August 26, 2021

The Shareholders Vs. Exxon

by How to Save a Planet

Background show artwork for How to Save a Planet

In our first episode on green investing, Are My Retirement Savings Invested in Fossil Fuels?? Help!, we talked about how to get your retirement money out of fossil fuels. Now, we’re looking at a different strategy – keeping your money IN fossil fuels, and using those investments as leverage to force companies into changing their behavior. Companies like Exxon Mobil, the poster child for a big, bad fossil fuel company. Because of its size and power, taking on a company like Exxon could seem kind of hopeless. But recently, an unlikely coalition of people have done just that — a coalition that included a group not typically associated with revolutionary behavior…Wall Street investors.

Guests: Diana Best, Charlie Penner, Boris Khentov

Calls to Action:

  • Understand and track the issues that shareholders raise via shareholder resolutions – check out Ceres’ Climate and Sustainability Shareholder Resolutions Database, which tracks shareholder resolutions focused on the climate crisis, energy, water scarcity, and sustainability reporting, and the shareholder resolutions filed by As You Sow, the shareholder advocacy group who runs
  • If you own stock in a company directly (not in a mutual fund), you can vote on that company’s proxy ballot. Find out what resolutions are coming up for vote – the Proxy Review offers an annual pre-season guide.
  • If you’re invested in mutual funds or ETFs (e.g. via your 401k) understand how votes are being cast on your behalf by asset managers that offer those funds. ShareAction, MajorityAction, Ceres, Morningstar and others profile asset managers’ climate-related proxy voting. Contact your asset manager encouraging them to vote in support of climate-focused resolutions.
  • Check out The Sunrise Project’s campaign BlackRock’s Big Problem.

Learn More

Check out our Calls to Action archive for all of the actions we've recommended on the show. Send us your ideas or feedback with our Listener Mail Form. Sign up for our newsletter here. And follow us on Twitter and Instagram.

This episode of How to Save a Planet was produced by Rachel Waldholz and Lauren Silverman. The rest of our reporting and producing team includes Kendra Pierre-Louis and Anna Ladd. Our supervising producer is Lauren Silverman. Our editor is Caitlin Kenney. Sound design and mixing by Peter Leonard with original music from Emma Munger and Peter Leonard.

Our fact checker this episode was Claudia Geib. Special thanks to Geoffrey Rogow, Jackie Cook and Rachel Strom.

Where to Listen


Dr. Ayana Elizabeth Johnson: Welcome to How to Save a Planet. I'm Dr. Ayana Elizabeth Johnson.

Alex Blumberg: I'm Alex Blumberg, and this is the show about what we need to do to address climate change, and how we make those things happen.

Alex: Hello everyone, it is just me today. My co-host Dr. Ayana Elizabeth Johnson is working on some of her other planet-saving projects. And today, I'm talking about ExxonMobil. And Exxon is probably the poster child for a big, bad fossil fuel company. It's the largest US company, with over 15 billion barrels of oil and gas reserves worldwide. For a while in the early 2000s it was the world's largest company period—and the most profitable. And to a degree that stands out even amongst other oil and gas giants, Exxon has used its power and size to fight attempts to address climate change. They've lobbied politicians to block climate legislation, they've funded efforts to sow doubt about climate science even when internal documents from their own scientists showed that they knew they were warming the planet, and that the unchecked effects would be catastrophic. If there were one company who could most claim the title of corporate Mr. Burns, most environmentalists would probably award that creepy, bald, skinny trophy to Exxon.

Alex: And because of their size and wealth and power, taking them on can seem kind of hopeless. But today, we're telling the story of a coalition of people who did take on Exxon. It was a coalition that ran the gamut from long-time dedicated climate activists, to folks who might not even consider themselves environmentalists at all. And I talked to one of the unlikely ringleaders of this unlikely coalition.

Alex: Can you just tell us who you are?

Charlie Penner: Uh, well, I'm nobody.

Alex: [laughs]

Alex: That is a lie. He is somebody. And on today's episode, we will tell you who exactly he is, and what he had to do with leading an insurgent revolt against one of the world's largest fossil fuel companies. An insurgent revolt made up largely of people not typically associated with revolutionary behavior: Wall Street investors.

Alex: This is the second episode in our two-parter about green investing. In the first part, we talked about some of the ways you can get your retirement money out of some of the big fossil fuel companies like Exxon by divesting. Today, we're talking about a different strategy some folks are employing. Keeping their money in companies like Exxon, and then using that money to try and force Exxon to change its behavior. We are going deep inside the weird world of shareholder activism—for the future of humanity and the world. That's coming up after the break.


Alex: So the "nobody" you heard from before the break, who led the campaign against Exxon that we're talking about today? He has a name: Charlie Penner.

Alex: So talk about why Exxon.

Charlie Penner: You know, Exxon was just, quite frankly, I can't remember a time when I wasn't thinking about it.

Alex: But Charlie wasn't like a lot of other folks out there who might dream of taking on Exxon: environmentalists, or activists. Charlie, in fact, works in an industry that for a lot of people might rank not far below the oil and gas industry on the Mr. Burns scale. He works in finance.

Charlie Penner: I spent about 15 years at a traditional hedge fund in New York.

