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Sustainable Investing

Making Progress Toward Sustainability: An Exxon Case Study

The business case for how engaging with management helped orient Exxon toward implementing a sustainability plan.

By David Byrns, CFA, Brandon McKinzie

Key Takeaways

Until recently, we believed that Exxon had little interest in developing a plan to reduce CO2 emissions.

Our engagement, alongside efforts from other investors, led to the appointment of new directors who prompted Exxon to adopt a sustainability strategy.

Exxon’s business has grown since it adopted its sustainability plan, showing that progress doesn’t compromise the bottom line.

In 2020, the CEO of Exxon Mobil said something that caught our attention.

Darren Woods told investors that competing oil and gas companies’ pledges to reduce carbon dioxide (CO2) emissions would do little to solve the climate change crisis. Woods called his rivals’ emissions-reduction promises nothing more than a “beauty competition” that Exxon would ignore as it sought other strategies to address the industry’s impact on climate change.1

The American Century Global Value team interpreted his comment as Exxon's lack of commitment to the energy transition. In the years since, however, we think Exxon has adopted a more serious approach to sustainability within its operations and in addressing the broader climate issue.

American Century's Global Sustainable Value team thinks Exxon is attractive because it's transitioning to sustainability for its business operations. Exxon also exemplifies how Global Sustainable Value applies its key performance indicators (KPIs) to evaluate whether to invest in a company and how our engagement with management can guide its progress toward sustainability.

We believe the result is a more sustainable and, at its core, a better-run business.

Our Journey with Exxon: From Disinvestment to Engagement

The American Century Global Value team has followed Exxon since the team's inception in the early 1990s. In 2016, we believed Exxon made questionable investments in high-cost assets in the U.S., Russia and Canada, saddling the company with an asset portfolio that we deemed to be of lower quality than its peers. We were also concerned about the company's strategic vision, especially its lack of focus on and planning for the energy transition.

Woods' "beauty competition" comment in 2020 and our evaluation of the company at the time left us doubtful that the company had adopted a meaningful energy transition plan.

Exxon’s Sustainability Pivot: How Investor Activism Catalyzed Change

We doubted Exxon’s willingness to craft a sustainability plan because we had previously asked company management how it would react to an activist investor seeking to influence change. Exxon’s response suggested it would resist an activist investor’s maneuvering.

But in February 2021, an activist investor tested the company. Engine No. 1, a small hedge fund and an unlikely foil for a behemoth like Exxon, took a stake in the oil and gas company. The hedge fund went public because Exxon’s management had dragged its feet on addressing climate change.

It appeared that Engine No. 1 had brokered some level of dialogue with Exxon’s board of directors, leaving us with the impression for the first time in five years that investors could influence the company to improve its strategic direction. We initiated a position in Exxon in 2021 and coalesced around the push to make Exxon a more sustainable company.

Later that year, investors nominated a slate of directors keen on lowering Exxon’s emissions. A close proxy vote resulted in three new directors on Exxon’s board — directors we supported — marking a surprising turn in favor of the energy transition and sustainability. The proxy vote was close enough that we believe new directors wouldn’t have reached the board without votes from shareholders like us.

Exxon’s Energy Transition Acceleration: Net-Zero Goals and Strategic Investments

The events of 2021 quickly redirected Exxon’s focus toward the energy transition. In January 2022, the company announced a plan for net-zero Scope 1 and Scope 2 greenhouse gas emissions by 2050. Woods, who had been dismissive of emission pledges two years earlier, said that Exxon was “committed to playing a leading role in the energy transition” and “developing comprehensive roadmaps to reduce greenhouse gas emissions from our operated assets around the world.”2

Exxon has launched aggressive goals to reduce emissions in the Permian Basin, the highest-producing U.S. oilfield. In 2023, Exxon announced plans to acquire Pioneer Natural Resources, a top oil producer in the Permian Basin. Upon announcing the acquisition, Exxon accelerated Pioneer’s net-zero emissions target from 2050 to 2035, which is expected to close in the second quarter of 2024.

Exxon also announced a corporate plan to spend $17 billion on lower-emission investments to reduce greenhouse gas emissions from its operations and that of its customers.

Exxon’s Sustainable Growth Story: Doubling Share Value Amid Energy Transition

Exxon’s business hasn’t suffered during its sustainability journey. It trades at around $115 a share and its balance sheet is as strong as ever as the company approaches a net cash position. It sustains its franchise with a deep reserve base. The portfolio of assets, which we soured upon in 2016, has improved with new investments in Guyana, the Permian Basin and liquified natural gas.

