Reassessing Engine No. 1’s Fight Against Exxon Mobil

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DealBook Newsletter

As investors property the lipid elephantine connected clime issues, activists accidental that a hedge fund’s eco-focused triumph implicit the institution 2 years agone has achieved little.

May 31, 2023, 7:18 a.m. ET


A surface  shows trading successful  ExxonMobil’s stock.
Two years ago, a proxy conflict led by a hedge fund, Engine No. 1, shook up the lipid giant.Credit...Lucas Jackson/Reuters

At Exxon Mobil’s yearly shareholder gathering connected Wednesday, activistic investors and large shareholders, including Legal & General Investment Management, volition instrumentality connected the institution with a bid of proxy measures aiming to propulsion it to chopped emissions and velocity its decarbonization efforts.

Climate investors aren’t expecting a triumphant repeat of what happened 2 years ago, erstwhile Engine No. 1, a San Francisco-based activistic hedge fund, stunned the firm world by landing 3 of its eco-conscious nominees connected Exxon’s board.

Climate activists and others told DealBook that Engine No. 1’s efforts person achieved negligible results, Vivienne Walt writes. Here’s what they say:

  • “Exxon has continued to put aggressively successful expanding its lipid and state production,” said Mark Kramer, elder lecturer astatine Harvard Business School, who wrote a lawsuit survey past twelvemonth on Engine No. 1.

  • Engine No. 1 “has not made a discernible quality successful the mode Exxon is addressing clime change,” said Danielle Fugere, president and main counsel of As You Sow, an capitalist advocacy radical successful Berkeley, Calif., that leads shareholder campaigns and has submitted resolutions for Wednesday’s meeting.

  • Mark van Baal, laminitis of the activistic shareholder radical Follow This, was much blunt. The hedge fund, helium said, was “the biggest disappointment successful the combat against clime change.”

Engine No. 1 rejected that assessment. In an email to DealBook, it highlighted a drawstring of changes astatine Exxon, including the instauration of net-zero targets for its Permian Basin operations successful Texas and New Mexico, early-stage carbon-capture and hydrogen projects, and investments successful lithium mining. “None of those initiatives were successful the company’s plans earlier Engine No. 1’s engagement,” a spokesperson said.

But critics accidental that greenish investments are inactive a tiny percent of Exxon’s spending, and that the institution remains committed to fossil fuels. They besides wonderment if the green-energy propulsion has much to bash with Inflation Reduction Act subsidies and taxation incentives than a genuine transition.

Legal & General, for one, thinks the hedge fund’s proxy combat “changed the narrative.”

Engine No. 1 has not waged a akin run since. Charlie Penner, who led the fund’s proxy fight, near his presumption soon after. The hedge money has focused connected firm research, moving with lipid companies to chopped methane emissions and supporting different groups’ shareholder resolutions against the likes of Tesla (work-force diversification), Amazon (improve warehouse moving conditions) and Home Depot (eliminate deforestation).

Through its exchange-traded funds, it has invested successful high-polluting energy, proscription and agriculture companies, saying that this enables it to support unit connected them to decarbonize.

Two years ago, Exxon was peculiarly vulnerable. Big investors grew impatient with enactment arsenic the banal languished: BlackRock, State Street, Vanguard and the New York and California nationalist pension funds each backed Engine No. 1’s proxy battle. Since then, Exxon shares person soared, adding astir $160 cardinal successful marketplace capitalization, and net deed nearly $56 billion past twelvemonth connected the backmost of a surge successful prices for accepted fossil fuels.

That did not powerfulness a greenish transition. Instead, the institution doubled down connected lipid and gas, importantly expanding drilling successful the Permian Basin, and expanding offshore drilling in Guyana.

The indebtedness ceiling woody heads to a House ballot contempt a Republican uprising. The House Rules Committee voted to send the measure to a level debate, contempt absorption from 2 G.O.P. members. President Biden and apical lawmakers are hoping to unafraid legislature support by Monday to avert a U.S. default — but immoderate are disquieted astir potential obstructions successful the Senate.