Alex: And the hedge fund that Charlie worked for made it's money in a particular way, what's called "shareholder activism." Analysts at the fund would look for companies that they felt weren't operating as efficiently as possible. Say, for example ,there was a big conglomerate that owned a lot of different businesses that the analysts at Charlie's firm believed didn't really fit together in any coherent way. Charlie and his colleagues would act. They would buy shares in this company, and then try to get the company to change, to ditch the parts of the business that didn't make sense, and focus instead on the parts that did. They'd reach out to try to influence company leadership, they'd make their case to other large shareholders, they'd introduce shareholder resolutions if necessary. And if Charlie and his colleagues at the hedge fund were successful in persuading the company to do what they wanted, and if those changes did in fact make the company more valuable, then Charlie's hedge fund would end up making a lot of money.

Alex: But after a decade or so of doing this kind of work, Charlie started to wonder if perhaps this approach could go further. Could it lend itself to tackling larger issues, beyond just what was the stock worth?

Charlie Penner: I wanted to see if it was possible to develop a strategy that would use those same tools of traditional shareholder activism, but apply it to a longer-term set of objectives—the big picture questions.

Alex: Big picture questions such as addressing climate change. Could encouraging companies through shareholder activism get them to embrace social responsibility while still causing the value of their stock to rise? That part was key, of course. If he got a company to embrace more stringent environmental controls for example, but it drove down the value of the company, that would be a failure. There'd be no way to get other investors on board to pressure the company to actually change.

Alex: But Charlie subscribed to a school of thought that said caring about long-term social concerns like climate would actually drive up the company value. And in fact, companies that focused too much on short-term and didn't think about long-term climate impact would eventually lose value. His theory was, in essence, caring about climate change, and other broader social concerns like racial equity and consumer safety was a win-win. Good for the world, and good for the bottom line.

Alex: And so, after 15 years at his old job, Charlie joined forces with another finance guy, named Chris James, to test this hypothesis in earnest. In early December 2020, they launched a new hedge fund named Engine No 1. Its mission? Use the tools of activist investing to bring about the win-win. Get companies to focus on big-picture questions while also returning more value to their shareholders. And a week after they launched, they announced their first target: Exxon.

[NEWS CLIP: ExxonMobil facing pressure from activist investment firm Engine No. 1 with support from pension fund CalSTRS. In a letter, Engine No. 1 urges the oil giant to better position itself for long-term sustainable value creation.]

Alex: Charlie thought Exxon was perhaps the most perfect example of a company focused on short-term profits over the long term fate of the planet as well as its investors.

Charlie Penner: They had been the most aggressive in, you know, really kind of acting as somewhat of an obstacle to the energy transition, to put it maybe diplomatically. And, you know, really had a mindset that was incredibly at odds, not just with, you know, most of the world, but also with their shareholders.

Alex: And it's not like this mindset was doing wonders for Exxon's share price. Exxon's stock had been in a long serious decline. Just over a decade earlier, in 2008, Exxon had been the largest company in the world measured in terms of what they call cap size, which is simply the total value of all of a company's stock. By this measure, Exxon in 2008 was worth over half a trillion in today's dollars. If its market cap were a country's GDP, 2008 Exxon would be bigger than Austria, Norway, Thailand and Israel to name just a few.

Alex: But in the intervening decade and a half, Exxon's value had plummeted, cut nearly in half. As of today, it's not even in the top 20 anymore. It hangs out way down on the biggest companies list, below Adobe, Paypal, and Nestle. To Charlie and Chris, Exxon was a wounded giant. It looked powerful, but it was ripe for rebellion.

Charlie Penner: It wasn't like they were, you know, taking this, in my opinion, very kind of short-term focused approach at the behest of the majority of their shareholders. Most of their large shareholders had spoken up and said, "We want you to actually be thinking longer term about these things."

Alex: And so on December 7, 2020, literally one week after Engine No. 1 launched, they came out swinging. They'd acquired a 0.02 percent stake in Exxon, and in their capacity as a shareholder, they released a letter outlining all the ways they thought Exxon was falling short. And, they said, Exxon was completely failing to plan for a future in which its primary product—fossil fuels—could no longer be burned at anything like the scale it had in the past. And so, the letter announced, Engine No. 1 was going to try and bring about that change by launching a campaign to unseat four members of the 10-member Exxon board of directors.

Alex: So just think of this: a tiny hedge fund that didn't even exist the week before, telling one of the most powerful companies in the world: you're doing it wrong, and we're gonna take out some of your top leadership. We're calling essentially for a coup on your board of directors.

Alex: See, the board of directors at a public company is sort of like the boss of the CEO. A lot of times the board of directors could be a pretty hands-off boss, Many times individual board members are hand-picked by the CEO. So it's pretty rare for a board to actually fire a CEO, but boards typically do have that power. And so, if enough board members are opposed to a company's direction, they can have a pretty real influence over the CEO.

Alex: And in Charlie's old world, a board coup? That was a pretty big deal. A last resort, sort of the nuclear option. Something to deploy only after you've had lots of conversations with management and proposed various other remedies. But Charlie said Engine No. 1 felt that these weren't new issues at Exxon, that other shareholders had raised them with management before and gotten nowhere, so there was no point in trying other routes first. They were going straight for the head, taking out a bunch of board members and replacing them with ones that Engine No. 1 had recruited.

