September 13 (Hfrance.fr) - The # 1 engine, which won a challenge against the odds against Exxon Mobil Corp (XOM.N) earlier this year released an investment framework on Monday that pushes for a value to be placed on how business activities affect the climate and society.
The "total value framework " provides important new information on how the San Francisco-based company, which manages approximately $ 430 million in assets under management, selects companies in which to invest. The framework was presented exclusively to Hfrance.fr before its publication.
Investors closely followed the activity of the No.1 engine afterwards that three of its candidates won seats on the Exxon board of directors in ashareholder vote in May criticizing the energy giant's track record and goals for reducing its carbon footprint. [nL3N2NK44M]
It was a stunning victory that the No.1 engine won by holding only 0.02% of Exxon's capital, and the Investors have been looking for clues about the company's next moves, which launched in December of last year.
In the white paper to be released on Monday, co-authored with Wharton School management Professor Witold Henisz, cabinet adviser, Engine No. 1 said traditional scores on the environment, society and corporate governance (ESG) were too far removed from the financial value attributed to companies.
This makes it more difficult for investors to focus their capital on changes such as reducing showsHenisz said in an interview.
Instead, Engine # 1 values a company's impact on climate change , water consumption, labor persity or human rights. In the absence of company data to allow it, it uses models that draw on sources such as the United Nations Unit and the International Labor Organization.
"What we're adding to the party is making it an economic argument, " Jennifer, CEO of Engine No.1 said Grancio in an interview.
To illustrate how its model works in practice, Grancio noted that Exxon only included about 10% of its total carbon emissions in its targets reduction, mainly by excluding the emissions created when customers have burned their fuel.
When companies fully declare thiss emissions and are taking steps to reduce them, "this is potentially a huge place to rise in value," said Grancio.
The No.1 Engine, founded by hedge fund veteran Chris James, has chosen to invest in companies that make fossil fuels in order to push them to minimize their impact on the environment.
Some funds avoid fossil fuel stocks altogether. Harvard University announced last week that its endowment would divest itself completely from fossil fuels. read more
Engine # 1 takes a very different approach, for example by investing in shares of energy companies on its new Transform 500 exchange - traded funds (VOTE.Z) , which has been set up to strategically use its votes by proxy. read more
Grancio declined to comment on what could be the next goal of Engine No.1, but said it aims to be a constructive partner of companies in which he invested, not an activist hedge fund running proxy contests.
"Exxon took a lot of work and we barely got past that, "s he says. Report by Ross Kerber in B oston Editing by Greg Roumeliotis and Sonya Hepinstall
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