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Banking On Financial Powers to Reverse Climate Change? The Tides are Shifting…

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Exxon’s company scientists studied fossil-fuel-based climate change for an entire decade. The company corroborated the research presented to them by one of their own scientists in 1977. 

It had an advantage. The world had barely any idea about climate change as a concept.

By 1981, the company switched tactics, (while continuing to research climate change), claiming instead that Exxon didn’t need to change its practices. Enough was already being done to correct the issue, it said.

And the reason is pretty clear: The more the world learned, the lower the company’s bottom line would sink if the world moved away from oil. 

And it got out in front of the research, funding campaigns to deny climate change before real science laid a foundation.

A pretty decent plan – cast public doubt on the science.

In 1986, the Vice President of Public Affairs at Mobil even had this to say:

”Your objective is to wrap yourself in the good phrases while sticking your opponents with the bad ones.”

By the 2000s, when climate activists had more or less cracked the foundation Exxon’s marketing had laid, the company had a new campaign. It borrowed from traditions of grand industries that had already faced and conquered the turning tide of public opinion – think tobacco and firearm…

It placed the responsibility for climate change reversal onto the shoulders of the consumer. 

And it worked beautifully.

“Energy-saving consumers can make a real difference,” read their 2007 marketing statement. Of course, a few years earlier, BP had implemented the carbon footprint calculator, paving the way for Exxon’s about-face.

Turning Up the Heat on Investors

Climate activism has gotten too powerful to control.

The internet, the global evidence of warming climates (tidal waves, hurricanes, melting ice caps, etc.), the publishing of the Harvard research associate report proving Exxon’s knowledge and culpability, the pandemic…

All have converged to create a climate that is, at last, inhospitable to Big Oil.

Investors also won’t have anywhere to go if the Earth becomes uninhabitable, after all.

So much has happened in the past year…

And recently, an unlikely savior stepped forward to demand ExxonMobil stop greenwashing and put its money where its mouth is.

An investment firm, Engine No. 1, considers itself a sustainable hedge fund intent on driving long-term value without planet and people casualties.

And at ExxonMobil’s annual shareholder meeting, the hedge fund accomplished what no other activist investor had done yet.

It unseated at least two directors from ExxonMobil’s board. (Possibly more to come.)

To understand Engine No. 1 was even able to get this far, it’s important to note that after decades and decades of complete domination… ExxonMobil is weakening.

Eight years ago, it was the world’s most powerful company.

Since then? It lost $200 billion in market capitalization (price of shares multiplied by number of shares.)

Last summer, after 92 years on the Dow Jones index, it was removed. That move was a harbinger of doom for the rest of Big Oil. Then company posted a loss of $22 billion in 2020, its first-ever loss on record as a public company. 

Although its finances have stabilized somewhat in 2021, its practices haven’t changed enough to pacify the climate activists who are increasingly gaining clout in the investing space.

Especially when compared to its siblings – BP, Royal Dutch Shell (which recently lost a major court case and now must cut its 2019 emissions by 45% by 2030), Total, and others. 

So why did other investors get behind Engine No. 1?

Hit Them Right in the Money

The world is going to make an energy transition. The gears are turning, whether or not ExxonMobil gets on board.

And it has decidedly not gotten on board. The company instead doubled down on oil and on carbon capture. (The International Energy Agency has been very clear that we need to stop drilling for new oil immediately.)

Because of these policies, major advisory institutions like Glass Lewis have speculated that ExxonMobil’s value to shareholders – what’s really in the way of the company committing to a complete transition – is going to plummet. 

Engine No. 1 presented four new candidates to replace existing board members, and two have so far won approval.

The so-called Big Three in asset management – BlackRock, Vanguard, and State Street – will likely have the final say. 

But even the fact that Engine No. 1, which owns only 0.02% of ExxonMobil shares, was able to flip two seats (with the support of major investors) is enormous.

ExxonMobil may not be able to maneuver its way out of accountability any longer.

And the power generated by small, organized, financially-backed investment groups proves this battle can be won.

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