EXCLUSIVE: An asset manager overseeing nearly $100 billion divested from Exxon on concerns it is failing to move fast enough to address climate change

  • Kempen Capital Management, a European investor with $99 billion in assets, has sold its Exxon stake over climate concerns.
  • Exxon has come under increasing investor scrutiny for lagging behind rivals in tackling the energy transition.
  • Other investors are selling out, Dimitri Willems, senior portfolio manager, told Insider.
  • Visit the Business section of Insider for more stories.

Kempen Capital Management, an Amsterdam-based asset manager with over €79.1 billion ($99 billion) in assets under management, offloaded its stake in Exxon Mobil in 2020 over concerns related to shareholder engagement, the firm told Insider.

Kempen, among the largest asset managers in the Netherlands, divested a $22.5 million stake in December because Exxon failed to engage with shareholders that were pushing the oil and gas producer to set more rigorous climate targets and invest more in renewable energy, said Dimitri Willems, a senior portfolio manager at Kampen. Other Exxon investors have expressed similar concerns and may also soon divest their holdings, he said.

“We were invested in Exxon and we sold it with the main reason being that they were not open for engagement, at least not as much as the European ones,” Willems said. “This was not only our experience, but also that of other investors.”

Exxon has come under increased scrutiny from shareholders in recent months over its climate goals, which lag behind Europe’s largest oil companies, including BP and Shell.

Some investors have been actively pushing the company to create more rigorous climate-related policies, while others have pursued divestments. In October, the Church of England Pensions Board divested its shares from the company, citing similar concerns, Bloomberg reported. 

Exxon declined to comment on Kempen’s divestment. Spokesperson Ashley Alemayehu pointed Insider to the company’s energy and carbon report, a blog post by vice president of investor relations Stephen Littleton, and other public comments. 

“Our risk-management approach recognizes the central role that policy will play in mitigating climate risks,” Littleton writes in the post. “We’ve been significantly expanding shareholder engagement for the past five years, and in 2019 we held more than 85 engagements with investors, pension funds, and other organizations on environmental, social, and governance issues.”

Exxon’s stock tanked in 2020, following the collapse in oil prices, and for the first time ever the company reported four straight quarters of losses, amounting to more than $22 billion for the full year. The oil producer’s shares are up more than 20% since January 1.

The company’s largest shareholder is Vanguard Group, which owns a $17.04 billion stake, according to Bloomberg data. Its 344.39 million shares equate to an 8.15% stake, although this is below a peak of 366.95 million in the first quarter of 2020.

Kempen tried to engage with Exxon on climate over a number of years

Kempen Capital Management originally bought a $22.22 million stake in Exxon in the fourth quarter of 2017, boosting that to $28.98 million in the third quarter of 2018, according to public disclosures. 

“We initially acquired Exxon for our portfolio years ago because we found the valuation quite attractive and we were hoping for a positive engagement,” Willems said. “But it did not work out that well — they weren’t really open for engagement or for change,” he added.

As a “starting point,” Kempen looks for a commitment to the Paris Agreement and a 2050 net-zero emissions target for its companies, he said. The firm also looks for shorter-term targets, actionable targets.

“Paris is the starting point for us, but between Paris and now, we want short-term proof and actual evidence that they are changing. But this should all be in a manageable and a profitable way — that is also key,” he said.

Exxon has said that it supports the goals of the Paris Agreement, but it has not pledged to reduce its emissions down to net-zero by 2050.

Kempen’s engagement with the management of oil and gas companies is central to its ability to invest from the perspective of its commitment to owning environmental, social, and governance-compliant assets.

“We think that as an investor, it gives you the possibility to talk to those companies, to those senior management teams, and also to share your views and insight with those teams,” Willems said. “We strongly believe that’s the better way of trying to change those companies.”

Kempen tried to engage with Exxon over more than two years, but little resulted from those efforts, he said. 

“If we notice that our engagement is not fruitful and it’s not getting any results — and we were seriously willing to give it a couple of years — we’re not afraid to take action,” he said. “We disposed of our position in Exxon as a result of non-successful engagements.” 

Kempen isn’t the only shareholder frustrated by the lack of engagement, Willems said, adding that other investors are also selling out of the stock. He declined to comment on who these other investors are.

Exxon’s new climate policies are “too little too late”

Exxon has responded to investor pressure late last year by upping its climate-related disclosures and pledges to reduce emissions. In December, the company said it would reduce the carbon “intensity” of emissions stemming from oil and gas operations by up to 20%. Carbon intensity refers to the emissions per unit of energy.  

Exxon also made commitments to reduce the flaring of methane, and announced a new business focused on low-emissions technologies including carbon capture. 

But investors are pushing the company to do more. At the end of January 2021, Insider reported the Irving, Texas-based company was facing calls from investors, led by BNP Paribas Asset Management, to disclose in more detail how it shapes US climate policy through lobbying. Activist firms Engine No. 1 and D.E. Shaw are also pressing Exxon for change. 

“At least there’s something now — but you can’t compare it to the European ones, which are at the forefront in the transition to renewable energy,” Willems said of Exxon’s recent climate-related announcements.

All major European oil companies have pledged to reduce their emissions to net-zero by 2050 and are invested in transition technologies like carbon capture and renewables. Exxon’s US peers are also making significant commitments to the shift to renewable energy sources.

In January, Occidental Petroleum announced a plan to build a large-scale direct-air capture plant, removing carbon dioxide from the atmosphere and pumping it underground. The investment is expected to cost hundreds of millions of dollars, Bloomberg reported.

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