The activist firm Engine No 1 is launching a new ETF called Transform 500 ETF (ticker: VOTE) as part of its socially responsible and environmental strategy. The company announced the news on June 22nd, along with the $100 million already received in commitments. The fund’s annual expense ratio is announced to be 0.05%.
The company intends to hold the firms it invests in accountable on environmental, social and governance (ESG) issues. It will invest in a market-cap weighted index of the 500 of the largest US stocks.
“Our idea with this product was, let’s be ESG investors, not by what we hold because we’re just holding the 500 largest companies by market cap. Instead, let’s be ESG by what we do as active owners,” said Engine No 1 managing director Michael O’Leary.
One of the objectives of Engine No 1 is to actively work with companies to strengthen the investments they make in stakeholders to drive company performance. It also aims to better serve investors’ long-term interests, as sustainability is seen as an important prerequisite for future growth stability.
Engine No 1 Strategy
Engine No 1 uses the strategy of working along with companies that need to change and reduce their emissions, instead of shifting the focus away from them. The company sees an opportunity of harnessing the power of investors to push those polluting companies towards transition.
“There shouldn’t be a trade-off between positive impact and financial performance. VOTE will be a unique solution to this long-time concern, enabling index investors the ability to generate long-term value while bringing action to the most critical environmental, social, and governance issues facing these companies,” added Yasmin Dahya Bilger, Head of ETFs at Engine No 1.
The company marked another milestone in recent weeks – it managed to win a campaign against Exxon’s climate resistance to change its operations. The firm that owns 0.02% of Exxon, gained a third board seat. The first two seats at the board of directors, it secured at Exxon’s annual shareholder meeting in May.
The company started targeting the oil giant in December 2020, claiming that Exxon needs to shift its operations and significantly reduce carbon emissions in order to ensure long-term financial viability for shareholders.
After making valid points that the Exxon climate change strategy is out of touch with investors’ concerns about pollution and business risks, Engine No 1 keeps moving forward with its activist sustainability campaigns. Launching a new ETF can be seen as one of the examples of environmental management strategies that other activist firms could deploy in the near future.