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New hedge funds indulge in Exxon’s local weather highlight By Reuters 

© Reuters. FILE PHOTO: Darren Woods, Chairman & CEO of Exxon Mobil Company, attends a information convention on the New York Inventory Change (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 highlight on two not too long ago launched sustainability-focused funding corporations that took reverse sides within the high-stakes battle: Engine No. 1 and Inclusive Capital Companions.

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 Companions sided with Exxon after its founder Jeffrey Ubben joined the power large’s board in March, and argued it was already working with the corporate to enhance its know-how in areas corresponding to carbon seize.

Each funds had been launched lower than a yr in the past. Their fast ascendance to Exxon’s board underscores how Wall Avenue’s new concentrate on environmental, social and company governance (ESG) is opening doorways for activist hedge funds at a number of 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 Companions, 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 cellphone name returned from an organization like Exxon, whose present market capitalization stands round $250 billion. But because of the backing of a number of the greatest Wall Avenue fund managers corresponding to BlackRock, it has gained a minimum of two seats on Exxon’s board.

Legal professionals and business analysts who labored with Penner mentioned he had immersed himself for years in researching how one can tackle the oil large and talking to different Exxon shareholders.

Engine No. 1 “did an efficient job of creating their case, and it seems that buyers are saying that with their votes,” mentioned Tim Youmans, engagement chief for at Federated Hermes (NYSE:), which advises purchasers how one can vote.

Ubben based Inclusive Capital in June of final yr 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 considerations in regards to the sustainable merchandise being offered by large index funds. In a current 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 prime Exxon buyers to make the corporate’s case, in line with individuals aware of the matter. Whereas 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 searching for to defend itself in opposition to Engine No. 1 within the first place.

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

A spokesman for Penner referred to his assertion at Wednesday’s annual assembly by which he mentioned the agency has “discovered that change can occur wherever. It is going to at all times be an extended shot, however it’ll at all times be value it.”

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

These administrators, “along with Mr. Ubben, convey the recent views and related transformative power expertise to the Board that may assist the corporate place itself competitively in addressing the dangers and alternatives offered by the power transition,” BlackRock mentioned.

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