Activist Fund That Forced ExxonMobil to Yield Launches First ETF 'ESG Investment'

[Asia Economy Reporter Park Byung-hee] Engine No. 1, an activist investment fund known for bringing the largest U.S. oil company ExxonMobil to its knees, has launched its first exchange-traded fund (ETF), Bloomberg reported on the 1st (local time).

The ETF, named The Transform 500 by Engine No. 1, aims to increase 'Environmental, Social, and Governance' (ESG) investments by driving corporate change. Engine No. 1 stated that it will evaluate how much the companies invested in by the ETF invest in and care for their employees and the environment. It plans to monitor employee diversity, employee health and safety, and greenhouse gas emissions.

Engine No. 1 recently drew attention by securing at least two of the 12 board seats at ExxonMobil, the largest U.S. oil company. Engine No. 1’s stake in ExxonMobil was only 0.02%. However, with the support of major U.S. institutional investors such as BlackRock, Vanguard Group, and State Street, Engine No. 1 won the shareholder vote battle at ExxonMobil’s annual meeting last week. It is expected that Engine No. 1 will secure up to four board seats in the future, leading ExxonMobil’s changes such as reducing greenhouse gas emissions and expanding investments in renewable energy.

Engine No. 1 is an activist fund established at the end of last year with $250 million in assets by Chris James, a veteran in the hedge fund industry. Its goal is to drive corporate change centered on ESG. It is growing the fund size by attracting investments from both individuals and institutional investors.

Mohit Bajaj, director at WallachBeth Capital, explained, "Engine No. 1 has recruited many heavyweights from JP Morgan and BlackRock," adding, "It aims to become an influential fund in the ETF market."

The ESG fund market size has recently grown rapidly. Currently, among about 2,400 products in the U.S. ETF market, only around 90 ETFs focus on ESG investments. However, last year ESG ETFs attracted a record $31.1 billion in investments, nearly four times the $8 billion raised in 2019. This year, they have already attracted $14.9 billion in investments, making it highly likely to surpass last year’s record.