Alex: And those recruits were four serious energy insiders, some of whom came out of the oil and gas industry itself. What they had in common, Charlie said, is a vision for how to profitably transition away from fossil fuels. And that was rare. Exxon's stock performance had been bad, but the rest of its peers hadn't done much better. Over the last 10 years, the entire energy sector had lost value. But Charlie says the four board members that Engine No. 1 proposed had actually improved the fortunes of the companies where they worked.

Charlie Penner: Most people in the energy space over the last 10 years have destroyed value, not created it. So it was a lot of work to find four people who individually have literally created billions of dollars of value in the energy space, and who've done it in kind of different ways. Like, you don't want to propose people who are duplicative.

Alex: One of the proposed board members was a 30-year veteran of oil and gas company ConocoPhillips, who'd gone on to run a very successful refining company. There was a former oil trader who'd headed up the renewables division at another big refiner. There was a former high-ranking energy department official and senior strategist at Google, and the former CEO of a wind turbine company.

Alex: Charlie and his team needed to convince Exxon's shareholders to vote for these four and not the people that Exxon's leadership had proposed. In other words, they needed to make the case that voting against Exxon's own leadership was the right thing for Exxon's shareholders to do.

Alex: Now shareholders. What is a shareholder, exactly? It's one of those words in finance that can mean many different things. Technically, anyone who owns any stock in Exxon is a shareholder. I can hope on E-Trade right now, plunk down some money to buy one stock in Exxon and boom, I'm a shareholder, entitled to vote for these board members. But my one stock doesn't give me much of a voice. There are over four billion shares of Exxon stock outstanding, so my one share is just one vote out of four billion. And small individual shareholders like me are often called retail investors.

Alex: But the biggest shareholders in a company like Exxon aren't retirees with a stock certificate in the safety deposit box, they're what's called institutional investors. They're often asset managers, managing other people's money. They manage pension funds or university endowments, quite often, if you have a retirement account, an asset manager is managing your money. And the biggest shareholders in Exxon are a group of asset managers known as The Big Three: Vanguard, State Street and a company called BlackRock. Remember that name, because we're coming back to it.

Alex: Altogether, the Big Three controlled around 18 percent of Exxon's shares, which is to say 18 percent of the vote. Now remember, Engine No. 1? They owned just 0.02 percent of Exxon, so Charlie knew that if he was going to win, he'd need to have lots of these big institutional investors—including the Big Three—on his side.

Alex: And so, a couple months before the big vote, Charlie and his team at Engine No. 1 went on a persuasion campaign. They put together an 80-page slide deck where they made the business case that they needed to shake up the board. For two solid months preceding the big shareholders' meeting, Charlie estimates he had between 75 and 100 calls with investors, marching them through the deck. And he says it was often tough to gauge in the moment how these meetings were going.

Charlie Penner: They're all weird and awkward because it's like the most important thing in your whole entire life. And for them, it's like, you know, it's important, but it's like their job and they're just trying to do their jobs correctly. So you don't want to, like, you know, do what you feel like doing, which is like, you know, get down on your knees and beg them to vote for you. You're trying to, you know, just be professional, focus on the arguments. But you've also—you're incredibly invested in it. So, you know, they don't end the call by saying, "Okay, good job. You have our vote," right?

Alex: Right.

Charlie Penner: They say, "Thank you for the time. That was really interesting. If we have any follow-up questions, we'll let you know." A lot of them, you feel like—maybe the same thing on this podcast where it's like, I've been talking too much, I should shut up, but no one else is stopping you. So there's nothing normal about it.

Alex: And even though Charlie believed in the case he was making, deeply believed in it, he also understood that what he was proposing? It's a huge deal. Taking this massive global corporation that had done one thing very well for decades—essentially, extracting and selling oil and gas—you can't do that anymore. You gotta do something else.

Charlie Penner: Transitioning to renewables is really difficult. So it's not to say that there's some easy—there's not like a switch sitting on the CEO's desk saying, you know, flip the switch to renewables. I mean, they are not wrong when they say it's a challenge. I feel like we kind of went to great lengths to make clear that we understand that the challenge facing you is incredibly difficult, right? As difficult as has faced any company in any industry. You are where you are and the choices right now are difficult.

Alex: Difficult choices that, to Charlie, were still necessary. The question was, would enough of Exxon's investors agree? Now watching all this unfold was another person—someone we talked to in our last episode about all this, Boris Khentov, senior vice president of operations and sustainable investment at Betterment. Listeners to our last episode about this topic will remember that, spurred on by my co-host and our mutual friend, Dr. Ayana Elizabeth Johnson, Boris had been hard at work figuring out how to provide a climate-friendly investing portfolio for his clients at Betterment. And he'd actually met folks from Engine No. 1, so he was aware that Charlie was out there trying to unseat some of Exxon's board members.

Alex: And what were you thinking at the very beginning of that, as they were sort of starting to make that case? What did you think the chances of success were?

Boris Khentov: Slim. It's a blue chip stock. There are a lot of old school retail investors holding it that aren't down for this whole, like, climate justice agenda, right?

Alex: Right.

