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Arjuna Capital: Encouraging Socially Conscious Policies Through Shareholder Proposals

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Clarence L. Polk

• January 22, 2024

Arjuna Capital, a sustainable-investment firm founded by Natasha Lamb and Farnum Brown, is making waves in its mission to encourage major corporations to adopt more socially conscious policies. Recently, the firm found itself at the center of a lawsuit initiated by Exxon Mobil Corp., seeking to block a shareholder proposal on climate change.

Arjuna Capital's mantra, "divest from old problems; invest in new solutions," embodies their objective to help clients invest in ways that align with their financial wellbeing and contribute to the health of society. Inspired by their study of yoga, the founders named their fund after a figure in the Hindu scripture Bhagavad Gita.

The investment strategy employed by Arjuna Capital is commonly known as environmental, social, and governance (ESG) investing. It has gained significant popularity over the years. As of May 2023, the firm managed $374 million in assets, as reported to the Securities and Exchange Commission.

Arjuna Capital has been active in filing shareholder proposals at major companies such as Amazon.com Inc., Microsoft Corp., Visa Inc., and Tesla Inc. These proposals advocate for changes related to pay equity, board diversity, and sexual harassment policies within these organizations.

While such proposals may not always result in immediate success, they have the power to influence corporate policies by compelling executives to respond. In a remarkable turn of events in 2021, Exxon Mobil faced a significant defeat when a small hedge fund named Engine No. 1 won two board seats, advocating for a more proactive clean-energy strategy.

In the same year, a proposal initiated by Arjuna Capital for clearer sexual harassment policies at Microsoft received support from 78% of shareholders.

Farnum Brown, the fund's chief strategist based in Durham, N.C., has been actively involved in sustainable investing since its earliest days in the late 1980s.

Arjuna and Exxon Mobil Enter Legal Battle over Shareholder Proposal

Arjuna, a prominent figure in ESG (Environmental, Social, and Governance) investing, is facing a lawsuit from Exxon Mobil regarding a shareholder proposal. The lawsuit, filed in federal court in Texas, accuses Arjuna of pursuing an "extreme agenda" and intentionally seeking to hinder Exxon Mobil's business operations.

The backlash against ESG investing has been steadily increasing, with even Republican presidential candidates criticizing its practices. Rep. Jim Jordan of Ohio subpoenaed Arjuna's communications with the Vanguard Group as part of a wider investigation into ESG investing.

Arjuna's specific shareholder proposal, which was filed in December, emphasizes the need for Exxon Mobil to make significant strides in reducing emissions. Interestingly, Dutch investment firm Follow This, known for its sustainable-investment goals, swiftly joined the proposal. Exxon Mobil argues that the proposal should be dismissed under SEC rules due to its similarity to a previously rejected proposal.

Exxon Mobil's annual meeting is scheduled for May 29th, adding urgency to the legal battle. While Arjuna has not yet provided a comment on the matter, Follow This denounced Exxon Mobil's lawsuit as an attempt to impede shareholders from exercising their rights. They also criticized Exxon Mobil's lack of imagination in failing to see the potential for renewable energy as a replacement for fossil fuels.

This legal dispute showcases the ongoing tension between ESG investors and traditional energy companies like Exxon Mobil. As ESG investing continues to gain momentum, clashes like these are likely to become more commonplace.