Q&A with Yasmin Bilger, Engine No. Exxon’s shakeup, and more

Few had ever heard of Engine No. Exxon Mobil shocked the corporate world this year when it forced its board to reorganize in order to put more emphasis on clean energy. It’s now bringing their active ownership approach to stock index funds. These are the core of many investors’ retirement accounts.

Yasmin Dhya Bilger heads exchange-traded funds for Engine No. 1 whose ETF started trading under the ticker symbol ‘VOTE” in June. It claims it owns 500 the biggest U.S. stocks from Apple to Zillow and will engage with them and vote at their shareholder meetings.

Varied stock funds claim they do the exact same thing and others charge lower fees than Engine No. 1’s. Bilger spoke about the differences in her fund and why more investors choose to consider environmental, governance and social issues when investing for long-term success. The conversation was edited to be more concise and clear.

Q – Is Exxon the Template for Engine No. 1. will work with other companies. To get things moving, shake up the board.

A – People like to refer to themselves as activists when they see the Exxon campaign. Active owners is what we like to call ourself.

There are many tools to help you engage with businesses. The first is activism. We don’t think we will use it much. We are focusing our efforts on more collaborations with managers to achieve key shareholder and environmental decisions.

Q. Are you trying to achieve the same with all 500 businesses in ETF?

A : We are trying to concentrate on key themes and small companies that can help us move the needle.

We believe there’s a strong case for long-term shareholder benefit to invest in key social and environmental issues. This means that we will only be involved in areas where we believe we have a strong economic case.

Q. Can you provide an example?

A. We are working closely with General Motors’ management on the long-term goal of electrifying their automobile fleet. We are hoping to support them in articulating their strategy and giving them the language that they can share with all their stakeholders (including shareholders) to carry out their plan.

Q: Can investors be sure that they will see the same kind of change in their markets as Exxon did?

A. Markets tend to be short-term. It is important to have a longer-term perspective. These things, such as a strong focus on the environment and diversity of the workforce, all work in favor of shareholder value. It’s all about the long-term perspective. Many of the things we do have a long-term cycle to it.

Q – You want ETF investors to feel excited about the results of shareholder meetings. Is there a difference between one who believes that nuclear power is good for the environment and another who hates it? Are they allowed to have a voice?

A : This space is undergoing a lot of activity about how best to interact with shareholders and gain their feedback. Many startups want to harness that energy and get their feedback. We want investors to be in touch with us, so we need that pulse. Transparency is what we are focusing on.

Most shareholders don’t know they are entitled to a vote and a voice as shareholders. They don’t even know what their votes mean. Anyone who has invested in our fund understands the position we take on certain topics. Reports that detail how funds were allocated at annual meetings are presented in lengthy shareholder reports. We believe it is important to push for real-time transparency and want to lead the charge.

Q – Because an ETF tracks an index it shouldn’t have a different performance from the wider market. What should home investors score you?

A. This area, ESG, is difficult to access for the average investor. We use jargon, create huge yearly reports, which are hard to read, and communicate in complex terms. The storytelling element of the actual work is what really matters. How we communicate that information to investors is one of my most important priorities.

Q. Should you expect that your fund will vote differently from the large index funds in shareholder meetings?

A. Historically, large passive providers have voted against shareholder proposals. This is changing. There has been an increase in support this year for many of these ideas, especially on climate. However, I believe there is still a lot of work to be done.

We hope to lead the charge on this subject and bring these topics to mainstream attention. This concept of shareholder voting has only recently been brought to the forefront.

Q. The stereotypical image of ESG investors says they are younger and more diverse than men. Does that really hold true?

A. ESG might have been a cornerstone of the past. This is because ESG investment was often discussed in terms of ideology and morality. You’ll notice that we are making an extremely strong shareholder value case for this investment space. This broadens the pool of people who are interested in joining us and taking part.

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