Socially-Conscious Shareholders Are Calling The Shots

Corporate annual general meetings (AGM) are often seen as a laid-back affair, during which a firm’s board members and investors mingle, listen to financial updates, and munch on hors d’oeuvres.

But halfway into 2021, that notion has been turned on its head. Shareholders are more emboldened than ever, passing a record 34 resolutions at AGMs that target a range of climate and social issues.

Mutual Alliance

The culture shift has been led by Engine No. 1, an activist hedge fund that installed three directors on ExxonMobil’s board this year after purchasing just 0.02% of the company’s shares. Now planning to press the oil titan on its climate record, how did Engine No. 1 whip up so much influence with such a tiny stake?

The hedge fund got the attention of BlackRock and a number of powerful mutual funds, who have also beat the drum for an overhaul of corporate climate policies. And the move appears to have galvanized shareholders across the board:

• 8 climate proposals have passed at AGMs this year. Resolutions covering political donations, diversity, and Covid-19 have also been confirmed.
• At Netflix, 80% of voting shareholders supported a proposal for further election spending oversight and disclosure.
• While Amazon and JPMorgan Chase defeated resolutions calling for racial justice audits, executives at both were struck by the support those proposals did receive.

“This is a startling proxy season,” Heidi Welsh, executive director of the Sustainable Investments Institute, told CNN. “I think it’s really going to change the way companies look at concerns on environmental and social issues raised by their investors.”

Activist ETF: Engine No. 1 is far from done. The hedge fund just launched its Transform 500 ETF, an exchange-traded fund that will invest in America’s 500 largest stocks in order to revamp their environmental and social strategies. It already has $100 million in assets.