Boris Khentov: To them this is all like, you know, my grandma gave me a share of Exxon and, like, I'll be damned if I, you know, fall in on this, like, woke climate stuff. Like, this is—right? And so it was a tough persuasion act. But fundamentally, who they had to persuade were the big institutional investors.

Alex: And you could argue that the big institutional investor Charlie most needed to bring on board, was the company we mentioned earlier: BlackRock. Of the big three asset managers, Blackrock is the biggest. It has $9-trillion under management, and a lot of that's our money. The retirement savings of millions of everyday people, socking money away month after month in our 401(k)s or IRAs. And all of our money, as well as all the other money that BlackRock has under management, has made it a massive force in finance. It's one of the largest shareholders, if not the largest shareholder, in almost every company in the S & P 500. BlackRock alone controls nearly seven percent of Exxon. That's one company controlling more than one out of every 20 votes. If Engine No. 1's resolution was to pass, they needed BlackRock on board.

Alex: But how receptive would Blackrock be to Engine No. 1's pitch? Well, as it happens, there were people who'd been working completely independently of Engine No. 1 for years, to prepare BlackRock to actually listen to a pitch like this. Coming up after the break, the tiny non-profit from Australia that took on the world's largest asset manager.


Alex: Welcome back. When we left off, it was 2021. We were in the midst of Engine No. 1's insurgent shareholder campaign to install new leadership at Exxon. And we'll come back to that campaign in a bit, but first I want to go back in time a little, to about three years earlier. And I want to talk specifically about a letter, a letter that comes out every year. It's wonky, full of finance lingo, written by someone most people have never heard of. But this someone happens to be one of the most powerful players in global finance. His name is Larry Fink, and he's the CEO and founder of BlackRock.

Diana Best: I cannot overstate how important Larry Fink's annual letter is to the finance community.

Alex: This is Diana Best. She's the senior finance strategist for The Sunrise Project, an environmental non-profit. And quick sidenote, this is not the Sunrise Movement that we've talked about on the show before, the group that occupied Nancy Pelosi's office, demanding a green new deal. This is a completely different group—The Sunrise Project. Anyway, Diana says BlackRock's CEO Larry Fink is a very big deal, even though lots of people outside the world of finance have never heard of him.

Diana Best: He's really held as this extremely smart, sort of eye on the longer game, moral guy, And BlackRock was sort of seen as this non-problematic—you know, if there was any good guy on Wall Street, it would be them. So his letter carries a lot of weight within a very specific niche group of people. However within that group, many of whom control, you know, the world's economy, what he says really matters.

Alex: And Diana and her colleagues had noticed something that seemed to be missing from these statements that Larry Fink issued over the years: a serious discussion of climate change. And that struck them as odd. Larry Fink had built a massive business around helping people save for long-term goals like retirement. It seemed odd that he rarely mentioned what to a lot of people seemed like one of the biggest long-term threats out there: climate change.

Diana Best: So the fact that he wasn't talking about climate change spoke volumes, right? Like, he's not talking about it, we're not talking about it. Not a thing we need to talk about.

Alex: And so, starting back around 2018, several years before Engine No. 1 was launching its insider campaign to change the leadership at Exxon, Diana Best and The Sunrise Project decided to start a campaign that was similar in spirit—a campaign to get Larry Fink to start talking about climate change, and use his tremendous power and influence to force action on it. And as unlikely as Engine No. 1's campaign might have seemed, Diana's campaign seemed even more so.

Alex: So you joined The Sunrise Project in 2018 and, like, the goal is to target the largest asset manager in the world, with many trillions of dollars of assets under management. How many trillions did you guys have?

Diana Best: Oh, no, we're close. Yeah, we're a nonprofit out of Australia. So when you talk about David versus Goliath, yeah.

Alex: [laughs] Millions? Did you have millions?

Diana Best: I don't—I don't know. I doubt it. Yeah, our campaign certainly did not.

Alex: So it was like, did you have hundreds of thousands? Was it hundreds of thousands versus trillions? Or was it tens of thousands versus trillions?

Diana Best: I would—yeah, who knows? Hundreds of thousands, probably.

Alex: Okay.

Diana Best: And with that, you know, our collective power with all of the groups combined, maybe we broke that million mark that first year. Because we do have some, like, fantastic, you know, partners that are a part of us, some of the big, heavy hitters in the climate movement, like Sierra club and Amazon Watch and Friends of the Earth. So we didn't do it alone, but yeah, certainly going up against a multi-trillion dollar financial institution that has the ear of every Wall Street investor, you know, cozy relationships with government, you name it. It was certainly an interesting and daunting task.

Alex: Diana started by launching a global campaign called "Blackrock's Big Problem," the campaign pointed out all the ways that various companies whose shares BlackRock managed were contributing to climate change. And they put out a stern call to BlackRock to work more aggressively to get those companies to change.

Diana Best: That, of course, didn't lead to changes by the company right away. For the most part, we were dismissed, ignored. You know, and that's where I think our tactics started to escalate a little bit. So you had people flyering outside of BlackRock offices and BlackRock headquarters in New York. You had people showing up to BlackRock's annual shareholder meeting, where Larry Fink and the rest of the board were there to deliver on the financials of the business and ba da boom, ba da bing, it's done, we'll be wrapped up. And all of a sudden you had people showing up and asking questions about how they're going to approach climate issues, and what they're planning on doing about their massive holdings in coal oil and gas companies. And I think that's where, you know, we started to see a little bit of shift or movement from "We're gonna ignore all of these climate activists," to "Oh, wait. This isn't going away."

