Exxon's Activist Investor Urges Increased Focus On Clean Energy Investment: WSJ

Exxon Mobil Corporation’s (NYSE: XOM) newcomer activist investor is in the process of urging the company to venture into clean energy, according to the Wall Street Journal. Investor Chris James’ new investment firm, Engine No 1 LLC, plans to communicate the matter to the board formally.

Last week, in its earnings release, the company disclosed plans to cut costs and impair assets after it books a loss for the third quarter in a row in 2020.

What Happened: Engine No 1 LLC holds approximately $40 million worth of stake in the Texas headquartered oil & gas company. Engine’s proposal is also backed by California State Teachers’ Retirement System, the second-largest pension fund in the U.S., which holds $300 million worth of shares in Exxon.

The Journal claims that Chris James’s letter also lists four nominations for Exxon’s board. These nominations could supposedly fill the role of independent directors, bringing in years of experience in the energy industry.

Other recommendations like preserving dividend by slashing Capex on projects unlikely to breakeven with low oil and gas prices, shifting the focus to renewable energy, and realignment of management incentives were also mentioned in the letter.

Exxon spokesperson Casey Norton declined to comment, claiming that he has not yet seen the letter, WSJ reports.

Why Does It Matter: The Journal quoted an excerpt from the letter which said that for Exxon “to avoid the fate of other once-iconic American companies, it must better position itself for long-term, sustainable value creation.”

Although both these investors’ collective holdings in a heavyweight company like Exxon might seem negligible, the proposal could pick up steam if it resonates with other larger stakeholders.

Presently, BlackRock Inc (NYSE: BLK), Vanguard Group, and State Street Corp (NYSE: STT) are some of the largest institutional investors in Exxon, with a 20% combined stake. 

Both BlackRock and State Street are associated with Climate Action 100+, an investor initiative to battle climate change and promote green energy.

Price Action: XOM shares are down by 1.49% to $41.06 in the pre-market session on the last check Monday.

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