities and challenges of the energy transition,” company spokesperson <span style="box-sizing: border-box; font-weight: 700;">Casey Norton</span> said. “Our board has played an important role in overseeing our strategy. Our board and management listen and respond to shareholder feedback.”</font></p><p style="box-sizing: border-box; margin: 0px 344.854px 1em 0px; font-family: Georgia, Times, " times="Times" new="New" roman="Roman" serif="serif" line-height="line-height" em="em" font-size="font-size"><span style="background-color: rgb(255, 255, 51);"><font size="4" face="Times New Roman"><span style="box-sizing: border-box; font-weight: 700;">Engine No. 1 faces an uphill fight.</span> Nearly half of Exxon Mobil’s shares are held by mom-and-pop investors, a group that tends to vote with management if they vote at all.</font></span></p><p style="box-sizing: border-box; margin: 0px 344.854px 1em 0px; font-family: Georgia, Times, " times="Times" new="New" roman="Roman" serif="serif" line-height="line-height" em="em" font-size="font-size" background-color="background-color" rgb="rgb"><b><font size="4" face="Times New Roman">Exxon Mobil has said it will spend $35 million to counter Engine No. 1’s campaign, which the investor group said cost it nearly $30 million to mount.</font></b></p><p style="box-sizing: border-box; margin: 0px 344.854px 1em 0px; font-family: Georgia, Times, " times="Times" new="New" roman="Roman" serif="serif" line-height="line-height" em="em" font-size="font-size" background-color="background-color" rgb="rgb"><a href="https://www.politico.com/news/2021/05/25/tiny-player-big-oil-defense-490744" target="_blank" data-debug-source-uuid="00000179-a42f-db57-abfd-b7bfe2b10000" data-debug-source-site="POLITICO" style="box-sizing: border-box; transition: all 0.25s ease 0s; text-decoration-line: none;"><font size="4" face="Times New Roman" color="#000000">Lorraine has the full story.</font></a></p></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">=</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><a href="https://theconversation.com/engine-no-1s-big-win-over-exxon-shows-activist-hedge-funds-joining-fight-against-climate-change-159983"><font size="4" face="Times New Roman" color="#000000">https://theconversation.com/engine-no-1s-big-win-over-exxon-shows-activist-hedge-funds-joining-fight-against-climate-change-159983</font></a></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">desjardins</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">
</font></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;"><span style="background-color: rgb(255, 255, 102);"><font size="4" face="Times New Roman">One of the <a href="https://www.reuters.com/article/us-exxon-mobil-proxy-activist-idCAKBN2C22SO" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">most expensive Wall Street shareholder battles</a> on record could signal a big shift in how hedge funds and other investors view sustainability.</font></span></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;"><span style="background-color: rgb(255, 255, 102);"><font size="4" face="Times New Roman">Exxon Mobil Corp. has been fending off a so-called <a href="https://www.investopedia.com/terms/p/proxyfight.asp" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">proxy fight</a> from a hedge fund known as Engine No. 1, which <a href="https://reenergizexom.com/wp-content/uploads/2021/05/Investor-Presentation-Summary-May-2021.pdf" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">blames the energy giant’s</a> <a href="https://www.nytimes.com/2021/02/02/business/exxon-mobil-lost-22-billion-in-2020-its-worst-performance-in-four-decades.html" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">poor performance</a> in recent years on its failure to transition to a “decarbonizing world.” In a May 26, 2021 vote, Exxon shareholders <a href="https://www.cnbc.com/2021/05/26/engine-no-1-gets-at-least-2-candidates-elected-to-exxons-board-in-win-for-the-activist.html" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">approved at least two of the four board members</a> Engine No. 1 nominated, dealing a major blow to the oil company. The vote is ongoing, and more of the hedge fund’s nominees may also soon be appointed.</font></span></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><b><font size="4" face="Times New Roman">While its focus has been on shareholder value, Engine No. 1 says it was also doing this to <a href="https://www.washingtonpost.com/climate-environment/2021/05/21/exxon-faces-shareholder-revolt-over-climate-change/" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">save the planet</a> from the ravages of climate change. It has been <a href="https://www.wsj.com/articles/exxon-vs-activists-battle-over-future-of-oil-and-gas-reaches-showdown-11621950967" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">pushing for a commitment</a> from Exxon to carbon neutrality by 2050.