Alex: And then in 2019, Diana said she noticed a big change.

Diana Best: If you remember the sort of story that was sweeping the world in the summer of 2019 was the unchecked fires that were happening in the Amazon basin. Everyone was paying attention to this.

[NEWS CLIP: Firefighters no match for flames this ferocious and this intense.]

[NEWS CLIP: The French leader called the wildfires an international crisis. Macron tweeted, "Our house is burning, literally."]

[ARCHIVE CLIP, Greta Thunberg: This is a clear sign that we need to stop destroying nature, and our war against nature must end.]

Diana Best: Devastating loss. It felt out of control. I think a really major tipping point for our campaign was very quickly groups on the ground, national and international climate organizations, journalists were starting to draw the connection between those fires, the companies behind—that were behind the deforestation that was happening in the Amazon. And then very quickly who were the investors in those companies. And of course, no surprise, BlackRock rose to the top. So all of a sudden we had BlackRock protests popping up all over the world.

[ARCHIVE CLIP, protester: I tried to glue myself to the building of BlackRock.]

[ARCHIVE CLIP, protester: BlackRock is the worst in terms of investing in coal, in gas, in oil.]

Diana Best: Truly faster than we could get in touch with people, people were coming to us and saying, "You're BlackRock's Big Problem." I mean, it just hit and spread around the world so quickly.

[ARCHIVE CLIP, protester: An American general said recently, "If you don't like change, you're gonna like irrelevance a hell of a lot less." That is the case. If you're underwater, Mr. Fink, that is what irrelevance will look like, so change your policies now.]

[ARCHIVE CLIP, protester [singing]: BlackRock's funding fracking, pipelines.]

Diana Best: And I think that was really the first time where we saw that this was bigger than just a single campaign that we were running from our own small groups and small network of BlackRock's Big Problem, to something that really touched so many different people. And people felt like they could make a difference by showing up at this company, and demanding that they, you know, take more action in the companies that were responsible for these fires.

Alex: In the months that followed the summer of protest, Diana started to notice the pressure stepping up on BlackRock in other ways as well.

Diana Best: We saw a noticeable change in the way that reporters and financial journalists were talking about BlackRock. Larry Fink had gone from being this good guy of Wall Street to journalists really asking hard questions about BlackRock's climate record. And I think that really started to get under their skin. And we noticed a very significant change in that. The second thing I want to point to is we saw some of BlackRock's big international clients either making very public statements around their concern around BlackRock's voting record on climate issues. Going so far as the Japanese state pension fund actually took money out of BlackRock because of their failure to take aggressive climate action, and put it into another asset manager.

Alex: Whoa!

Diana Best: So all of a sudden you had this other motivation, which was oh, my gosh, BlackRock's actually seeing client loss because of this failure to really take their climate responsibility seriously.

Alex: And then, on January 14, 2020, Larry Fink, BlackRock's CEO, released a bombshell. Like he did every year, he published his annual letter to the CEO's of the companies in BlackRock's portfolio. But unlike in past years, this letter did not avoid the topic of climate change—it put it front and center. "Dear CEO," it started. Quote, "As an asset manager, BlackRock invests on behalf of others, and I am writing to you as an advisor and fiduciary to these clients. The money we manage is not our own. It belongs to people in dozens of countries trying to finance long-term goals like retirement. And we have a deep responsibility to these institutions and individuals—who are shareholders in your company and thousands of others—to promote long-term value. Climate change has become a defining factor in companies' long-term prospects." The letter went on to describe all the ways climate, finance and corporate profits were interwoven, culminating in this sentence that said investors are increasingly, quote, "Recognizing that climate risk is investment risk."

Alex: With that one sentence, Larry Fink had gone from barely mentioning climate change in these letters, to saying climate change was central to what BlackRock did. Not surprisingly, this letter was big news, and Larry Fink was all over the financial press.

[ARCHIVE CLIP, Andrew Ross Sorkin: Always good to see you. So this letter, you think, is the most important letter you've ever written.]

[ARCHIVE CLIP, Larry Fink: Well, it was the hardest letter I've ever written. And I do believe I became more emotional as I wrote it about what we need to do. And more importantly, the reflection on my 40-odd years of being in finance. And I was thinking about all the different crises we've dealt with in my career. And it's very clear to me, the physical changes that we may see with climate change are more permanent. We can't—we don't have a federal reserve to stabilize a world like in the five or six financial crises that occurred during my 40 years in finance. This is bigger. It requires more planning. It requires more public-private connections together to solve these problems. And I do believe many of these problems could be solved, but the actions have to begin now.]

Alex: Were you expecting that letter?

Diana Best: I wish I could say yes we were, we had eyes a hundred percent on it. We were so plugged in. But that would be a lie. We were completely floored when we started to read this letter, just how much was included in it. And I want to remind you that this came out at two in the morning my time. I had colleagues from Europe texting me and calling me constantly, like, "Get up, get up, get up, get up, get up." Like, "You need to respond to this really quickly."

