Engine No. 1 CEO details his mission to help investors hold big companies accountable


Jennifer Grancio, CEO of Engine No. 1, joins Yahoo Finance Live to discuss the company’s mission and the new ETF.

Video transcript

JULIE HYMAN: Exxonmobil made headlines yesterday by announcing that it is aiming for net zero emissions by 2050. One company that has lobbied for – an investor that has lobbied for changes in the business is Engine No. 1. And CEO Jennifer Grancio joins us now. Jennifer, I want to talk about the bigger picture for the year in a moment.

But first I want to get your reaction to this news from Exxon. There was a sort of quibble with the company that didn’t include the downstream companies that it sells to, the consumers that it sells to in that emissions target. But overall, what is your reaction?

JENNIFER GRANCIO: Our view is that Exxon has made changes since our campaign a year ago, which is great. We believe that there is still a lot to do. And our campaign added three independent directors to the board. And Exxon has taken action on capital allocation discipline and emissions targets.

We believe that there is still a lot to do. We would like to see more focus and strategy on what happens before 2050. And we would like to see continued progress on scope three. But we think they’ve moved on a lot since we started engaging with them.

JULIE HYMAN: And, you know, for your point, 2050 is a long way off. When you look at ExxonMobil in particular and the oil and gas industry in general, 10 years from now, what do you think it should look like?

JENNIFER GRANCIO: We think – and in fact, I’m going to boil this down to why did we start engine #1 in the first place? And so, from an investment point of view, if companies have a big social impact from a labor point of view or if they have a big climate impact, i.e. emissions, it is the responsibility of the CEO and the board to think about how the business is growing, how customers will hold them accountable, and the return on long-term oil and gas projects that are another 10, 20, 30 years before they are repaid.

So to answer your question, we believe that in emissions-sensitive industries, boards and CEOs should have goals and should have an approach to how they make money at 5, 10 and 15 years old. So we think we’ll see more progress there.

BRIAN SOZZI: Jennifer, we cover a lot of consumers… very large consumer goods companies. We just spoke to the CEO of P&G this morning – a great quarter from them. But many of them, arguably, are not doing enough in terms of ESG and reducing their waste for the products they sell. Is this another area of ​​opportunity for Engine?

JENNIFER GRANCIO: Yeah. The way we think about it is that as investors, we are an investor on behalf of other investors. We therefore manage assets for investors. And we believe investors have an opportunity, just like you would in a political election – you have a vote. And you should use it, and use it as a way to have a dialogue with these companies.

And so all of our business is based on working on how environmental, social and governance issues show up over time in a company’s economy and financial value. We are therefore very active owners. We work with companies all the time. And every year you have the opportunity, as an investor, to vote on what the company does.

And that’s what led us to launch the Engine No. 1 Transformation ETF. The ticker is VOTE. And what we do there is we work with companies every year on how transparent are they about what they’re doing and how can investors hold them accountable for making the right decisions – and to embed climate and social in the workforce in how they run the business and drive value.

JULIE HYMAN: And in terms of how this ETF is done, we’ve seen an increase in the price of the ETF – basically tracking the S&P 500, but allowing you, as you say, to kind of have a voice here. And you are also introducing transparency measures regarding the votes you make within your ownership through VOTE.

In other words, you know, the whole shareholder meeting process is still shrouded, to some degree, in a little…if not secrecy, then opacity, right? ? And so tell me how it’s going to work on a meeting-by-meeting basis when you go to those meetings and when you vote on shareholder actions.

JENNIFER GRANCIO: Yes, so ETF VOTE is radically transparent about how we vote for stocks. We believe this is a problem in the asset management industry and we have solved it with the VOTE ETF. It therefore owns the 500 largest public companies. And every year, as an investor, you have an opportunity, you have a voice to influence what these companies do.

So we work through that. We review every company every year. And what we do is very different is we support voting for proposals where there’s a climate or social or governance issue, and we believe that if the company does something differently, that will translate by long-term economic value. So we go through them all.

I thought I might share some examples if that’s helpful. One is Tesla, which has already held its annual meeting for the year. And if you’re a VOTE shareholder, your take on Tesla would be that they should have a gender and racially diverse workforce because they operate businesses in building cars and manufacturing factories. batteries in places where there is an abundant set of diverse workers.

And so this is an example where we voted on a proposal that simply suggests that Tesla should disclose workforce diversity. Because if you have that information, you can understand what Tesla is doing, there’s transparency, and you can hold them accountable. So that’s an example of what we’ll do for investors.

And what is very different from the rest of the funded ETF industry is that we will disclose it immediately. You can find it on our website. And we’ll even post some sort of case studies and stories about how we come to each of those decisions. So it gives investors a voice.

JULIE HYMAN: Fascinating stuff. And really, as we’ve talked about before, this is just the beginning of that kind of wave. Jennifer Grancio, always happy to catch up with you… CEO of Engine No. 1, thank you for your time this morning.

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