Don’t Sell Your Fossil-Fuel Stock If You Want to Make a Climate-Change Difference in 2022

Climate France
Laurent Cipriani—AP Smoke rises from the Feyzin Total refinery chimneys, outside Lyon, central France, Friday, Oct. 15, 2021.

James is the founder and executive chairman of Engine No. 1, an activist and impact investing hedge fund.

In 2022, investors who want to address climate change should focus on one simple but essential goal: active stock ownership. They should engage with companies on both sides of the energy transition–those heading in the right direction and those falling woefully short and move away from blame and toward responsibility.

Engine No. 1 spent the first six months of 2021 in a fiercely contested proxy battle with ExxonMobil, trying to place four new members with industry expertise and experience in transitioning away from fossil fuels on a board lacking in both. We were successful in winning three of those seats and the company’s behavior has begun to change.
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Before we launched our campaign, Exxon was aiming to increase oil production from 3.7 million barrels per day to 5 million by 2025. Once our campaign was under way, Exxon announced it would instead keep production flat at 3.7 five million barrels per day. That 1.3 million reduction means that there will be roughly 220 million tons fewer carbon emissions annually. Exxon barely mentioned the word “carbon” before we started our campaign, but it has since launched a low-carbon solutions business and is investing more in decarbonization. Recently, it announced a more ambitious target for reducing company-wide greenhouse gas emissions intensity by 20% to 30% by 2030.

The company still has a long way to go. To succeed over the long term, every energy company needs a strategy for transitioning away from fossil fuels, and Exxon has yet to articulate one. But the company’s behavior has started to change and we’re confident that had we not engaged with Exxon a year ago, the changes we’ve witnessed so far wouldn’t have happened.

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So, the goal for 2022 should be active ownership, and it should not be limited to large or professional investors. Now more than ever, retail investors are interested in engaging on issues they care about. But many of those investors don’t even realize they have a vote on issues related to companies’ environmental and social impacts or the way those companies are managed. Anyone who owns even a single share of stock in some ways owns that company. Every spring, they can vote on proposals ranging from a company’s environmental policies to important management policies such as executive pay and board composition. Just like voters in political elections change the direction of countries, shareholders have the ability to push the direction of the companies they own. But they must vote.

Read more: Thinking of Investing in a Green Fund? Many Don’t Live Up to Their Promises, a New Report Claims

Historically, the way investors tried to change a company’s bad climate-impact behavior was to divest their holdings as a show of discontent. Divestment was an important early step in bringing awareness to the negative effects that companies can have. But the idea that simply walking away will help solve the problem is misguided.

If every investor who cared about moving away from fossil fuels and addressing climate change divested from Exxon to show their disdain for the company and its approach, it would simply leave the company with shareholders that don’t particularly care—and that would be a problem. It certainly would have doomed our effort to place new members on the board.

In 2022, investors big and small should make it their goal to vote this proxy season on all environmental, social and governance issues raised at the annual meetings of companies they own. As investors, they have a seat at the table. They should sharpen their elbows and raise their voices.

This essay is part of a series on concrete goals the world should aim for in 2022 in order to put us on track to avert climate change-related disaster. Read the rest here.

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