Exxon has outperformed relative to the MSCI World Value benchmark by 40%, plus dividends, since 2021, when the company was pushed toward the energy transition.3 It has outperformed peers over the same period, besting Chevron by 30% and Shell and TotalEnergies by 15% each.4

To us, Exxon is a rich example of why we believe Global Sustainable Value’s approach works:

  • We invest in companies overlooked by the market for their progress toward sustainability.

  • We actively engage with management teams to ensure that companies we invest in continue their sustainability journeys.

  • We can escalate our engagement to reorient companies toward the targets we set for them in our KPIs.

  • Our investment targets become better-run enterprises due to their business model progression.

Driving Sustainable Progress: Our Proactive Engagement Approach

Global Sustainable Value actively engages with companies like Exxon. With some companies, we escalate our engagement to ensure that they continue to make progress toward sustainability, whether through proxy voting or, in some cases, board-level conversations.

As part of our well-defined engagement plan, we identify KPIs for each company that set a baseline for improvement and allow us to measure progress toward sustainability. Figure 1 details some of the specific KPIs we developed for Exxon.

Figure 1 | Monitoring Exxon’s Carbon Footprint

Representative KPIs we evaluate to determine the company’s progress toward sustainability

Data from 2018 – 2023. Source: Exxon, American Century Investments.

We have defined specific, relevant and measurable KPIs for all portfolio holdings. Our goal is to engage and partner with our investee companies on their transition journeys.

David Byrns, CFA
David Byrns, CFA

Portfolio Manager

Senior Investment Analyst

Brandon McKinzie

Brandon McKinzie

Client Portfolio Manager

Discover more about our Global Sustainable Value capabilities.

Kevin Crowley, “Exxon CEO Calls Rivals’ Climate Targets a ‘Beauty Competition,’’ Bloomberg News, March 5, 2020.

Nermina Kulovic, “ExxonMobil Joins Pledge for Net Zero in Oil & Gas Operations by 2050,” Offshore Energy, January 18, 2022.



Many of American Century’s investment strategies incorporate sustainability factors, using environmental, social, and/or governance (ESG) data, into their investment processes in addition to traditional financial analysis. However, when doing so, the portfolio managers may not consider sustainability-related factors with respect to every investment decision and, even when such factors are considered, they may conclude that other attributes of an investment outweigh sustainability factors when making decisions for the portfolio. The incorporation of sustainability factors may limit the investment opportunities available to a portfolio, and the portfolio may or may not outperform those investment strategies that do not incorporate sustainability factors. ESG data used by the portfolio managers often lacks standardization, consistency, and transparency, and for certain companies such data may not be available, complete, or accurate.

Sustainable Investing Definitions:

  • Integrated: An investment strategy that integrates sustainability-related factors aims to make investment decisions through the analysis of sustainability factors alongside other financial variables in an effort to make more informed investment decisions. A portfolio that incorporates sustainability factors may or may not outperform those investment strategies that do not incorporate sustainability factors. Portfolio managers have ultimate discretion in how sustainability factors may impact a portfolio’s holdings, and depending on their analysis, investment decisions may not be affected by sustainability factors.

  • Sustainability Focused: A sustainability-focused investment strategy seeks to invest, under normal market conditions, in securities that meet certain sustainability-related criteria or standards in an effort to promote sustainable characteristics, in addition to seeking superior, long-term, risk-adjusted returns. Alternatively, or in addition to traditional financial analysis, the investment strategy may filter its investment universe by excluding certain securities, industry, or sectors based on sustainability factors and/or business activities that do not meet specific values or norms. A sustainability focus may limit the investment opportunities available to a portfolio. Therefore, the portfolio may underperform or perform differently than other portfolios that do not have a sustainability investment focus. Sustainability-focused investment strategies include but are not limited to exclusionary, positive screening, best-in-class, best-in-progress, thematic, and impact approaches.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

References to specific securities are for illustrative purposes only and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.

No offer of any security is made hereby. This material is provided for informational purposes only and does not constitute a recommendation of any investment strategy or product described herein. This material is directed to professional/institutional clients only and should not be relied upon by retail investors or the public. The content of this document has not been reviewed by any regulatory authority.