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A TINY PLAYER TAKES ON BIG OIL — 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.
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.
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.
For decades, investor activism on climate was heavily ideological. 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.
Policymakers in Washington might be mired in old-school ideologies, 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.
“This debate should not be ideological,” Engine No. 1 founder Chris James 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.”
These groups will be watched as they cast their ballots: 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.
Those doubts remain, judging from the rhetoric we’ve heard. Wisconsin state Treasurer Sarah Godlewski said she expects “sufficient explanations regarding the reasoning and justification for the votes BlackRock and Vanguard cast.”
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.
“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 Casey Norton said. “Our board has played an important role in overseeing our strategy. Our board and management listen and respond to shareholder feedback.”
Engine No. 1 faces an uphill fight. 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.
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.
Lorraine has the full story.
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REMEMBER THOSE DIVERSITY PLEDGES? — The murder of George Floyd a year ago prompted corporations to pledge to spend billions of dollars on racial justice initiatives and overhaul their own hiring practices. Now, investors want to know whether they’re living up to those promises.
Shareholders have filed a record number of proposals asking banks, asset managers and other companies to assess their diversity and inclusion efforts. At Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, those requests drew between 26 percent and 40 percent of shareholder support — not enough to pass, but still a win of sorts, said Tejal Patel, director of corporate governance at the labor-affiliated CtW Investment Group, which filed the resolutions.
“Newer proposals tend to get support in the single digits. So getting nearly 40 percent at JPMorgan is pretty incredible,” Patel said.
“It marks a shift in how shareholders are viewing racial justice issues,” she said. “These concerns permeate every aspect of how banks do business, from lending to political donations. They impact a company’s reputation.”
Then there were the clear wins. Nearly 60 percent of American Express shareholders backed a request for an annual report on alignment of workplace practices with the company’s commitment to diversity, equity and inclusion.
American Express on Monday released its latest ESG report, which includes race, gender and ethnicity data from its federal Employment Information Report, or EEO-1. Investors say EEO-1 data is the best available because it can be compared across companies.
The company will have ESG and diversity updates this fall, Amex spokesperson Leah Gerstner said.
At Union Pacific Corp., more than 75 percent of shareholders supported two proposals seeking data on its workforce diversity. The company will release its EEO-1 report this summer and make past data available in the same format, spokesperson Kristen South said.
On deck: Amazon, Chevron and PayPal face votes on racial equity. Amazon and Chevron hold their annual meetings Wednesday; PayPal meets Thursday.
Beyond the meetings: Amazon Employees for Climate Justice, an employee group, has gathered 640 tech and executive signatures on a petition asking the company to raise its emissions goals and address the disproportionate environmental harms its warehouse operations have on the predominantly Black, Latino, Indigenous and immigrant neighborhoods in which they’re based. Amazon had blocked a formal shareholder proposal from the group.
And while shareholders vote, CEOs will be testifying to Congress. Chief executives of the country's six largest banks will speak at the Senate Banking and House Financial Services committees this week. The group includes five white men, one white woman and no people of color.
Lawmakers want to know what the banks — and other big American companies — have done since Floyd’s death to address diversity within their ranks and take a more active role in advocating for social justice.
CLIMATE RESILIENCE — President Joe Biden is doubling federal spending to $1 billion to help communities prepare for hurricanes, floods and other natural disasters.
About 40 percent of the extra funds for FEMA’s Building Resilient Infrastructure and Communities, or BRIC, will target disadvantaged areas.
The damage: Twenty-two natural disasters each caused at least $1 billion in damage last year, a vivid reminder of the cost of climate change. Local governments typically don’t invest in mitigation, even though each dollar invested in preparedness saves $6 in future recovery costs, according to the National Institute of Building Sciences.
National Oceanic and Atmospheric Administration forecasters expect an above-average Atlantic hurricane season, with 13 to 20 named storms, six to 10 of which could become hurricanes.
Ana didn’t wait for hurricane season. The season’s first named subtropical storm developed near Bermuda Saturday.
— A hydrogen hub could rise in the New Mexico desert. Libertad Power Project LLC is one of several hydrogen projects being pursued in the Four Corners. Its first generating station could be running by 2024. The Albuquerque Journal has the story.
— Archaeologists say humanity's oldest art is crumbling before their eyes, WIRED reports.
- Catherine Boudreau @ceboudreau
- Lorraine Woellert @Woellert
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