Startup Backed by Billionaire Investors on Crusade Against Climate Investing, ‘Stakeholder Capitalism’
By Emel Akan, July 9, 2022
A few years ago, it would have been hard to imagine an activist hedge fund gaining three board seats at America’s largest oil and gas company. A fledgling fund, Engine No. 1, with just 0.02 percent ownership in ExxonMobil, voted out three board members at the oil giant in 2021, scoring a victory for the climate change movement.
The fund had backing from “big three” institutional investment firms BlackRock, Vanguard, and State Street.
Exxon wasn’t the only target of shareholder activism. The world’s largest oil producers, such as Shell, Chevron, and BP, have all faced shareholder revolts from activist investors who urged them to address climate change.
However, the actions of these investors have crippled U.S. oil and gas production, contributing to the current energy crisis, according to Vivek Ramaswamy and Anson Frericks, co-founders of Strive, an Ohio-based asset management firm.
Launched in May, Strive says it wants to replace the voices of large investment firms in theU.S. economy with those of everyday citizens. The founders claim that large fund managers breach their fiduciary duties by placing too much emphasis on climate change and“stakeholder capitalism” rather than higher returns.
Among Strive’s notable backers are billionaire investors Bill Ackman and Peter Thiel.
US Energy Crisis
On Independence Day, the startup announced that it launched a “five-week national education campaign to draw attention to the American energy crisis and how U.S. citizens are unknowingly contributing to the problem through their investment accounts.”
“Americans do not just vote in November at the polls, they vote every day with how they choose to allocate their investment dollars. Today their money is often used by large asset managers to erode U.S. energy independence and increase their own energy bills,” the company said in a statement.
The founders of the firm believe that every day firefighters, police officers, teachers, doctors, and small business owners funnel their money into these large asset managers through their retirement funds. But the shareholder voting and engagement behaviors of these investment funds in the past few years have pressured U.S. energy companies to produce less oil and natural gas in the United States, causing high energy prices, they said.
“Our expectation from this campaign is to make the energy sector more successful in the United States,” Frericks told The Epoch Times.
He criticized BlackRock, Vanguard, and State Street for investing based on ESG(environmental, social, and governance) standards that may be in conflict with the interests of their clients.
Most big European and U.S. oil companies have net-zero targets for 2050, as well as interim emissions-reduction goals. However, activist investors find these proposals to be unambitious. Thus, they use their voting powers to push corporations to adopt more stringent climate change goals that are in line with the Paris Agreement.
Since losing board seats to activist investors, Exxon has cut long-term production plans, maintaining oil output at its lowest level in two decades, according to Strive’s founders.
“The same large asset managers who pressure U.S. companies to adopt climate change strategies by reducing oil and gas production stay notably silent as their Chinese portfolio companies behave in the opposite manner,” Ramaswamy said in the statement. “American citizens are left holding the bag twice, both as investors and as consumers at the pump.”
In the coming weeks, Strive plans to promote a series of digital videos to raise awareness of the domestic energy crisis. As part of the education campaign, Ramaswamy will also tour theUnited States for the next five weeks, speaking to Americans about the significance of regaining energy independence.