Alex: Yeah.

Diana Best: And so it's now really hard to go back and remember just how different this position was when they came out with that letter in 2020, and where they had been publicly all of 2019.

Alex: What role—if any—Diana Best and The Sunrise Project played in Larry Fink's decision to write that letter is probably impossible to say. BlackRock declined to talk to us on tape for this podcast, but over email they suggested there were many factors, including their own internal modeling that showed just how dramatic the financial impact of climate change would be on things like property values, crop prices and energy demand. Whatever prompted the letter, it was here now. And there was one section in particular that pertains to the story we are telling today. A section at the very end that was targeted directly at the leadership of the companies in BlackRock's portfolios. The sentence read, quote, "We will be increasingly disposed to vote against management and board directors when companies are not making sufficient progress."

Alex: In other words, "Management, if you're not serious about this stuff, we're gonna use our vote to change direction." When Diana read this sentence, she was like, "Fantastic! We have a list of climate-related shareholder resolutions that you guys should vote on if you are serious about this.

Diana Best: And we were like, "Wonderful. Here are the key climate resolutions and director votes that are coming up this year. This is it. Like, you're serious about this, here's the list." And what we found and our—again, our close partners at Majority Action, a US-based shareholder advocacy group, what they found was, of the 36 climate-critical resolutions that companies faced in the US this year, BlackRock voted for three.

Alex: Oh. [laughs]

Diana Best: That's it.

Alex: To paraphrase, [sad trombone]. Now some might see this as BlackRock engaging essentially in greenwashing—talking a big game when it comes to climate, but then not following up that talk with action. But BlackRock had shown it was willing to vote against management on climate issues. In fact, in 2017, it voted against Exxon, supporting a shareholder resolution that required the company to basically start planning for a world where greenhouse gas emissions are regulated.

Alex: Boris Khentov at Betterment says there's maybe a more charitable way to look at this. For one, BlackRock is a massive financial institution, not prone to sudden large changes in how it operates. And two ...

Boris Khentov: It is strategically fraught for these giant asset managers to flex these muscles and draw attention just to how powerful they're getting.

Alex: Right.

Boris Khentov: Because, because they're managing $15-trillion on our behalf. Like, the Big Three: State Street, Vanguard, BlackRock are holding about 20 percent of every company.

Alex: To be specific, that's 20 percent of every public company. The big three don't own 20 percent of the laundromat down the street. But the point is, they own a huge stake in the world's biggest companies. And, says Boris ...

Boris Khentov: That number is only growing.

Alex: Wow!

Boris Khentov: Like, that was, like, 10 percent maybe a decade ago, right? And so as this power keeps growing, and as their ESG promises to the public are putting them in an impossible position where they can no longer stay passive.

Alex: Right.

Boris Khentov: That's a very concerning thing, that three democratically unelected portfolio managers that run $15-trillion just change the leadership of a company.

Alex: And they themselves were worried about that. They themselves were worried about flexing those muscles, because they didn't want to have the world notice how powerful they were.

Boris Khentov: Exactly. They don't want to attract attention to just how much power they're wielding. They'd rather pretend like they don't have it.

Alex: Whatever was behind BlackRock's three out of 36 voting record in 2020, this was where things stood when Charlie Penner and Engine No. 1 launched their shareholder-led board coup attempt at ExxonMobil. And the big question was: how would BlackRock vote? And for the months leading up to the big shareholder meeting, when the official tally would be announced, BlackRock didn't say. But Exxon seemed worried about how the vote would go. They reportedly spent more than $35 million blanketing shareholders with appeals to reject Engine No. 1 and stick with their own board recommendations. They also added more board members, increasing the board size to 12, thereby diminishing the voting power of any new board members. And they announced a $3-billion investment in a low carbon solutions venture, mainly focused on carbon-capture projects.

Alex: And then, a day before the meeting, news broke that BlackRock was voting with Engine No. 1. Engine No. 1's campaign had moved from the longshot category, to leaning towards victory. But still, nothing was certain. And then finally, the day of the big shareholder meeting arrived.

[ARCHIVE CLIP, automated announcement: Morning and welcome to ExxonMobil's 2021 annual meeting of shareholders. This broadcast will be ...]

Alex: So the actual day of the shareholder meeting, you spoke right at the beginning of that meeting, and you said—one of the things you said was, "The investment community still too often treats the acceptance that humanity will drive itself off a cliff as hard-headed realism or sound business sense." [laughs] That's quite a thing to say.

Charlie Penner: That's why you shouldn't write stuff at, like, two o'clock in the morning.

Alex: [laughs] No, I like it. What were you trying to do with that, with your words?

Charlie Penner: Well, first of all, I wrote it not knowing if we were gonna win, and I didn't want to have to write two things. So I wrote something that would work in any scenario. I guess what I was most directly kind of talking about is you have a lot of people, particularly like talking heads and things who will say, like, "Well, you know, sorry, but you just have to be practical. And the world needs this much oil and gas, and these are the returns for renewables. And, you know, sorry, but this is just hard-headed realism. And, like, it is not hard-headed realism to consign humanity to the worst possible outcomes of climate change, even from a financial perspective. So, you know, that was, I guess, the most direct kind of sentiment I was responding to, is there's nothing hard-headed or realistic about throwing up your hands and saying, "Sorry, but this is the path we're on, and we're gonna blow through three degrees and then four degrees and five degrees." Like, that's not hard-headed, that's idiotic.