</font></b></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><font size="4" face="Times New Roman">As <a href="https://scholar.google.com/citations?user=U96ThnoAAAAJ&hl=en&oi=ao" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">business sustainability scholars</a>, <a href="https://scholar.google.com/citations?user=37AiB_kAAAAJ&hl=en&oi=ao" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">we can’t</a> recall another time that an energy company’s shareholder – particularly a hedge fund – has been so effective and forceful in showing how a company’s failure to take on climate change has eroded shareholder value. That’s why we believe this vote marks a turning point for investors, who are well placed to nudge companies toward more sustainable business practices.</font></p><div class="slot clear" data-id="17" libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; clear: both;"><div class="promo" style="background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; margin: 0px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline;"><div class="MuiBox-root-95 jss96 jss94" style="background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; margin: 0px 0px 16px; padding: 16px; border: 0px; outline: 0px; vertical-align: baseline; border-radius: 4px;"><div style="background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; margin: 0px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; transition: opacity 300ms ease-in-out 0s; opacity: 1;"><h5 class="MuiTypography-root-111 jss97 MuiTypography-h5-120 jss102 MuiTypography-colorInherit-133" style="background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial; margin: 0px 0px 8px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; text-rendering: optimizelegibility; line-height: 1.33; letter-spacing: initial; text-transform: initial;"><span libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" font-size="font-size" px="px" background-color="background-color" rgb="rgb"><font size="4" face="Times New Roman">Hedge funds to the rescue?</font></span></h5></div></div></div></div><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;"><span style="background-color: rgb(255, 255, 102);"><font size="4" face="Times New Roman">Climate strategies aimed at saving the planet are an odd play for a hedge fund. Such investment firms are better known for getting companies to stop investing in this type of thing so they can collect quick profits.</font></span></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;"><span style="background-color: rgb(255, 204, 102);"><font size="4" face="Times New Roman">Recent research undertaken by one of us found that activist hedge funds <a href="http://www.doi.org/10.5465/amj.2019.0238" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">tend to target companies</a> that spend more of their resources on these types of sustainability initiatives. That is, they buy shares of a company to gain influence and then convince other investors to join them in demanding efficiency enhancements and cost-cutting protocols to return more cash to shareholders. A follow-up study found that companies <a href="https://doi.org/10.1002/smj.3126" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">cut spending</a> on sustainability initiatives within five years of a hedge fund getting involved.</font></span></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><font size="4" face="Times New Roman"><b>In other words, hedge funds focus on short-term returns – not long-term concerns such as climate change or even a company’s own future profitability. And this is because of how hedge funds fundamentally operate</b>.</font></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;"><span style="background-color: rgb(255, 255, 102);"><font size="4" face="Times New Roman">Hedge funds usually charge their investors – often wealthy individuals and institutional investors – <a href="http://dx.doi.org/10.1561/109.00000003" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">a 1% to 2% management fee in addition to a 20% cut of any gain in their investments</a>. In return, these clients <a href="http://dx.doi.org/10.1561/109.00000003" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">expect quick and substantial returns that substantially outperform the market</a>.</font></span></p><h2 libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 12px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255); text-rendering: optimizelegibility;"><font size="4" face="Times New Roman">Engine No. 1, a new type of hedge fund?</font></h2><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><font size="4" face="Times New Roman">This is what makes Engine No. 1’s fight so interesting.</font></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><font size="4" face="Times New Roman">It began in early December 2020, shortly after tech investor Chris James launched Engine No. 1 with two other hedge fund industry veterans. The firm said it was “<b><a href="https://engine1.com/" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">purpose-built to create long-term value</a> by harnessing the power of capitalism.”