Engine No. 1 CEO details mission to help investors hold big companies accountable

Engine No. 1 CEO Jennifer Grancio joins Yahoo Finance Live to discuss the company's mission and new ETF.

Video Transcript

JULIE HYMAN: Exxonmobil made headlines yesterday by announcing it is targeting net zero emissions by 2050. One company that has pushed for-- one investor that's pushed for changes at the company is Engine No. 1. And the CEO, Jennifer Grancio, is joining us now. Jennifer, I want to talk in a moment about the bigger picture for the year.

But I do want to first get your reaction to this Exxon news. There were some sort of quibbles with the company not including sort of downstream companies it sells to, consumers it sells to in this emissions target. But overall, what's your reaction?

JENNIFER GRANCIO: Our point of view is that Exxon has made changes since our campaign a year ago, which is great. We think there's further to go. And our campaign added three independent directors to the board. And Exxon has taken steps on capital allocation discipline and emissions targets.

We think that there's farther to go. We'd love to see more targets and strategy on what happens before 2050. And we'd love to see continued progress on the scope three. But we do think they've moved a lot since we started to engage with them.

JULIE HYMAN: And, you know, to your point, 2050 is a long time away. When you look at ExxonMobil specifically and the oil and gas industry more broadly, 10 years from now, what do you think it should look like?

JENNIFER GRANCIO: We think that-- and actually, I'm going to bring this back to why did we start Engine No. 1 in the first place? And so from an investment perspective, if companies have a big social impact from a worker workforce perspective or they have a big climate impact, i.e. emissions, it's the responsibility of the CEO and the board to think about how the business is changing, how customers will hold them accountable, and the return on long dated oil and gas projects that are still 10, 20, 30 years before they pay back.

So to answer your question, we think in emissions-sensitive industries, that boards and CEOs should be having targets and should have an approach to how they're making money at 5, and 10, and 15 years. So we think we'll see more progress there.

BRIAN SOZZI: Jennifer, we cover a lot of consumer-- very large consumer products companies. We just talked to P&G's CEO this morning-- strong quarter from them. But a lot of them, arguably, are not doing enough in terms of ESG and bringing their waste down for the products that they sell. Is that another area of opportunity for Engine?

JENNIFER GRANCIO: Yeah. The way we think about it is as investors, we're an investor on behalf of other investors. So we manage assets for investors. And we think investors have an opportunity, like you would in a political election-- you have a vote. And you should use it, and use it as a way to have a dialogue with these companies.

And so our whole business is predicated on doing the work on how environmental, and social, and governance issues show up over time in the economics and the financial value of a company. So we're very active owners. We work with companies all the time. And every year, you have a chance as an investor to vote on what the company is doing.

And so that is what led us to launch the Engine No. 1 transform ETF. The ticker is VOTE. And what we do there is we work every year with companies on how are they being transparent about what they're doing and how can investors hold them accountable on making the right decisions-- and embedding the climate and the social in the workforce into how they're running the business and driving value.

JULIE HYMAN: And in terms of how that ETF is done, we've seen an increase in the price of the ETF-- basically tracks the S&P 500, but allows you to, as you say, sort of have a voice here. And you guys are also introducing some transparency measures when it comes to the votes that you're making as part of your ownership through VOTE.

In other words, you know, the whole shareholder meeting process is still swathed, to some extent, in a little-- if not secrecy, then opacity, right? And so talk to me how this is going to work on a meeting by meeting basis when you go to these and when you vote on shareholder measures.

JENNIFER GRANCIO: Yeah, so the VOTE ETF is radically transparent on how we vote shares. We think that's a problem in the asset management industry and we fixed it with the VOTE ETF. So it holds the largest 500 public companies. And every year as an investor, you have an opportunity, you have a voice to influence what those companies are doing.

So we work through that. We look at every single company every year. And what we do that's very different is we are in favor of voting for proposals where there's a climate, or social, or governance issue that we think if the company does something differently, it'll result in long-term economic value. So we go through all of them.

I thought maybe I'd share a couple of examples if that's helpful. One is Tesla, which has already had their annual meeting for the year. And if you're a VOTE shareholder, your point of view on Tesla would be that they should have a diverse workforce in terms of gender and race, because they're operating businesses in building cars and battery plants in places where there's an abundant set of diverse workers.

And so that's an example where we voted on a proposal that simply suggests that Tesla should disclose diversity of the workforce. Because if you have that information, you can understand what Tesla's doing, there's transparency, and you can hold them accountable. So that's an example of what we'll do for investors.

And what's very different than the rest of the funded ETF industry, is we then we'll disclose that immediately. You can find it on our website. And we'll even publish some sort of case studies and stories about how we come to each of these decisions. So it gives investors a voice.

JULIE HYMAN: Fascinating stuff. And really, as we've talked about before, just the beginning of this kind of wave. Jennifer Grancio, always good to catch up with you-- Engine No. 1 CEO, thanks for your time this morning.