Sustainable investing

The energy company Exxon Mobil had been a Wesleyan holding for many years.

In 2021, Wesleyan made the decision to divest from Exxon Mobil as the Sustainable Investment (SI) Team felt that it was not keeping pace with industry peers on ESG issues – mainly due to its response to climate change and the worldwide transition to renewable energy.

Before divesting, the SI Team voted at Exxon Mobil’s 2021 Annual General Meeting, to help the company progress its transformation journey. Team members voted to replace two of the company’s Board directors with experts in the fields of energy transition and alternative fuels. The team was pleased to see that change was made in line with its vote and the new Board Members at Exxon Mobil have brought expertise to help redefine the company’s strategy.

Since the vote, there has been significant improvement in Exxon Mobil’s approach to the sustainability of its operations, such as announcing plans to invest in low carbon energy and spending £15bn over the next six years on initiatives to reduce greenhouse gas emissions.

Even though Wesleyan decided to divest at the time, the SI Team felt it helped the company to embrace positive change.

In November 2021, two members of the Sustainable Investment (SI) Team met with an Investor Relations representative from Rio Tinto plc – the world’s second largest metals and mining corporation – to discuss a range of environmental and social issues.

This included the relationship between the company and Aboriginal Australian peoples, which had deteriorated following the tragic Juukan Gorge explosion. This event saw a 46,000-year-old sacred site destroyed by the company’s operations at the Brockman iron ore mine in the Pilbara region of Western Australia.

In the meeting, the SI Team challenged the company on the remediation measures put in place for the affected communities and its commitment on what it would do to ensure such a disaster would never reoccur.

Three months after the meeting, Rio Tinto stated that it had entered a formal agreement with the Yinhawangka Aboriginal Corporation to ensure that social values are protected during activities at its iron ore mine.

The mine’s expansion would also be designed to reduce its impacts on cultural heritage sites, and the plan will be used as a framework for future developments. It also stated that discussions regarding remediation for the destruction of Juukan Gorge were underway.

Caterpillar is a global manufacturer of construction and mining equipment, diesel and natural gas engines, industrial turbines, and diesel-electric locomotives. The team felt that Caterpillar was falling behind its peers by not setting sufficiently challenging targets for carbon emission reductions and not giving enough prominence to sustainability issues in its business strategy.

Caterpillar has responded positively to engagement, and we have seen it addressing key investor concerns. Since the Sustainable Investment (SI) Team began engagement activities, the firm has established the new leadership position of Chief Sustainability & Strategy Officer, reporting directly to the Chairman and CEO. The Board of Directors has also committed to incorporating ESG factors into the 2022 incentive plan for Executive Officers. This goes a long way to ensuring that sustainability metrics are central to the business.

The SI Team continues to work with Caterpillar to ensure further improvements are introduced. In 2022, the team was also asked to review and provide feedback on their sustainability report.