</b></font></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;"><span style="background-color: rgb(255, 255, 0);"><font size="4" face="Times New Roman">Engine No. 1’s first order of business was to pick a fight with one of the world’s largest energy companies, Exxon Mobil. It <a href="https://www.reuters.com/article/exxon-shareholders-engine-no-1/exxon-faces-proxy-fight-launched-by-new-activist-firm-engine-no-1-idUSKBN28H1IO" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">sent a letter to the company’s board</a> on Dec. 7, 2020, urging it to focus on clean energy and shake up its board of directors – a bold move for an upstart investment firm with just a 0.02% stake in the <a href="https://finance.yahoo.com/quote/XOM/" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">nearly US$250 billion company</a>.</font></span></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><font size="4" face="Times New Roman">But Exxon was an obvious target for this strategy. It <a href="https://www.bloomberg.com/news/articles/2021-03-24/u-s-oil-companies-lag-far-behind-greener-europe-rivals-green-insight" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">has been a laggard</a> on developing <a href="https://theconversation.com/oil-companies-are-thinking-about-a-low-carbon-future-but-arent-making-big-investments-in-it-yet-122365" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">low-carbon fuels</a> for years and <a href="https://www.scientificamerican.com/article/exxon-knew-about-climate-change-almost-40-years-ago/" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">has promoted misinformation</a> about the human impact on climate change for decades.</font></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><font size="4" face="Times New Roman"><b>After Exxon refused to commit to a transition to carbon neutrality, Engine No. 1 <a href="https://reenergizexom.com/wp-content/uploads/2021/03/Engine-No.-1-3.15-Definitive-Proxy-Statement-XOM.pdf" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">formally launched</a> its proxy battle in March to force a change of strategy at the company, which traces its history back to 1870, when </b><a href="https://exxonenergy.com.theyesmen.org/html/ourcoAboutHistory.htm" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;"><b>John D. Rockefeller founded the Standard Oil Compan</b>y</a>.</font></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><font size="4" face="Times New Roman">A proxy battle is when a group of shareholders tries to garner enough support from other investors – in the form of votes – to <a href="https://www.investopedia.com/terms/p/proxyfight.asp" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">force a company to do what it wants</a>, whether it’s to cut costs or change strategy.</font></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;"><span style="background-color: rgb(255, 255, 102);"><font size="4" face="Times New Roman">Exxon said it <a href="https://www.reuters.com/article/us-exxon-mobil-proxy-activist-idCAKBN2C22SO" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">expected to spend $35 million</a> more than its usual costs to deal with the proxy battle; unfortunately, by increasing Exxon’s expenses, these are costs that are actually footed by investors. Engine No. 1 put its expenses at $30 million. The total cost, by some estimates, has exceeded $100 million.</font></span></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;"><span style="background-color: rgb(255, 255, 102);"><font size="4" face="Times New Roman">Engine No. 1 was hoping to replace a third of the <a href="https://corporate.exxonmobil.com/About-us/Who-we-are/Corporate-governance/ExxonMobil-board-of-directors#ExxonMobilCorporationBoardofDirectors" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">oil giant’s board of directors</a> with four individuals who have more clean energy experience. The hedge fund was also seeking corporate governance reforms, a review of Exxon’s climate action plan – and its impact on the company’s finances – and greater public disclosure of its environmental and lobbying activities.</font></span></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;"><span style="background-color: rgb(255, 255, 102);"><font size="4" face="Times New Roman">Even before the vote, the campaign was already changing the way Exxon does business. In the past few months, Exxon has proposed a <a href="https://www.reuters.com/business/sustainable-business/exxon-proposes-massive-carbon-capture-storage-project-houston-2021-04-19/" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">$100 billion carbon capture project in Houston</a> and <a href="https://corporate.exxonmobil.com/News/Newsroom/News-releases/2021/0201_ExxonMobil-Low-Carbon-Solutions-to-commercialize-emission-reduction-technology" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">committed $3 billion to low-emission technologies through a new venture</a>.</font></span></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><font size="4" face="Times New Roman">Though Exxon denies any of these investments were due to pressure from Engine No. 1, it’s hard to believe the hedge fund wasn’t a catalyst. These are some of the <a href="https://corporate.exxonmobil.com/Sustainability/Sustainability-Report" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">biggest investments Exxon has proposed in sustainability in recent years</a>, and they came right after pressure from the hedge fund – as well as the election of a new U.S. president <a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/27/executive-order-on-tackling-the-climate-crisis-at-home-and-abroad/" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">who has made fighting climate change a priority</a>.