Wind of Change
Fast Company|September 2021
Public companies are struggling to embrace stakeholder capitalism. Can a new breed of activist investor help?
By Kristin Toussaint

When upstart activist hedge fund Engine No. 1 secured three seats on the board of ExxonMobil, in June, it was a high-profile repudiation of the way the country’s largest oil company has long conducted business: with a laser focus on returns and a blind eye to its impact on the world at large. The fund vowed to push ExxonMobil to develop a plan to address climate change and reduce its carbon footprint. Exxon’s responsibility as a business would no longer be only to its shareholders, the boardroom showdown signaled, but also to the public and the planet.

To pull off this coup, however, Engine No. 1 first needed to woo other, bigger shareholders. Launched in December 2020 with a goal of getting companies to prioritize long-term value, the fund found a perfect first target in Exxon. The oil company had ignored the kinds of renewable investments that would set it up for future success, and its stock had been plummeting. Though Engine No. 1 held just 0.02% of the company, it persuaded some of Exxon’s largest shareholders, including BlackRock and the California State Teachers’ Retirement System, that the company’s myopia was a liability. “I think the issue you’ve seen at Exxon, really for years, is an overly short-term focus and a real disregard for the way the industry has changed, where the world is changing,” Charlie Penner, who leads campaigns at Engine No. 1, told Fast Company.

Just how much Engine No. 1 will be able to reform Exxon isn’t yet clear—the three new board members join nine legacy ones, so their influence may be muted—but its successful campaign reflects changes taking place beyond the oil company. Over the past several years, a new kind of activist investor has emerged. Instead of enacting takeover campaigns simply to achieve higher returns, they’re pushing companies to address their environmental and social impact.

Last fall, just before Engine No. 1 was founded, activist fund Bluebell Capital Partners sent a letter to chemical company Solvay’s board demanding it stop discharging chemical waste from its Tuscany, Italy, plant into the sea. Bluebell, which was founded in 2019 with a $75 million fund, has committed to pursuing one campaign a year focused on getting a company to be more responsive to environmental, social, and corporate governance (or ESG) issues. Last year also saw the creation of Inclusive Capital Partners, an ESG-focused fund, now worth $1.3 billion. Among its co-founders: Jeffrey Ubben, who previously founded the hedge fund ValueAct Capital, and Lynn Forester de Rothschild, who founded the Coalition for Inclusive Capitalism to get business leaders engaged with ESG. In 2019, Lauren Taylor Wolfe founded the ESG-focused firm Impactive Capital, which has used its stake in companies such as Wyndham Hotels and the engineering firm KBR to push them toward better environmental practices.

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