Alex: At some point during that day, Exxon halted the meeting.

[ARCHIVE CLIP, ExxonMobil shareholders' meeting: Given there are a considerable number of votes still coming in, and we want to ensure all of our shareholders have the opportunity to express their views, we will now take a one hour recess and resume at 11:15 ...]

Alex: Do you remember that moment?

Charlie Penner: Yeah, I remember.

Alex: Now Exxon told us in an email that they decided to pause the meeting because they said they were concerned that their shareholders were unfamiliar with the voting process, and might not take all the steps needed to properly cast their votes. So they say they were calling shareholders to explain the procedures. Charlie, though, has a different take on what those calls were about—a take he ended up sharing with the world.

[ARCHIVE CLIP, newscaster: We're joined by Charlie Penner on the phone. He's the head of active engagement for Engine No. 1, which is an activist seeking to ...]

Alex: And at one point, you called—you went live on CNBC, right?

Charlie Penner: Yeah. Well, yeah, because, you know, it's kind of hard to get people's attention on a quick basis, so it seemed to make sense. And just—you know, because we knew that directors of the company were calling people, trying to get them to change their votes. And most people at least have CNBC on in the background. I find a lot of people don't actually have the volume on, but they at least have the screen up.

[ARCHIVE CLIP, newscaster: Why are you upset by this delay in getting those results?

[ARCHIVE CLIP, Charlie Penner: It has a very banana republic feel to call the meeting, put it on hold for an hour. We're aware that directors of the company are calling large shareholders and trying to get them to switch their votes. They're doing a tactic called the "whittle down," where they ...]

Charlie Penner: And so if they saw something about the meeting while they're on the phone with the company, maybe they'd look up and listen. So it's kind of desperate, but yeah, that's what we did.

Alex: So you went on directly. Like, it was like a channel basically, if some big investor somewhere is—you're worried that Exxon is calling them, you want to be talking to them too, basically. And the way you could do that was through CNBC. Because you figured CNBC is probably on. That's amazing!

Charlie Penner: It was better than just, like, you know, yelling at the computer screen. I mean, it gave me something to do. So, yeah.

Alex: Eventually the meeting did end. And when the dust finally settled, Engine No. 1 had prevailed—well, mostly. Three of Engine No. 1's four directors were voted onto the board. Only one, the former wind CEO, didn't make it on. Exxon CEO Darren Woods was interviewed on CNBC right after the vote. He acknowledged what happened, but didn't talk like he was planning any drastic immediate changes.

[ARCHIVE CLIP, Darren Woods: Of course we'll adjust as we get new information, and we feel good about what we've got today. What we're seeing with these votes is the desire to continue to put pressure in that space and in areas where we can to accelerate that to help society move through this transition, but at the same time recognize we're going to continue to need oil and gas as societies transition. We've got to continue to support the economies and people's standards of living.]

Alex: So the impact, like, sort of narrowly on Exxon is that they have three board members that they otherwise wouldn't have had.

Charlie Penner: Yeah.

Alex: What do you expect the impact on Exxon to be, of this big campaign and these new board members? How's that gonna change things?

Charlie Penner: You know, to kind of come back to where we started, you know, this was a company that for a long time has acted in many ways as an obstacle to energy transition, and that has been because they don't have a long-term business plan for anything other than a world of continued growth in oil and gas production. If these directors can help the board give this company a reason for being in 20 or 30 years, and it can actually hopefully move this company from being an obstacle to the energy transition, to being an active and potentially, you know, very successful participant in the energy transition. Is that—as I again said at outset, is that easy? No, but it's certainly better than them pursuing a long-term business plan that doesn't make sense, quite frankly, for shareholders, of excessive spending on oil and gas production growth. And that doesn't make sense for the planet in terms of being a drag on progress.

Alex: Boris Khentov agrees, and actually he says, the impact of all this goes far beyond just Exxon.

Boris Khentov: Because every corporate boardroom in America right now is whispering and buzzing and asking their lawyers, "What does this mean?" I mean, I'd been talking to some old colleagues—I used to be a corporate lawyer. I've been talking to some friends that are sustainability consultants at big four accounting firms. It's sent ripples all across corporate America because the rules have changed. Like, this wasn't supposed to be. You couldn't do this. Like, the big three were never going to support something like this. Clearly, they have. How much further will they go?

Alex: To Boris, this is the beginning of a new era in which we as ordinary shareholders through our index funds can have a voice in how companies are run. Right now, many of us are simply passive shareholders—we put our money in these funds that are controlled by BlackRock or Vanguard, and they historically have not tended to vote with the shareholder activists. But if they start to do that more, if ordinary investors insist that they do it more, that could be transformative.

Boris Khentov: In my mind, everyone woke up to the fact that there's a way for us to actually kind of change the course. We never thought that people could just—our index funds sitting in our 401(k)s were the swing votes that made this happen. That newfound agency is kind of transformational for individual investors.