</font></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;"><span style="background-color: rgb(255, 204, 102);"><font size="4" face="Times New Roman">Another likely reason for the new initiatives is that Engine No. 1’s campaign was enlisting significant support from other major Exxon investors, such as the <b>California Public Employees’ Retirement System</b> and the New York State Common Retirement Fund, which laid <a href="https://www.reuters.com/business/energy/calpers-back-activists-four-director-nominees-exxon-board-fight-2021-04-26/" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">additional pressure on Exxon to do something about its lagging sustainability strategy</a>.</font></span></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><font size="4" face="Times New Roman">So despite its pushback against Engine No. 1 and its proposed climate plan, clearly Exxon Mobil’s attention to its sustainability plans has been piqued.</font></p><h2 libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 12px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255); text-rendering: optimizelegibility;"><font size="4" face="Times New Roman">What it all means</font></h2><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><font size="4" face="Times New Roman">So why is Engine No. 1 really doing this – and do its motives matter?</font></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><font size="4" face="Times New Roman">While the firm is pushing hard for more investment in sustainability and clean energy, the focus in its statements on what’s driving this fight is mostly about shareholder value. And <a href="https://reenergizexom.com/wp-content/uploads/2021/03/Engine-No.-1-3.15-Definitive-Proxy-Statement-XOM.pdf" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">many of its demands</a>, such as better long-term capital allocation strategy, a plan to enhance shareholder value and a “misaligned” management compensation, are straight out of a <a href="https://corpgov.law.harvard.edu/2019/01/25/dealing-with-activist-hedge-funds-and-other-activist-investors-2/" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">typical hedge fund’s playbook</a>.</font></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><font size="4" face="Times New Roman">What we see as fundamentally different here is the emphasis the hedge fund is putting on the connection between sustainability and long-term profits. It makes a strong case that the reason Exxon’s <a href="https://www.fool.com/investing/2021/02/14/im-not-in-love-with-exxon-mobils-low-carbon-strate" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">financial position has been deteriorating</a> is because of its failure to invest in low-carbon technologies.</font></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><font size="4" face="Times New Roman">Or, like a hedge fund, Exxon has been focusing on the short-term gains from fossil fuels at the expense of its long-term future in a global economy that <a href="https://doi.org/10.1177/1476127013520265" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">puts a premium on sustainability</a> and a penalty on carbon-intensive activities.</font></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;"><span style="background-color: rgb(255, 255, 102);"><font size="4" face="Times New Roman">Moreover, the readiness of so many major investors – including the <a href="https://www.washingtonpost.com/climate-environment/2021/05/21/exxon-faces-shareholder-revolt-over-climate-change/" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">three largest U.S. pension funds</a> and <a href="https://www.reuters.com/business/energy/exclusive-blackrock-backs-three-director-nominees-challenging-exxons-board-2021-05-25/" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">BlackRock</a>, the world’s biggest investment manager with $7.4 trillion in assets under management – in joining Engine No. 1 shows which way the winds are blowing, which Exxon seems to now also realize.</font></span></p><p libre="Libre" baskerville="Baskerville" georgia="Georgia" times="Times" new="New" roman="Roman" serif="serif" style="margin: 0px 0px 18px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; background: rgb(255, 255, 255);"><font size="4" face="Times New Roman">So the vote itself isn’t the story here. It’s that the weight of activist hedge funds – the <a href="https://doi.org/10.5465/amp.2018.0059" style="outline: none; white-space: pre-wrap; overflow-wrap: break-word;">most potent form of shareholder activism</a> – seems to be shifting in favor of sustainability. As we see it, this means companies and executives that don’t invest in the transition low-carbon energy will increasingly risk incurring their wrath.</font></p></div><div times="Times" new="New" roman="Roman" font-size="font-size" large="large"><font size="4" face="Times New Roman">
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