New hedge funds bask in Exxon’s climate spotlight By Reuters

© Reuters. FILE PHOTO: Darren Woods, Chairman & CEO of Exxon Mobil Corporation, attends a information convention on the New York Stock Exchange (NYSE) in New York, U.S., March 1, 2017. REUTERS/Brendan McDermid

By Ross Kerber and Svea Herbst-Bayliss

(Reuters) – The profitable board problem in opposition to Exxon Mobil Corp (NYSE:) casts a spotlight on two lately launched sustainability-focused funding companies that took reverse sides in the high-stakes battle: Engine No. 1 and Inclusive Capital Partners.

Engine No. 1 set the spark in January by formally nominating 4 administrators to Exxon’s board, accusing it of not transferring quick sufficient to diversify away from fossil fuels. Inclusive Capital Partners sided with Exxon after its founder Jeffrey Ubben joined the vitality big’s board in March, and argued it was already working with the corporate to enhance its expertise in areas corresponding to carbon seize.

Both funds had been launched lower than a 12 months in the past. Their fast ascendance to Exxon’s board underscores how Wall Street’s new deal with environmental, social and company governance (ESG) is opening doorways for activist hedge funds at among the world’s largest corporations.

Engine No. 1 was launched by hedge fund veterans Charles Penner and Chris James in December 2020. Penner spent a lot of his profession at activist hedge fund Jana Partners, the place he quarterbacked a marketing campaign to get iPhone maker Apple Inc (NASDAQ:) to create instruments for fogeys to trace and restrict the usage of youngsters’s’ smartphones.

Engine No. 1 reported as of the tip of March proudly owning 917,400 Exxon shares valued at $51 million – a sum that historically would barely get a telephone name returned from an organization like Exxon, whose present market capitalization stands round $250 billion. Yet due to the backing of among the greatest Wall Street fund managers corresponding to BlackRock, it has gained at the least two seats on Exxon’s board.

Lawyers and business analysts who labored with Penner mentioned he had immersed himself for years in researching how one can tackle the oil big and chatting with different Exxon shareholders.

Engine No. 1 “did an effective job of making their case, and it appears that investors are saying that with their votes,” mentioned Tim Youmans, engagement chief for at Federated Hermes (NYSE:), which advises shoppers how one can vote.

Ubben based Inclusive Capital in June of final 12 months after leaving ValueAct Capital, the activist hedge fund he launched in 2000. He had a constructed a repute for pushing for change exterior the limelight and dealing extra collaboratively with administration than many different activists.

He has described Inclusive Capital as a return-driven environmental and social activist agency and raised issues concerning the sustainable merchandise being offered by large index funds. In a latest regulatory submitting the agency mentioned it owned 1.6 million share of Exxon, valued at $93.6 million.

Ubben defended Exxon in opposition to Engine No. 1’s criticism, and as of Wednesday morning Ubben was nonetheless calling high Exxon buyers to make the corporate’s case, in accordance with folks aware of the matter. While the result’s a setback for Ubben, he will get to maintain a board seat at Exxon he could not have gained if the oil main was not looking for to defend itself in opposition to Engine No. 1 in the primary place.

Representatives for Ubben didn’t instantly remark for this text.

A spokesman for Penner referred to his assertion at Wednesday’s annual assembly in which he mentioned the agency has “learned that change can happen anywhere. It will always be a long shot, but it will always be worth it.”

In an announcement on its web site on Wednesday a high Exxon investor BlackRock Inc (NYSE:) mentioned it backed three of the 4 dissident nominees.

Those administrators, “together with Mr. Ubben, bring the fresh perspectives and relevant transformative energy experience to the Board that will help the company position itself competitively in addressing the risks and opportunities presented by the energy transition,” BlackRock mentioned.

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