A apical Goldman Sachs enforcement is departing. Dina Powell McCormick, 1 of the Wall Street firm’s highest-profile officials, is leaving to join BDT & MSD Partners, a merchant slope tally by erstwhile Goldman colleagues; she’ll enactment with the firm’s clients and drum up caller business. Meanwhile, 1 of Goldman’s youngest-ever partner, Fred Baba, is besides leaving, and the slope is preparing for much occupation cuts, according to The Wall Street Journal.

The Sackler household is fixed immunity from opioid liability. An appeals tribunal ruled that the billionaire owners of Purdue Pharma, the shaper of OxyContin, tin beryllium shielded from current and aboriginal ineligible claims implicit their relation successful the company’s medicine opioids business. The determination volition let much than $6 cardinal of the family’s wealth to travel to states and communities ravaged by the opioid crisis.

Fidelity further marks down its involvement successful Twitter. In a securities filing, the concern elephantine valued its holdings successful the societal network’s genitor company, X Holdings, astatine astir $6.55 million arsenic of April 28, down from astir $8.63 cardinal successful precocious November. It’s the latest motion of fiscal troubles astatine Twitter; Musk himself said the institution was present worthy little than fractional of the $44 cardinal helium paid for it.

JPMorgan Chase kicked disconnected a star-studded concern league successful Shanghai connected Wednesday the U.S. bank’s chief, Jamie Dimon, returning to mainland China for the archetypal clip since the onset of the pandemic.

Both Mr. Dimon and Tesla’s chief, Elon Musk, who made a abstracted travel to the country, asserted that their companies stay committed to doing concern successful the world’s second-largest economy. But those pledges came amid heightened tensions betwixt Washington and Beijing that won’t easiness anytime soon.

Dimon doesn’t deliberation determination volition beryllium a “decoupling” of the U.S. and Chinese economies, helium told Bloomberg Television connected Wednesday. Meanwhile, a Chinese authorities connection astir Mr. Musk’s gathering with the country’s overseas minister, Qin Gang, said the Tesla main opposed efforts to interruption the 2 countries’ trading relationship.

Corporate America shares those sentiments, judging by the size and prima powerfulness of the attendee list for the JPMorgan conference: C.E.O.s including Albert Bourla of Pfizer and Laxman Narasimhan of Starbucks were among the 2,500 expected to attend. Leaders of apical Chinese companies including the carmakers BYD and Geely and the tech elephantine Baidu were besides listed arsenic speakers.

To stress the value of maintaining the commercialized bonds, JPMorgan enlisted Henry Kissinger, who arsenic caput of authorities helped unfastened the U.S.-China relationship, arsenic a speaker.

It’s each a reminder of the delicate equilibrium concern is trying to strike. Tim Cook, Apple’s C.E.O., utilized his archetypal travel to the state since the commencement of the pandemic to praise the “symbiotic” relationship betwixt the institution and China.

Mr. Dimon acknowledged that matters are “far much analyzable now,” fixed efforts by Washington to bounds spot exports to China’s tech industry, Beijing’s crackdown connected overseas consulting firms operating successful the state and more. “Over time, determination volition beryllium little trade,” Mr. Dimon told Bloomberg, and helium called himself an American patriot who would yet travel Washington’s direction.

Beijing has its ain economical issues to benignant retired arsenic well. Recent data suggests that a roar pursuing the lifting of pandemic restrictions is running retired of steam. Industrial production, existent property sales, concern and user spending person each been falling, stoking worries astir China’s near-term maturation prospects. Mr. Dimon besides pointed to what helium called “scary” youth unemployment levels of 20 percent.

What’s happening present is starting to sap the assurance of the Chinese people, he said, “and assurance is precise important for growth.”

— The banal marketplace capitalizon Tuesdayched connected Tuesday by Nvidia, which became the seventh U.S. company and archetypal chipmaker to deed that mark. (Its worth retreated to astir $991 cardinal astatine the adjacent of trading.) The yearlong rally has been fueled by booming request for chips that tally artificial quality programs.

Generative A.I. is starting to alteration the concern of law, but the modulation is proving a small bumpy. One lawsuit made waves past week erstwhile a justice discovered that a lawyer had cited a fig of cases that did not beryllium aft his steadfast used ChatGPT to prepare. Yet lawyers experimenting with A.I. tools designed for the assemblage envision a aboriginal successful which machines bash overmuch of the dense lifting — and task capitalists are betting connected it.

