Last December, when a week-old hedge fund named Engine No. 1 challenged Exxon Mobil to change its ways, laughter echoed through Wall Street circles, from the fund’s name that recalled a famous children’s book to its tiny, then-$40 million stake in what was once the world’s largest publicly traded company.
Just six months later, the fund delivered a massive blow that rippled throughout the oil-and-gas industry. Engine No. 1′s campaign forced Exxon to accept new board members who could bring about a reckoning over its business strategy and confront the risk of global climate change that many investors say Exxon has long been reluctant to address.
Companies with a market value of $250 billion like Exxon rarely face, much less lose, shareholder battles. But stakeholders familiar with Exxon’s thinking said Wednesday’s defeat was years in the making due to ongoing weak returns.
Institutional investors had grown frustrated with the company’s approach to the energy transition, trailing global rivals who promised big spending on power generation, solar and wind. In addition, Exxon failed to recognize how the investment community had become more attuned to climate change issues, which helped Engine No. 1 sway big pension funds in California and New York to its