One of Wall Street’s leading responsible investors, Jeff Ubben, has joined the board of Exxon Mobil. This has been widely interpreted as an attempt by Exxon to see off a looming shareholder revolt at its annual meeting in May. Or is it more than ‘impact washing’?
The board are asking shareholders to reject a series of climate-related motions put forward by Chris James’s ‘Engine No. 1’ activist fund, and said to be supported by the California State Teachers’ Retirement System.
Shareholder hostility has certainly not been helped by comparisons to the clean energy moves of rivals Royal Dutch Shell and BP.
“Unlike their big oil competitors that have begun taking action on climate change, (CEO) Woods and Exxon Mobil continue to live in a fairy-tale world of inaction, while California burns and Texas freezes,” said Peter Krull, chief executive of Earth Equity Advisors, in the New York Times.
Some dismissed Ubben’s appointment as an attempt at ‘impact washing’ and one that has failed. Engine No.1’s team have made clear they are pressing ahead with their campaign.
A new era for impact investing
But perhaps we should look more carefully at Ubben’s motivations to understand what is going on. The American investor left ValueAct, the investment firm that he founded twenty years ago in June, for ‘the next iteration of my investing career’. He will continue to manage ValueActs’s socially responsible investments.
In a statement to the press at the time, he said that he wants to “scale another untested strategy – that working with management teams and boards with the courage to lead on solutions to climate change and social inequity can generate massive shareholder value.”
Ubben sees a new era for impact investing. He is seeking $8bn for the new impact fund that he describes as a return-driven environmental and social activist firm to promote a healthy planet.
Changing legacy companies
The American investor believes that ESG has been ‘productised’ and signals the danger of many of the funds investing in the same few ‘over-owned’ stocks. With his new fund he’s instead aiming for real strategy change at large incumbent companies.
These will include those in the oil & gas sector and other industries that sustainable investors tend to avoid. He thinks the so-called ‘legacy’ companies show the greatest potential to become part of the solution and to be re-valued.
Inclusive Capital Partners is thought to take stakes in roughly fifteen companies and is striving for a seat on the board. Is Exxon Mobil one of them and will his approach work?
Apparently, Ubben has been in dialogue with the board ahead of his appointment, a dialogue that has borne fruit. Exxon has announced new emissions targets, increased climate disclosure and a new $3bn investment in carbon capture, all before 2025. Watch this space.