By R. Paul Herman, founder and CEO of HIP Investor, a team of experts in sustainable and profitable growth that use a framework to measure human, social and environmental impacts of products, processes and portfolios — and to measure the results for positive impact. HIP stands for Human Impact + Profit -- positive human impact being what Herman believes is the only focus that will maximize profitability.
If you own mutual funds or participate in a pension fund, chances are you’ve got a piece of ExxonMobil – whether you want it or not. News from the oil giant’s recent annual meeting isn’t good, but we’ve got strategies you can use to send Exxon a message -- as a shareholder and a consumer. Here’s the situation. This week, shareholders of ExxonMobil, second largest firm in the world, with $372 billion in revenue last year (topped only by Wal-Mart), ceremoniously rejected proposals to become more HIP. Several measures falling short of shareholder support would have created the mandate to up ExxonMobil’s HIP factors (Health, Wealth, Earth, Equality, Trust), such as:
- Increasing renewable energy research (27% support by shareholders)
- Reducing greenhouse gas emissions more aggressively (31% support)
- Splitting the CEO from the Chair role so it can be more independent of management and responsive to overall shareholder concerns (39.5% support)
- Supporting non-discrimination by sexual orientation and gender identity (39.6% support) (ExxonMobil is the only major oil company to avoid this policy)
This news is no surprise. In a HIP analysis of Big Oil companies in the February 2008 issue of Fast Company magazine, ExxonMobil ranked second to last among US-based energy companies (only Valero was worse). Contributing to this low score was extensive lobbying (including opposing the science of climate change) and the worst greenhouse gas emissions performance by volume and ratio of any top-ten energy company. So how HIP is ExxonMobil? Not very. The HIP 'management practices' score rated a 10 out of 25, and its 'impact' score, incorporating Health, Wealth, Earth, Equality and Trust, a 39 out of 100. As a HIP Investor, what can you do to change companies, including ExxonMobil?
- Vote your proxies. As a shareholder, you can vote on the proposals of any company you hold, including the components of your mutual funds. In fact, most investors (through ETFs, mutual funds, or pensions) own ExxonMobil and many other energy companies, which have delivered 20% to 50% annual financial returns since the beginning of the Iraq war.
- If you drive, buy gas from HIP energy companies. Oil prices have climbed to $130 per barrel, based on increasing world demand from China and India, and supplies that have not kept pace with this growth. If you don't walk, bike or take public transit, you are filling up your tank often enough at $4 per gallon (or more) to "vote" as a consumer. Next time you fill up, seek out a HIP energy provider like Shell (and avoid Exxon, Mobil and Valero).
- Engage the portfolio managers of your mutual funds. Do you own an oil company in your mutual fund? Probably, according to an analysis promoted by "the people of American's oil and natural gas industry." Details of this study are EnergyTomorrow.org, which is run by the energy trade association American Petroleum Institute. (To see the analysis Click here (pdf)) But as an investor, you are a partial owner. So what can you do? Call, email, fax or write your portfolio manager to influence their decisions to allocate the overall weighting. Encourage them to evaluate renewable energy and reconsider fossil-fuel energy firms.
- Consider renewable energy companies for your portfolio. According to the Associated Press, CEO Rex Tillerson has claimed that XOM's "corporate social responsibility" is only to produce more fossil fuels for our energy future. You can invest your portfolio in renewable energy companies in solar (SunTech, SunPower, FirstSolar, JA Solar), wind (Vestas Wind Systems) and others. In fact, many renewable companies outperformed fossil energy firms in 2007 – and most have remained competitive in 2008.
- Tell Big Oil what you want. Call, email, write or fax a letter to Investor Relations, the Executive Offices or Customer Service. Ask Big Oil to become "Big Green Energy," pursue bio-plastics, lease efficient vehicles to customers, scale renewable fuel sources, and sell variety at the pump. See more Big Green Energy ideas here.
Listen to the Big Oil podcast featuring Paul Herman of HIP and Sara Olsen of SVT interviewed by co-author Amy Feldman of Fast Company.