Alex: And that newfound agency? It suggests that there's another tool in our toolkit as individual investors. Remember in our first episode about green investing, we talked about how a lot of the solutions out there focused on moving your money out of companies like fossil fuel companies, that are bad for the climate—divesting. But there is still so much of our money sitting in these big, broad, super low-fee funds. Funds like the ones managed by Vanguard and BlackRock. And what the Engine No. 1 story shows us is that this passive money, it has lots of power if the people administering it choose to use that power. And Boris says, the same way that firms have started to offer divested funds for investors who want that, they will also start to offer funds that harness the power of all this passive money as well. In fact, Engine No. 1 is in the process of launching a fund exactly like this. It's a new ETF, a fund that contains pieces of a big basket of stocks.

Boris Khentov: And the premise for this ETF is we're going to buy the 500 biggest companies in America. We're not going to screen any of them, we're not going to tilt, reweight. We're not going to, like, you know, reward the leaders or, like, punish the laggards. It's just going to be a straight S&P 500-type fund. We're gonna charge five basis points, which is dirt cheap.

Alex: Mm-hmm.

Boris Khentov: And all we're going to do is use—now that we have a position in all 500 companies, we're going to curate a handful of activist campaigns like Exxon, but now inside of an ETF. So that means if you're an individual investor and you have that ETF in your portfolio, in your 401(k) in your whatever, you are now directly supporting these kinds of campaigns that Engine No. 1 plans on launching.

Alex: In other words, this Engine No. 1 ETF looks mostly like one of those plain, boring super low fee broad-based funds that's out there. The kind that if you have retirement money invested somewhere, you likely have some of your money in it. But there's one key difference. Right now, for our money to be part of a shareholder activist campaign, we basically have to wait for the Charlie Penners of the world to launch a campaign, and hope that the Larry Finks of the world—or whoever's managing our money—eventually get on board. But what if our money could be leading these campaigns, not just passively sitting around and waiting for them to happen? That's the idea behind this Engine No. 1 fund. It looks at all the companies it owns shares in, picks a few companies that it believes could meaningfully change their long-term climate impacts, and it launches shareholder campaigns at those companies to get them to change, using the collective power of the money invested in it—our money.

Boris Khentov: I think that's so transformational because this powerful, super dramatic Exxon battle was so great, but ultimately it was the hedge fund that led it, and they convinced BlackRock, State Street and Vanguard to support it, so that's our money. Our money did support the campaigns. But don't we want to be a part of the spear, the tip?

Alex: Boris, for his part, thinks this Engine No. 1 ETF is just the beginning. He sees a whole wave of vehicles like this: super broad, super low-fee funds that use the collective power of the money invested in them to push for change in the companies that they hold.


Alex: That music can only mean one thing. It's time for the How to Save a Planet patented calls to action. We have a couple for you this week. Our first call to action is to check out this really amazing resource. It is a database that tracks all the main climate-related shareholder resolutions out there. So all the major resolutions that are focused on the climate crisis, on energy, water scarcity and sustainability, are tracked in this database. It's called the Climate and Sustainability Shareholder Resolutions Database—very appropriate name. And it is put together by a group called Ceres, C-E-R-E-S.

Alex: You should also check out the shareholder resolutions filed by the group As You Sow. This is a shareholder advocacy group who runs We talked about that database on our last episode on green investing. They also have a database of all the shareholder resolutions that they themselves have launched. You should check it out and see if you want to get involved in any of those.

Alex: Speaking of which, how do you get involved in some of these shareholder resolutions? Well, if you own stock in a company directly—not in a mutual fund—you can vote on that company's proxy ballot. To find out what resolutions are coming up for a vote, a website called the Proxy Preview offers an annual pre-season guide. If you're invested in mutual funds or ETFs like through your 401(k) you can understand how votes are being cast on your behalf by the asset managers that offer those funds. We'll throw in links to a bunch of websites that track those votes. And contact your asset manager yourself, if it's a Vanguard or a State Street or a BlackRock, encourage them to vote in support of climate-focused resolutions.

Alex: Finally, you can check out The Sunrise Project's campaign BlackRock's Big Problem—we'll link to that. And also, you can check out what BlackRock itself has to say—we'll link to Larry Fink's 2020 letter and his 2021 letter. And we'll link to their own reporting on their sustainability actions for 2020.

Alex: As always, if you do it, we love hearing from you and hearing how it went. You can contact us on all our social media @how2saveaplanet—how, the number 2, save a planet. Also you can contact us at You can also sign up for our newsletter at

Alex: How to Save a Planet is a Spotify original podcast and Gimlet production. It's hosted by me, Alex Blumberg, and Dr. Ayana Elizabeth Johnson. This episode was produced by Lauren Silverman and Rachel Waldholz. Our reporters and producers are Kendra Pierre-Louis and Anna Ladd. Our senior producer is Lauren Silverman. Our editor is Caitlin Kenney.

Alex: Sound design and mixing by Peter Leonard, with original music by Peter Leonard, Bobby Lord and Emma Munger. Our fact-checker this episode is Claudia Geib. Special thanks to Geoff Rogow, Jackie Cook and Rachel Strom. And thanks to all of you for listening. We'll see you next week!

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