Earlier this month Exxon Mobil Corporation announced it would acquire “drill baby drill” icon Pioneer Natural Resources, which dominates oil and gas extraction in the Permian Basin in Texas and New Mexico.
This comes only 2 1/2 years after insurgent “clean energy” hedge fund Engine No. 1 won board seats for three of its four nominees in a competitive battle against Exxon’s slate of preferences. They did so with support from across the pro-ESG investosphere, including from mega-firm BlackRock and the major blue state pension managers in New York and California.
So how did the Engine directors vote on the Exxon-Pioneer deal?
They joined all of their fellow board members in approving the merger, as Bloomberg reported:
“We need oil and gas in the short-term and the Permian is the best and most affordable short-term asset,” Engine No. 1 spokesman Steve Murray said by email. The investment fund “believes you can create value in a world that wants to decarbonize.”
As part of the deal, Pioneer will gain two new board seats, reducing the impact of Engine No. 1’s own independent directors. Even then, the unanimous support for the deal shows how far the environmental, social and governance investing movement has come since its peak more than two years ago, when the fund’s successful campaign rattled Wall Street…
Not everyone is convinced, with climate advocacy groups slamming advisers and investment banks involved in the deal for their “hypocrisy” given Wall Street’s commitments to support a move toward net-zero greenhouse gas emissions.
The California State Teachers Retirement System, an early backer of Engine No. 1’s shareholder campaign and a holder of more than 6 million Exxon shares worth close to $700 million, is still reviewing the specifics of the Pioneer deal “to better understand its implications on Exxon Mobil’s long-term strategy and broader low-carbon efforts,” CalSTRS spokesman Thomas Lawrence said in an email.
Back in early 2021 Engine No. 1 waged an aggressive proxy campaign on behalf of its nominees, dubbed “ReenergizeXOM” (XOM is Exxon’s Wall Street ticker symbol), which included its own website and Twitter feed. The website is still up, but has been strangely purged of most of the content that once populated it, which made the case for its board candidates.
While Engine No. 1 was celebrated for its success against the Big Oil icon, and whose efforts were viewed as a climate-conscious power pursuit, in reality its director nominees weren’t of the Extinction Rebellion variety. One candidate, Gregory Goff, had recently served as a director for Marathon Petroleum and had a 30-year career at ConocoPhillips. The other directors who won seats, Finland native Kaisa Hietala and clean tech investor Alexander Karsner, were more naturally aligned with the “green” Engine No. 1 reputation. The group’s candidate who fell short of victory, Anders Runevad, was a former CEO for wind turbine company Vestas.
While its intent was clear, the ReenergizeXOM campaign was measured in its approach, which probably helped win it support from major Wall Street firms and the blue state government investment managers. Sure, terms like “sustainable value creation” to put Exxon “on a path to net zero total emissions by 2050” were employed, but the majority of social media posts as the shareholder vote neared emphasized financial returns, dividends, and value creation.