The Inside Story of How Tiny Hedge Fund Engine No. 1 Reshaped Exxon’s Board

Though it owns just 0.02% of the company, the fund convinced big investors to vote for three new board members with backgrounds in clean energy. But will they be able to actually change how Exxon operates?

By Adele Peters

The board of ExxonMobil, the largest oil company in the United States, includes the CEO of Merck and the former CEO of Caterpillar. They now have some new colleagues: three board members that the fossil fuel company didn’t want — and who plan to push for a coherent plan to address climate change. That’s thanks to Engine No. 1, a hedge fund that didn’t even exist a year ago.

Chris James, the investor who launched the investment firm in late November 2020, isn’t a climate activist. In fact, in the mid-2000s, James helped open a new coal mine to try to bring jobs back to his Midwestern hometown. But his experience as an investor — including the failure of the coal mine around 18 months later because of the changing economics of the energy system — helped him better understand the business case for companies to improve their social and environmental impact. Engine No. 1 describes itself as “purpose-built to create…