There's a lot of Climate folks running victory laps in that article, and I share Ben's concern with virtue signaling with my retirement funds, but there are a couple of clues there as well that make me think it might not be the Climate Change Hat Trick it sounds like.
Engine No. 1. Upset with Exxon's financial performance and its foot-dragging on climate, the hedge fund sought to oust four directors at the company's annual shareholder meeting.
I suspect Blackrock was upset as well.
Engine No. 1 has criticized Exxon's reluctance to diversify into renewable energy and steps to maximize oil production.
I'm not an Exxon shareholder, but I am a BP shareholder and BP's diversification into other forms of energy production is a large concern of mine. I can see why Exxon's shareholders might also be concerned.
The world's most valuable company as recently as 2013, Exxon has lost nearly $200 billion in market capitalization since its peak. It had enjoyed an unbroken run as a member of the Dow Jones Industrial Average from 1928 until it was kicked out of the exclusive index last summer.
During the five years prior to the pandemic, Exxon's total return (including dividends) fell by 17.5%, according to Engine No. 1. That was easily last among the five biggest oil companies over that span, with Exxon the only one suffering a loss. The S&P 500 surged nearly 80% during the same time frame.
Engine No. 1 argued the climate crisis poses an existential threat to Exxon — one the company hasn't taken seriously enough. Unlike BP, Royal Dutch Shell and other European oil majors, Exxon has doubled down on oil and gas despite growing concern about the climate crisis.
"A refusal to accept that fossil fuel demand may decline in decades to come has led to a failure to take even initial steps towards evolution, and to obfuscating rather than addressing long-term business risk," Engine No. 1 wrote in its investor presentation.
That is, I think, a valid statement. Regardless of Climate Change's effect on the planet, the politics is on the wall, and much of the industrialized world is going to spend trillions of dollars in the next 20 or so years to make energy and transportation that is not oil dependent. If you are an oil company, that is a big deal, that you need to be planning for. Throw in the instability when the screaming beards start hurting for money as demand for oil declines and Exxon really
should have some kind of non-oil dependent plan and it seems like they don't.
I would have to do some research (which I don't care enough to do) to find out if the 2 Engine #1 board candidates that Blackrock backed are climate change crazies, or just kinda moderate executives that picked up backing from two disparate groups. I think the climate groups might be patting themselves on the back a little too hard for this "shot across the bow" of a company that was about to have it's board shaken up pretty hard anyways. It also doesn't take an Activist Investor to want an energy company to look at diverse ways of providing that energy in a near term future that is obviously going to be moving away from petroleum.
TL:DR: Exxon *expletive deleted*ed themselves by some piss poor performance in the last decade and questionable strategies. Folks on their board were going to get fired, and more firings are coming. I don't think this is the huge win for Greta's team that CNN seems to think. Still bears keeping an eye on though.
