Engine vs. ExxonMobile: profit activists with green coats

ExxonMobile

The success of a hedge fund against ExxonMobile is a milestone for climate protection. At the same time, however, the case raises an important question: How sustainable do activist investors really thank?

Chris James and Charles Penner made corporate governance history on Wednesday: At a dramatic shareholder meeting, they prevailed over ExxonMobile management. Shareholders elected two candidates nominated by their Engine No. 1 fund to the oil company’s 12-member board.

We watched this with mixed feelings. Because on the one hand, the slap at ExxonMobile CEO Darren Woods is more than justified given the company’s faltering climate strategy. On the other hand, the newcomers Gregory Goff and Kaisa Hietala are highly qualified: Both have many years of experience in the oil industry, and Hietala is also a proven sustainability expert.

On the other hand, it gives us pause for thought that a fund founded just a few months ago with a share of 0.02 percent can shake up the control center of a billion-dollar corporation. Because there is much to suggest that this will happen more often in the future – even in less clear-cut cases.

The key question: green tech investments or dividends?

We already warned before the AGM season that “unholy alliances” of activist and traditional investors are increasingly forming. And recently, we have also seen activists in this country increasingly pushing for sustainability. Cevian CEO Lars Förberg, for example, called for bonuses to be linked to sustainability targets. And Petrus Advisers even organised a majority against the lavish manager salaries at Aareal Bank.

But how sustainable do activist investors really think? We fear: The green cloak is sometimes only meant to help forge alliances with ESG-driven institutional investors. And after that, it quickly flies back into the corner – for example, when it comes to the crucial question: should companies invest in climate-friendly technologies or rather pay out high dividends?

Traditional investors are therefore well advised to look carefully at who they get involved with – and how closely they cooperate. So far, this has worked quite well: Deka, for example, sided with Petrus on the Aareal bonuses, but not on the appointment of the new supervisory board. And major US funds voted for only two engine candidates at the Exxon AGM. The other two received significantly fewer votes (the result was therefore so close that a recount is currently underway).

Quite a few investors apparently had construction pains about giving the young hedge fund too much power. Some may brand this as half-hearted – but it may have been an important precaution.