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Engine No. 1 wants passive investors to vote with their wallets Business և economics news


Impact Investor Group No Engine, which has made a big difference in its climate victory over Big Oil, is set to launch its first EFT under VOTE, which aims to encourage better corporate behavior through shareholder voting.

Not content with turning the big oil company around by sending shockwaves through the market, Engine # 1 is trying to start a mini-revolution in how trillions of dollars of passive cash is being raised with Corporate America.

Impact Investment Group plans to launch its first stock exchange, called Engine No 1 Transform 500 ETF. Reveals how it hopefully shook the situation. It is in a doll. VOICE:

Instead of excluding companies with poor scores on social և management standards or giving more weight to “good” companies, the foundation aims to encourage better behavior by exercising its shareholders’ voting rights. It will follow the voting guidelines, which aim to put the business into the environment of employees, communities, customers, according to the declaration.

This is a dramatic new approach to combining the introduction of ESG indexes. Back in February, Robeco Quant Research found that passive managers were the least likely to vote for social or environmental proposals.

(Bloomberg)

Even products focused on ECG usually reward good behavior in practice, punishing bad behavior at the time of equity, rather than through the actions of shareholders.

“The climate fund may limit your carbon footprint in your portfolio, but not really change the amount of carbon emitted into the environment,” said Michael O’Leary, chief executive of Engine No. 1. “The idea with this product is as follows. What can we, as active owners, do to really influence these companies through our voting, our campaigns, and the other investors we bring with us? ”

Earlier this month, the No. 1 engine won three places at Exxon Mobil Corp after a six-month proxy race. The bet now is that ETF investors will want to get involved.

Given this, the pricing for the new fund was set at 0.05%. It is also aimed at the mass audience. The VOTE will follow the Morningstar US Large Cap Select index of the 500 largest companies in the United States և, respectively, will weigh them according to the market cap.

“Most of the stable products in the market are excluded or re-evaluated by companies with low ESG ratings,” said Jasmine Bilger, head of ETFs for No. 1 engine. “This idea of ​​a clean game. It is the same price point and driving value through active dominance that is truly unique in the market. ”

Will it stay that way, it remains to be seen. Asset managers of all walks of life are increasingly committing to ESG standards, including companies such as BlackRock Inc., the world’s largest money manager and issuer of ETFs, with a huge shareholder force at its disposal.

In fact, much of the engine’s success will depend on three major players: BlackRock, Vanguard Group և State Street Corp., which now owns 43% of the US stock industry, according to Morningstar Inc. The three could one day own a 35% stake in a regular company, said John von Recentaler, the company’s vice president of research, in a recent report.

“If these three organizations remained committed to corporate governance, they could effectively shut down almost any activist,” Rekentaler wrote.

A study by Robeco found that larger, more passive managers were less likely to vote in favor of ECG proposals, which he said may be due to the need to keep costs low. However, the study was based on historical data, with the authors acknowledging that recent years have shown that votes in favor are “slowly growing”.

In addition to its vote, Engine No. 1 will use the proceeds of the ETF to help fund its work in support of change in some major US companies. Despite such a low cost ratio, it must attract significant assets to generate meaningful revenue.

The new fund has an initial capital commitment of $ 100 million. It receives a boost from investment consultant Betterment LLC, which will implement VOTE in all of its socially responsible investment strategies.

“It has become clear to us that this will be the focus of attention as investors, including our clients, understand how capital can make a difference,” said Boris Khentov, senior vice president of operations at Betterment. “People will want to be part of campaigns like the Exxon Engine # 1.”

To contact the author of this story.
Claire Ballentine in New York at cballentine@bloomberg.net





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