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Engine No.1 CEO Jennifer Grancio on the company’s new approach after winning the battle with Exxon

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Engine #1 was founded a year ago this month, and since then, has been a huge hit among investors. Most notably, the ESG-oriented investment company has Exxon Mobil in a proxy battle and won. It also launched an ETF and published a white paper, mostly in favor Synthetic engine.

#1 Engine CEO Jennifer Grancio sat down with Provide Alpha to discuss her strategy and what’s next for the company.

(Below has been edited for length and clarity.)

The person who chose Leslie: You have a lot of areas where you are active: active, ETFs, constructive research, maybe a lot more that we don’t even know yet. What do you think is the best way to achieve the means to achieve ESG results?

Jennifer Grancio: We founded Engine #1 on the simple idea that you have to understand the relevant E, S, and G data and then you can simply use that data to think about the top rated companies right now. What is now? Are they mispriced? And how do you orient economic value over time? And this data is important for long-term value. So we started there. And then in everything we do, we’re also deeply involved in companies. So our point is, if you’re interested in ESG, you want to work with companies to get them on the right track. And if you’re just investing, and you’re looking to build wealth and have strong performance through these transformation cycles, you care about ESG data and you really have to engage with companies as well. You have to keep them and we don’t believe in divestment. Maybe we can talk more about that later. You have to get hold of the companies and stick with them to be able to help them with the transition.

Selector: I want to learn from this interaction, because Exxon, it’s a more important interaction. You’ve looked at a company, you feel like they’re doing bad things that can happen in regards to ESG and sustainability, esp. With GM, you are participating but in a more liberal way. Do both of these strategies do you think work? Is there one that you are more focused on than the other?

Grancio: We really think there are a lot of different ways to engage with a company. And so everything we do is based on the total value framework, this is the idea when you look at a company’s business and you look at their physical impacts, that then related to the value of the company over time. And so when we look at Exxon, we see, you know, a problem. That is an exception. So, from an E, S, and G perspective, the company is making choices that lead to negative long-term value outcomes for shareholders. And that’s a case where maybe the company doesn’t see it that way and as investors you really have to get in to think about how you do something different.

In GM’s case, the company really understands that they have a good CEO, they have a great management approach to running their business, and they understand the E and the S, and they are Use it to drive value for shareholders. So they are two very different examples. So in a case, like Exxon, where it’s an outlier, you can be an investor – and we feel like we can go and make this argument – let’s argue economic spearheaded this conversation, and so many people came to us and followed us that we took an activist approach. In almost everything else we do, we think it’s going to be a constructive approach, like what we do with General Motors.

Selector: After Exxon’s campaign, a lot of CEOs across companies in the US are researching their ESG divisions out of concern that they might be vulnerable in the next scenario. Do you feel like you can use that halo and do something similar in the future on the operational front, because you’ve been so successful with Exxon, that now you’re like a kite? to make a follow-up campaign?

Grancio: Well, the way we think about it now is that we have information, we have a way of thinking about the world where we can really help CEOs. And what we found on the back of the net with Exxon was that CEOs wanted that help. A lot of CEOs, they have ESG reports, they have research, and a lot of them, frankly, would love someone to talk to to help them think through the important things in ESG that they should. What is thinking? And we think that’s really the magic thing, it’s to calculate and figure out what areas of impact are most important to a business and then how they engage so that they really deliver. value to shareholders over time. And we’ve had great conversations with a lot of CEOs, where we’re not going to intimidate activists, we’re going to be deeply constructive about how they run their companies and make money for the activists. investors over time.

Selector: Your head of operations has recently left the company. And if I’m reading among the tea leaves, it doesn’t seem like proxy battles will be the norm for Engine 1. Do I understand that right?

Grancio: We think a lot of opportunities are very constructive. An opportunity for CEOs to learn about how they make E, S, and G a part of themselves, essentially just running their businesses. They want to do it, we think it’s a huge opportunity for investors. So yes, sometimes we may need to do a proxy campaign or an activist campaign but mostly we will be constructive.

Selector: So it’s not fair to call you an active investor…

Grancio: It’s fair to call us an investor trying to drive performance for everyone we work with.

Selector: It was reported that you met with Chevron and several other executives from the oil and gas industry. Would you like to share anything concrete from those conversations?

Grancio: We’ve talked to a lot of people and so our view on that whole area is that companies are working to figure out, as we go through the energy transition, how they manage operate your business to achieve optimal returns over time. So we don’t comment on exactly what we’ve done with whom, but we’re having some constructive conversations. And again, we think that’s a huge opportunity for energy companies and a great opportunity for investors to do just that.

Selector: What do you think of Exxon’s recently announced targets to reduce the intensity of greenhouse gas emissions across the company by 30% by 2030? Have they gone far enough?

Grancio: We’re pleased that Exxon is starting to make some progress on these issues since we started the campaign a year ago. But our view remains that it is a company that must work on governance and must work to share with the market a strategic plan over time for how their business will transform. So we want to see more there, and we’re glad we can lead a campaign to bring the right capabilities into the boardroom for a chance to chat now.

Selector: If they don’t get where you need to be, are you willing to run another proxy war at Exxon?

Grancio: Well, we’ll keep an eye on them.

Selector: You took a different approach, as you mentioned to the GM. This is a white paper that largely commends the automaker, saying it is at the forefront of incumbents making the switch to electric vehicles. Is this something we’ll see more of? And will it always involve sustainability? Or will there be other research on the social part of the ESG or the governance part of the ESG?

Grancio: Our view on the matter is that all of that matters. So governance: how good is your board? Is your board potentially suitable? Are the people on the board of directors those with a track record of running businesses before? Administration issues. And then from a climate perspective, it’s just a little bit right in front of our noses because the companies have revealed a lot of information. So it’s very easy to have a math- and economics-based conversation about how the environment relates to long-term value. Then, on the social side, and the data on the social side.

We use existing data and there is a clear cause-and-effect relationship between how a company brings people up through a leadership perspective and how a company thinks about their impact on the community, how a companies think about the quality of wages for their workforce. So absolutely, those are all areas that are in our sights.

Selector: If you wanted to talk broadly to the CEOs out there, which of the ‘S’ factors would you say, “Get the order in now, or you know, you might get a call soon enough. from us.”

Grancio: Well, I think I think it’s a little bit different for each company, depending on their business and where they have the most impact. So if you’re a professional services company, you know, how do you get people up through the leadership ranks? If you are a company that employs people, with lower median wages, are you hiring people in such a way that they have more than a living wage, and are you hiring commensurate with the communities in which you work? serve? So it’s a little different for different companies. But our guide will be [to] think about matter. Think about running a business the right way so it’s sustainable and you’re serving customers, and you’re beating your competitors over time. So let’s make it that long-term economic value and it makes it much easier for companies to do the right thing.

https://www.cnbc.com/2021/12/16/engine-nopoint1-ceo-jennifer-grancio-on-the-firms-new-approach-after-winning-the-battle-against-exxon.html Engine No.1 CEO Jennifer Grancio on the company’s new approach after winning the battle with Exxon

Sarah Ridley

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