(Bloomberg) -- Engine No. 1 seemingly came out of nowhere when it won a campaign to replace three seats on the board of Exxon Mobil Corp. last May. And from now on the activist fund will be advertising its every move.
San Francisco-based Engine No. 1 recently introduced an online dashboard that will disclose how it votes on every proposal at each company in its Transform 500 ETF (ticker VOTE). While some funds wait months to disclose how they vote to investors, Engine No. 1 will release its decisions in “as real time as technologically possible,” said Michael O’Leary, managing director at Engine No. 1.
The transparency will show VOTE investors, competitors and corporate board members exactly how Engine No.1 is voting in a world that is increasingly focused on ESG proposals.
VOTE, which tracks an index of large-cap U.S. companies, has attracted $287 million of assets since launching in June. Unlike other ESG-focused exchange-traded funds that shun certain industries and companies, VOTE enacts ESG principles via proxy voting at companies to try to make change from within.
The strategy already appears to be working. Less than a year after the firm secured a victory to replace three directors on Exxon’s board, the oil and gas company announced it plans to eliminate some greenhouse gas emissions by 2050.
Engine No. 1 plans to share proposals with the public and campaign on issues prior to the vote taking place, as they did with Exxon.
During this proxy season, O’Leary said the fund expects to take on certain proposals and companies “with special cause,” but they haven’t announced details yet. More broadly, he said, issues like racial equity, workforce issues and carbon emissions transparency are area of focus.
“As we think about where we can make meaningful action on climate, that’s not just energy companies, that includes auto companies, agricultural companies, industrial companies,” he said.
Engine No. 1 said VOTE supported more than 90% of ESG proposals submitted by shareholders in the 2021 proxy season, compared with the average fund which supported 34% of proposals, according to data compiled by Morningstar Inc.
Although the firm, which had about $396 million of assets under management as of its most recent 13F filing, pales in size relative to asset management giants like BlackRock Inc., O’Leary said they’re trying to shake up the market with transparency.
BlackRock has a similar voting dashboard, though the firm typically updates results of its voting every quarter, with the exception of a few key proposals shared closer to real-time, said Rob Du Boff, senior ESG analyst at Bloomberg Intelligence. He noted that BlackRock has many funds to compile, while Engine No. 1 only has one.
Still, Engine No. 1 clearly hopes to influence other funds that promote ESG aspirations but don’t always act on them, said Todd Rosenbluth, head of ETF and mutual fund research at CFRA.
“They’re hoping that being transparent might influence other asset managers to also be transparent,” he said. “And if they’re not voting in a favorable way towards ESG, perhaps the transparency will encourage them to vote differently.”
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