Fresh off its AGM victory against energy giant Exxon, activist investor Engine No. 1 unveiled its Total Value Framework, launching a white paper detailing its data-driven approach linking companies’ ESG impacts to their valuation.
Engine No. 1 rose to ESG investment fame in its successful battle to win seats on Exxon’s board, aiming to push the oil and gas giant to act on the emerging global energy transition to clean and renewable sources of energy. The campaign gained backing from numerous high-profile investors including CalPERS, CalSTRS and the New York State Common Retirement Fund, and BlackRock.
Developed in collaboration with The Wharton School Professor of Management Witold J. Henisz, Engine No. 1’s framework integrates ESG data into mainstream financial reporting and attempts to understand and accurately predict how ESG performance affects future valuations.
Chris James, founder of Engine No. 1, said:
“Through our prior investing experience, we had seen strong correlations between ESG impacts and economic outcomes. When we used newly available data in our analysis, it became clear that these correlations are consistent for most companies, proving that ESG data is as core to the investment process as financially driven analysis. This framework, when applied to capital allocation, brings common sense back to capitalism itself.”
According to Engine No. 1, the framework drives the firm’s investment decisions, enabling the firm to focus on how the value delivered to stakeholders affects the value a company delivers to its shareholders, while identifying environmental and social actions companies to increase shareholder value.
Jennifer Grancio, Chief Executive Officer of Engine No. 1, said:
“The Total Value Framework finally makes sense of all of these ESG criteria and will help identify and maximize high-value impact opportunities that lead to improved financial value. There should not be a tradeoff between impact and returns, and the framework’s analysis shows the significant financial upside of material, high-impact actions. This framework unites CEOs, board members, investors and those seeking impact.”
Click here to view Engine No. 1’s white paper detailing its Total Value Framework