September 2024 - Engagement and Divestment: Shareholders Transcend a False Binary

Altering investment strategies to defend a portfolio from threats to its value is a standard part of fiduciary practice; the impacts of a warming world are no exception.¹ If continued exposure is not providing a pathway to meaningfully reduce systemic or idiosyncratic risks, investors need the ability to change course. [...] the other, best practice for investors is to embrace the full toolkit — and to apply the best tools for a given job. [...] Meanwhile, the fund backed a slate of dissident directors for ExxonMobil’s board, three of whom won board seats but were largely sidelined by the company.5 In 2024, the fund chose to divest the company and several peers from its debt and active equity portfolios, as well as to diminish fossil fuel exposure in the passive equity portfolio over time.6 The fund’s actions were taken after a systematic. [...] But in the hands of prudent and careful actors, it seems to do the opposite: strengthening the ability to respond to risks and exercise voice in the process. [...] As IEEFA research has shown, the fossil fuel industry has substantially underperformed the stock market for the last 10 years — a pattern that the significant temporary spikes in global oil and gas prices due to Putin’s invasion of Ukraine and the COVID-19 recovery have been unable to reverse.