Francis Scialabba
- The activist group that won two board seats at Exxon last month is launching an ETF.
- The fund is explicitly aimed at retail investors, and will vote on corporate matters related to ESG goal.
- The new ETF comes as the SEC is evaluating its role in regulating the growing universe of ESG investments.
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Engine No. 1, the activist group that fomented a coup against Exxon and won two seats on the board of the oil giant last month, announced an ETF designed to exert ESG pressure on corporate management of the 500 biggest American companies.
Engine No. 1 said the ETF, trading under the ticker VOTE, will seek to passively replicate a Morningstar large-cap index while offering a near-zero expense ratio, much like other low-cost index funds. The twist is that VOTE will actively wage shareholder campaigns against corporate management on ESG issues.
"There shouldn't be a trade-off between positive impact and financial performance," said Yasmin Dahya Bilger, Engine No. 1's head of ETFs, in a statement. "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."
The fund is explicitly aimed at retail investors, both with its 0.05% expense ratio and its crusading pitch for ESG goals. The ETF has a $100 million initial investment and backing from robo-advisory firm Betterment.
In May, Engine No. 1 won a milestone victory against Exxon, rallying shareholders to secure two of four director seats against the oil giant's wishes. The activists owned a minuscule fraction of Exxon stock, but won over big shareholders like Blackrock with a climate-focused push.
The new ETF comes as the SEC is evaluating its role in regulating the ever-expanding universe of ESG investment products. In a speech on Tuesday, Commissioner Elad Roisman said calls for the SEC to standardize ESG disclosures may be premature.
"I worry that by stepping in to promulgate a static list of ESG disclosure requirements, the SEC would displace a good amount of this private sector engagement and freeze disclosures in place prematurely," he said.
"The proliferation of ESG disclosure frameworks suggests that the standards have not yet settled."