Tuesday 11 May 2021 3:13 pm

Legal & General backs activist investor over Exxon climate concerns

Legal & General, one of Exxon Mobil’s major investors, has said it will back an activist hedge fund at Exxon’s shareholder meeting later this month, after the fund raised climate-related concerns about Exxon’s practices.

US oil producer Exxon is battling hedge fund Engine No. 1 over four seats on its 12-member board and the direction of the company.

The hedge fund has criticised Exxon’s poor returns, spending on fossil fuels and lack of clear plans for the energy transition.

Earlier this month climate activists bombarded Exxon Mobil’s top shareholders with calls and emails, urging them to vote against the reelection of chief exec Darren Woods and lead independent director Kenneth Frazier at an upcoming shareholder meeting on May 26.

Legal & General Investment Management (LGIM) owns Exxon shares worth nearly $1bn, according to Refinitiv data.

LGIM opposes the reelection of Woods and Frazier, and backs the separation of the CEO and chairman roles, John Hoeppner, head of US stewardship and sustainable investments at LGIM, said in an interview.

LGIM will vote for Engine No. 1’s board nominees – Gregory Goff, Anders Runevad, Kaisa Hietala and Alexander Karsner – he said.

“We think they have a good, complementary set of experiences that would be in the best interest of the long-term shareholders,” Hoeppner said.

Exxon’s current board is full of “incredibly accomplished CEOs” but lacks people who understand oil and gas and the energy transition, and who have overseen business transformation, he added.

Exxon did not comment but pointed to a Monday letter to shareholders that said its directors “bring valuable expertise in capital allocation across industries, complex corporate transitions, the energy industry, investor perspectives, Asia-Pacific markets and environmental, social and governance,” practices.

LGIM has “very rarely, if ever,” spoken with Exxon’s directors and has not found that its board offers “the same level of board-level buy-in that we see in other organizations,” Hoeppner added.

LGIM last year voted against CEO Woods and in favor of an independent chairman. LGIM has signed onto the Net Zero Asset Managers  Initiative, which vows to press portfolio companies to achieve net zero emissions by 2050 or sooner.

Exxon has not set 2050 net zero targets as European peers have done. To try to address investor concerns on climate, in recent months it has expanded its board, pledged to increase spending on lower-carbon initiatives and said it would lower the intensity of its oilfield greenhouse gas emissions.