An activist investor successfully waged a battle to install three directors on the board of Exxon Mobil last week with the goal of pushing the energy giant to reduce its carbon footprint. The investor, a hedge fund called Engine No. 1, was virtually unknown before the fight.
The tiny firm wouldn’t have had a chance were it not for an unusual twist: the support of some of Exxon’s biggest institutional investors. BlackRock, Vanguard and State Street voted against Exxon’s leadership and gave Engine No. 1 powerful support. These huge investment companies rarely side with activists on such issues.
The stunning result turned the sleepy world of boardroom elections into front-page news as climate activists declared a major triumph, and a blindsided Exxon was left to ponder its defeat, Matt Phillips reports for The New York Times.
Observers say Engine No. 1’s victory shows there is a path for shareholder activism to change how companies approach issues like racial diversity and the environment, often considered distractions from producing profits.
“We’re finding that there are other components that factor into a company’s overall performance: social, cultural and, now, environmental,” said Andrew Freedman, a partner and co-head of the shareholder activism group at Olshan Frome Wolosky, a law firm in New York. “Shareholders are able to now find a way to run a campaign where there’s alignment on the initiative because it all feeds to the bottom line.”
In other words, activist investors can now agitate for changes at companies on the ground that such shifts aren’t just the right thing to do but will also enrich shareholders by pushing up the price of the stock.
Exxon Mobil isn’t the only energy giant facing pressure on climate-related issues. On Wednesday, Royal Dutch Shell said it would accelerate efforts to cut its carbon dioxide emissions, after a Dutch court ruled Shell must reduce its global net carbon emissions by 45 percent by 2030 compared with 2019.