Underdog Activist Engine No. 1 launches an ETF after an enormous Exxon win

A view of the ExxonMobil Baton Rouge refinery in Baton Rouge, Louisiana, May 15, 2021.

Kathleen Flynn | Reuters

Engine No. 1, the emerging activist firm that has nominated three candidates to Exxon’s board of directors, is launching an exchange-traded fund to bet that shareholder activism will be the focus for years to come.

The engine no. 1 Transform 500 ETF, trading under the ticker VOTE, has received $ 100 million in commitments, the company said on Tuesday. The passive fund will invest in 500 of the largest US companies and track the Morningstar US Large Cap Select Index with the aim of “creating positive change for employees, customers, communities and the environment”.

The company said it will hold companies accountable on environmental, social and governance issues through the votes it cast, while also working with companies to strengthen investment in stakeholders.

“Our idea with this product was to be ESG investors, not by what we hold, because we only hold the top 500 companies by market cap. Instead, we should be ESG by what we do as active owners, ”said Engine No. 1 managing director Michael O’Leary. “Through this fund, we will now become long-term, near-permanent owners of the 500 largest companies in America.”

Engine # 1 has grown in prominence in the last few months following a campaign against Exxon that ultimately proved successful. The company began targeting the oil giant in December 2020 and said Exxon needed to relocate operations and significantly reduce emissions to ensure long-term financial sustainability.

The activist firm nominated four board members, two of whom they secured at Exxon’s multi-hour annual shareholders meeting in May, which included a surprising hour-long break between meetings.

The vote on a third candidate was too tight at the end of the meeting, but was later confirmed in favor of Locomotive No. 1.

The campaign against Exxon takes place amid a surge in ESG investment and as investors – especially younger generations including millennials – increasingly seek to support companies whose mission aligns with their values.

“There should be no compromise between positive impact and financial performance,” said Yasmin Dahya Bilger, Head of ETFs at Engine No. 1. “We believe that this product gives investors an opportunity to take their place in between the votes we cast and the ways we get involved.”

Engine No. 1 said that digital investment advisor Betterment will incorporate the new fund into its socially responsible investment strategies. The fund’s annual expense ratio is 0.05%.

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