The contention to put successful ineligible A.I. is on. Thomson Reuters, proprietor of the ineligible probe behemoth Westlaw, was portion of a radical that invested successful Spellbook, an A.I. assistant, past week. That followed a fund-raising circular past period for Harvey, a start-up gathering customized large connection models for instrumentality firms, that was led by Sequoia Capital, the Silicon Valley task superior firm. (Harvey was launched past twelvemonth with backing from OpenAI and Google’s caput of A.I.)

Should we fearfulness robot representation? Platforms similar ChatGPT are often trained connected ample datasets from the web, which is afloat of misinformation. That tin origin “hallucinations,” accusation confidently relayed by the level that is wrong. The cardinal to reliable ineligible A.I. is limiting the inputs to “a database of existent knowledge” to trim the hazard of errors, said Laura Safdie, main operating serviceman astatine Casetext, creator of the A.I. ineligible adjunct CoCounsel.

A.I. is already proving a boon for immoderate lawyers. “We person constricted resources to spell done insane amounts of information,” said Michael Semanchik, managing lawyer astatine the California Innocence Project, a nonprofit enactment that works to exonerate wrongly convicted prisoners. He is utilizing A.I. to rapidly place issues successful monolithic lawsuit files and said helium could ideate each instrumentality bureau utilizing the tools.

Greg Siskind, an migration lawyer, told DealBook that erstwhile it comes to research, ineligible A.I. “does successful hours what would erstwhile instrumentality a week” and “does a beauteous bully occupation astir of the time.”

Lawyers accidental robots volition not regenerate humans due to the fact that idiosyncratic volition ever person to cheque the work. Ultimately, this gyration whitethorn conscionable trim drudge enactment and the fig of billable hours spent connected comparatively elemental tasks, freeing radical to absorption much connected lawyering.



  • Relatives of radical who died successful a 2019 clang involving a Boeing 737 Max pitchy tin writer the institution for compensation tied to the victims’ symptom and suffering, a national justice ruled. (WSJ)

  • A erstwhile worker of Coinbase settled insider-trading charges by the S.E.C. — without resolving a cardinal question of whether the integer assets progressive successful the lawsuit are securities. (Axios)

Best of the rest

  • Writers Guild officials are urging shareholders to ballot against “say connected pay” compensation proposals astatine Comcast and Netflix, amid the union’s combat with studios. (Hollywood Reporter)

  • Riot Games delayed the start of its North American League of Legends summertime play aft players voted successful favour of a walkout. (The Verge)

  • William O’Neil, the stockbroker and writer champion known for founding Investor’s Business Daily, the stocks-focused quality publisher, has died astatine 90, his steadfast announced. (William O’Neil + Co)

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Andrew Ross Sorkin is simply a columnist and the laminitis and exertion astatine ample of DealBook. He is simply a co-anchor of CNBC’s "Squawk Box" and the writer of “Too Big to Fail.” He is besides a co-creator of the Showtime play bid "Billions." @andrewrsorkin Facebook

Ravi Mattu is the managing exertion of DealBook, based successful London. He joined The New York Times successful 2022 from the Financial Times, wherever helium held a fig of elder roles successful Hong Kong and London. @ravmattu

Bernhard Warner joined the The Times successful 2022 arsenic a elder exertion for DealBook. Previously helium was a elder writer and exertion astatine Fortune focusing connected business, the system and the markets. @bernhardwarner

Sarah Kessler is simply a elder unit exertion for DealBook and the writer of “Gigged,” a publication astir workers successful the gig economy. @sarahfkessler

Michael de la Merced joined The Times arsenic a newsman successful 2006, covering Wall Street and finance. Among his main sum areas are mergers and acquisitions, bankruptcies and the backstage equity industry. @m_delamerced Facebook

Lauren Hirsch joined The Times from CNBC successful 2020, covering deals and the biggest stories connected Wall Street. @laurenshirsch

Ephrat Livni reports from Washington connected the intersection of concern and argumentation for DealBook. Previously, she was a elder newsman astatine Quartz, covering instrumentality and politics, and has practiced instrumentality successful the nationalist and backstage sectors.   @el72champs

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