Note: Since the publication of this article, New York City Comptroller Scott Stringer contacted RI to request a clarification. Mr Stringer confirmed that, despite their divestment commitments, New York's public pension funds were all still invested in Exxon at the time of its AGM, and voted in favour of all four board nominations by Engine No.1. His full statement is included at the bottom of this article.
All four of Engine No. 1’s candidates would have been elected to Exxon’s board if major investors hadn’t divested from the company, Anne Simpson, Managing Investment Director at US pension giant CalPERS, has told RI.
“If a whole string of funds hadn't divested from Exxon in the last year or two, we could have won that vote and had four on the board,” Simpson said. “That’s my only little moment of regret [about the Exxon campaign].”
Activist hedge fund Engine No. 1 nominated four board members at Exxon's recent annual general meeting in May, claiming that they were better suited to navigating the transition to a low-carbon economy than some of the firm's incumbent board members.
In a dramatic showdown, three of the candidates were elected, despite heavy pushback from Exxon. The oil major reportedly made the unusual move of suspending the meeting for an hour, which Charlie Penner, Engine No.1’s Head of Active Engagement, described at the time as “classic skulduggery”.
Voting was so close that the election of Alexander Karsner, Engine No.1’s third candidate, was not confirmed until several days after the AGM.
According to filings, Anders Runevad, former CEO of wind turbine manufacturer Vestas, received 295m votes against the 1.2bn of Steven Kandarian, the board member elected with the fewest votes. Simpson described this as missing out “by a whisker”.
“[Runevad’s] only flaw as far as we can tell was that he was the easiest to sacrifice for the sake of moderation by at least some investors who are serious about getting companies to commit to a Net Zero trajectory, but worry about rocking the boat too much at ExxonMobil,” Penner said in his speech at the AGM.
A number of major investors have divested their Exxon holdings over the past two years. In June 2019, Legal and General Investment Management’s Future World funds sold their Exxon holdings, saying the firm was not doing enough to tackle climate change. Storebrand Asset Management followed suit in August 2020, as did the Church of England's pension fund in October, ditching its holdings over failures to implement Scope 3 emission targets. New York City’s pension funds began to divest all of their fossil fuel holdings, including Exxon, in January this year.
Dutch metalworkers pension fund PMT also divested in January, citing failure to publish Scope 3 data. PMT’s sister fund PME had ditched its holdings two years previously, and Canadian pension fund Caisse de dépôt et placement du Québec said that it had reduced the size of its Exxon investment by 78% over the course of 2020.
Statement from Scott Stringer:
In “Exxon divestments stopped fourth Engine No.1 board nominee being elected, says CalPERS’ Simpson” (August 3), RI reports that all four of Engine No. 1’s candidates would have been elected to Exxon’s board if major investors had not divested from the company.
RI falsely reports that New York City's pension funds are among those “major investors.” While three of the five New York City pension funds — the New York City Employees’ Retirement System (NYCERS), the Teachers Retirement System (TRS), and the Board of Education — announced earlier this year that they will divest an estimated $4 billion from certain fossil fuel reserve owners, at the time of Exxon’s shareholder meeting, all five of New York City’s pension funds still maintained their full ownership positions and voted in favor of the four Engine No.1 board nominees.
Moreover, as well-recognized and influential leaders in the areas of corporate governance and of board accountability, New York City’s pension funds deliberately cast — and publicly disclosed — their votes for the dissidents well ahead of the vote deadline in order to contribute to the growing momentum in support of the dissidents. Those votes remain available on my office’s website.
In addition to championing Engine No. 1’s nominees, all of whom had relevant energy industry or environmental expertise, New York City’s pension funds strongly advocated — and helped pave the way — for Engine No. 1’s theory of change.
In 2016, I joined with Anne Simpson to urge Exxon shareholders to vote in favor of the New York City's pension funds’ shareholder proposal requesting a bylaw change to make it easier for substantial, long-term investors to nominate climate-competent directors to the company's board. My office successfully negotiated the change with Exxon, and with nearly three dozen other carbon-intensive energy companies. While Engine No. 1 did not use the new bylaw change and instead conducted a conventional proxy fight, it achieved the same objective.
While divestment from fossil fuel reserve owners is critical to protecting the New York City's pension funds from climate-related financial risks, we will continue to exercise our shareholder rights at portfolio companies to create long-term value, accelerate the transition to a low-carbon economy and hold recalcitrant boards accountable."