Jeff Ubben: The # 1 engine model is “not enough to create lasting change”



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Jeff UbenTaking over the world’s largest company as an activist investor, he took on one of the toughest jobs of his career this year – he joined the board of ExxonMobil, an American oil major whose operations and stock prices fell due to the pandemic recession last year.

After leaving ValueAct, the activist fund he launched is Japan Olympus and the British Rolls Royce. Above all, Uben has partnered with Lynn Forester De Rothschild, CEO of the Nonprofit Coalition for Inclusive Capitalism, and two former colleagues at ValueAct, are launching a new activist fund called an Inclusive Capital Partner.

In an interview with Moral Money, Uben talks about the epic battle for Exxon this year, the No.1 green hedge fund engine, won three seats on the board of an oil company. Uben said he appreciated the pressure the No.1 engine placed on Exxon, but said he was able to make more money by making internal changes.

“A shareholder resolution or a sale will not change the company’s investment strategy. On the contrary, you are in the room with the idea that E and S are levers of new value.

Learn more about activist investors why he takes a different approach from some of his peers. Uben told us the day before the Wall Street Journal’s Exxon report. Consider a commitment Have zero net carbon emissions by 2050. The following has been edited for length and clarity.

Moral Money: Do you think the # 1 mover got it wrong on how to campaign against Exxon?

© FT Montage; Bloomberg

Jeff Uben: Shareholder resolutions have been around for years. But just as the voices of shareholders on the board of directors have been a game-changer over the past two decades, so now we need stakeholder voices on the board. That’s the # 1 engine goal, which is a big goal. However, the # 1 engine is the campaign manager. No one is the # 1 engine [Exxon’s] Now the conference room. No one. The new directors are not affiliated and are independent of the engine n ° 1.

At Inclusive Capital, we continue to be the leader in the boardroom because we have the money in our mouths. We own a lot of stocks [in Exxon].. We “eat our own food”. So when we work with the CEO on strategy and capital allocation, it gives us tremendous confidence.

You can’t just run Model Engine # 1 – making persistent changes isn’t enough. Meeting rooms need constructive stakeholders [who] We invest real money and consider all members, shareholders, employees, the planet and our customers.

MM: Do you think you can see other attacks on other big companies from something like Engine # 1? And do you think there are lessons activists need to learn to change tactics?

JU: I don’t want to see you jump right into a proxy contest. I am an activist shareholder company based on spending a lot of time with management and board before understanding their role and asking for a board seat, rather than running a proxy contest. I built everything.

If you’re sitting in a New York office, you’re not involved in management, vacuuming business theories, pitching without speaking to the business, and entering proxy contests directly. If the model is approved, I think it’s a shame.

And if you go straight to the agent he gets too much power [asset managers’] Governance team. The problem is analyzed in detail and the business model takes a long time. This is not what the governance team is supposed to do or mandate.

To celebrate it as well, I worry about encouraging people to speak directly to their agents rather than their actual involvement, and to attend the board of directors and work hard.

MM: What are your objectives to bring Exxon to a better place in climate issues?

© AFP via Getty Images

JU: Exxon is investing in carbon reduction technology. The ongoing work on the Houston Carbon Capture Project demonstrates the company’s efforts.

It is Exxon’s job to show what it takes for these decarbonations, where it is difficult to electrify industrial processes as quickly as possible.

In the long term, the company’s deep technology and scale will reduce the cost of low carbon fuels. This is the role they have to play. We are also developing and designing entirely new technologies such as direct capture that they are working on. You will need it to reach the Net Zero goal of 2050.

MM: You mentioned that Exxon supports carbon taxes. The political reality in Washington is that Republicans never go. How does Exxon make it politically attractive to conservatives?

Darren Woods, Chief Exxon

© Bloomberg

JU: I think it is doable. CEO of Exxon (Darren woods, Photo) is aimed at parliamentarians and women, especially Republicans and women. It will not be adopted by COP26.

But can it be totaled by having carbon rates and carbon dividends? We are talking about $ 2,000 for some families most affected by carbon prices. This is what we are currently working on. For me, the carbon capture and storage tax credit must be completely bipartisan.

NOT. [issue] With ESG indices [carbon] Completely problematic. Most of the time, you own Big Tech, so you walk away from the problem. Because Big Tech is already clean. Actual emissions are generated by fertilizer companies, oil and gas companies, and utilities. This is where we have to go to go faster with the emissions. And the ESG will then run away.

MM: What else do you follow in the ESG field?

JU: ESG investors active in the public market are the key to decarbonizing as quickly as possible.

And for many asset owners, owning an exon in this area isn’t very intuitive, so I have to say it’s not easy to be the man.

And what’s frustrating is that the leaders of the “E” and “S” want exactly what they want. In fact, we are working hard to make it happen. It’s all perversion and this whole idea of ​​negative screen and reputation laundering.

I’m still early, right? Pioneer takes an arrow. There is a big comeback. The hydrocarbon industry provides good energy in nature, but it must be less harmful. However, there is no pressure to change until stock prices reflect these externalities. Many other industries that feed, cool, dress and transport people, and even social media companies, will face their own harm.

Active ESG derives its unique advantages by addressing these externalities by investing in the big oil business behind the emission reductions. A shareholder resolution or a sale will not change a company’s investment strategy. Rather, they see the “E” and the “S” as levers of new value.

What worries me about ESG is that if the real economy continues to increase emissions, as others are currently pursuing, ESG can help decarbonize paper in the economy. . Is there.

The problem can only be solved by tackling the problem, and the problem is that we have to decarbonize faster.

[To] Carbon-free goods and services are what we really need to do and now we need to do it faster. And that’s why I joined the Exxon board of directors. Degeneration is idealism. It is exorbitant today. He is a politician [environmental] NGOs do not speak. My goal is to use existing infrastructure, be it ammonia infrastructure or hydrocarbon infrastructure, to bring carbon back to the ground, and over time with new, more expensive infrastructure such as green ammonia and green hydrogen. To be able to superimpose with. Economic. For me, this is the only way not to shock the global economy and the prices are going up too fast. The GSS is very inflationary to be honest with you.

Asked about The role of his other great council – At the struggling electric truck company Nicola – Uben declined to comment.

Integrated Stakeholders: PBC’s Guide to ABC

Do you know your B Corps from your public benefit corporation? Third report of the Moral Money Forum, published here today, Sarah murray We will look at the model of “stakeholder governance” that more and more companies are adopting around the world and we will ask what role they can play in making their activities more sustainable.

We would like to thank all of the Moral Money readers whose responses to our survey on this topic informed Sarah’s report. The overwhelming majority of you have told us that traditional corporate structures hamper the transition to more stakeholder-oriented capitalism.

So can capitalism change if the corporate charter remains the same? Please check the report and give us your feedback. (Andrew Edge Cliff Johnson)

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