BlackRock backs dissident's nominees in rebuke to Exxon

BlackRock Inc, Exxon Mobil Corp's second largest shareholder, has voted for three of four director candidates nominated by hedge fund Engine No. 1, contrary to the oil company's advice, people familiar with the matter said on Tuesday.

BlackRock, the world's largest asset manager, has a 6.7% stake in Exxon, according to the company's proxy. Its vote signals investors have grown much more serious about fighting climate change, adding pressure to Exxon and other oil companies.

Exxon declined comment until after voting results are disclosed on Wednesday. It has spent tens of millions of dollars to oppose their election. The top US oil producer, has been calling shareholders including Vanguard and State Street to support its slate of 12 directors, other people said.

Engine No. 1 has a stake worth only about $50 million in Exxon, a company with a market capitalization of about $250 billion, but its traction with BlackRock underscores the importance investors are giving to environmental, social and corporate governance (ESG) factors. The hedge fund has criticized Exxon, saying its returns lag the industry and it is not moving fast enough to reduce its carbon footprint.

Exxon holds its annual shareholder meeting on Wednesday and investors have the option of changing their votes until then.

The International Energy Agency (IEA) has said investors should stop funding new fossil fuel projects if they want to cut greenhouse gas emissions by 2050.

BlackRock did not respond to a request for comment.

The sources requested anonymity because BlackRock does not publicly disclose how it casts its vote ahead of time.

The final vote could turn on Exxon's three largest investors -- Vanguard, State Street and BlackRock. Vanguard owns about 8.2% of the Exxon's stock while State Street owns 5.7%. Vanguard will not disclose its decision before the meeting, a spokesman said on Tuesday.

BlackRock has been more willing than Vanguard and State Street to back dissident investors, analysts have said. Its decision could prove critical to securing one or more seats for Engine No.1's nominees.

Engine No.1 proposed four directors -- Gregory Goff, Kaisa Hietala, Alexander Karsner and Anders Runevad -- with expertise in energy, technology and regulatory policy. BlackRock supported all but Runevad, the people said. Exxon has said the four do not have the expertise needed for its board.

BlackRock also voted for Exxon Chief Executive Darren Woods and lead director Kenneth Frazier, the people said. A year ago, it voted against Frazier and for splitting the chairman and CEO roles.

The California-based hedge fund won the backing of three large pension funds and other investors dissatisfied with Exxon's efforts to chart a clean energy strategy. Exxon's past dismissal of governance and climate concerns also cost its support, investors have said.

Three proxy advisory firms that guide how investors vote backed the hedge fund's slate. Institutional Shareholder Services recommended three of Engine No.1's candidates while Glass Lewis backed two of the hedge fund's candidates.

Exxon pledged on Monday to add two new board members with energy and climate expertise within 12 months. Exxon's share price has climbed 45% since the start of the year. The stock was off 2% at $58.30 at midday on Tuesday.