Long Form White Paper - ESG Activism

The Potential & Limitations of Activist Investing as a Mechanism for Corporate Reform

Introduction: Millennials are looking for more than profits when it comes to their investments. An increasing plurality of investors have been looking at investment portfolios as vehicles for social change—often by seeking to “divest” from companies with harmful policies on climate change, unscrupulous corporate governance issues, or other socially harmful practices.[1] This has driven the rise of a $14.5 million dollar “divestment market,” with companies like MSCI, BlackRock, and Morgan Stanley creating a suite of “socially responsible” exchange traded funds (“ETFs”) that invest only in those companies that have met certain environmental, social, and governance (“ESG”) benchmarks.[2]  

While the market share of ESG-focused companies has increased over the last decade, in failing to reach a critical mass, divestment has allowed purely profit driven investors to reap the profits the socially conscious have forgone.[3]  While divestment has pushed certain ESG priorities into the mainstream, it has not led to the dramatic industry changes its founders envisioned.[4]

This has given rise to the idea of investing in morally unscrupulous companies in order to effect change from the inside out. In 2021, Engine No. 1 went public with the first U.S. ETF with the objective of using corporate voting laws to “harness the power of investors[] to create good jobs, reverse climate change, fight gender and racial injustice, and build an economy that is sustainable, inclusive, and prosperous.”[5]  This was a radical shift away from the divestment movement. Rather than abstaining from investments in companies that fail to meet ESG standards, Engine No. 1 set out to purchase shares of these companies to change policies internally.

This paper assesses the potential of this type of investor activism to effect meaningful ESG reforms. It argues that Engine No. 1’s Model is limited to issues that can be shown to have a significant impact on a corporation’s profitability. This limits the prospect of effecting meaningful change where the cost of action is easier to quantify than the cost of inaction. However, if investors are willing to risk short term profitability for the sake of long-term sustainability, investor activism has the potential to effect more meaningful reform.

This paper finds that while there is some potential for for-profit activism to bring about environmental reforms (at least in those cases where there is a clear link to diminished profitability), there are four limitations to its potential to effect meaningful change on social and governance issues: 1) the difficulty of getting shareholders to vote on matters that appear counter to their short-term self-interest; 2) the lack of robust and uniform ESG disclosure requirements; 3) shareholders’ lack of access to, and engagement in, the proxy voting process; and 4) the lack of competition between big corporations.

The paper concludes by recommending strategies that center on non and not for profit entities to increase the potential of investor activism as a catalyst for ESG reform.

Activist Investing & Engine No. 1: Activist investing is the practice of buying a significant stake in a publicly traded company, in order to exert influence over the way the company is run. There are typically two strategies employed to effect this outcome. The first is a hostile takeover (buying a majority interest in a corporation against the wishes of its board of directors.)[6] As you can imagine, this is an expensive and risky endeavor, particularly when dealing with high emissions companies like Exxon Mobil and BP, with market capitalizations of more than $398 billion, and $98 billion, respectively.[7] The other strategy is to mount a “proxy challenge” to sitting directors through statutorily required annual shareholder meetings.[8] During a proxy challenge, new candidates are advanced against those directors whose terms are up for renewal that year.[9] If the majority of shareholders vote for the new candidates, they take those directors’ seats on the corporation’s board. Until recently, this strategy was exclusively employed by hedge funds and the extremely wealthy, for the purpose of increasing their bottom line.[10]

In recent years, there has been a push for investor activism to advance an entirely different prerogative: forcing companies to enact environmental and socially conscious policies and reforms. This trend garnered significant attention when investment group Engine No. 1 used proxy challenges to place three climate focused directors on Exxon Mobil’s Board in 2021.[11]

Rather than requiring an investment of >$130 billion via a hostile takeover, Engine No. 1 mounted its proxy challenge holding a mere 0.02% interest in Exxon (roughly $50 million at the time).[12] The hedge fund spent just $12.5 million on the proxy challenge that succeeded in getting 3 of its 4 proposed directors on Exxon’s board.[13] The strategy was twofold. First, it found a company that was ripe for reform—both in terms of the ESG issue in question (here climate change), as well as financially (Exxon’s stock value had plunged by 40 percent in 2020, with its market valuation dropping by more than $120 billion.)[14] Second, it tailored its messaging to focus on the intrinsic link between these two issues, arguing it would be “strategically smarter for Exxon Mobil to be part of an energy transition, rather than letting itself be outstripped by other companies innovating to meet demand for low-carbon power.”[15] This message resonated with the majority of shareholders, who voted in favor of three of their four proposed directors.

It’s important to note that, even if Engine No. 1 had won all 4 seats, this would have netted just 1/3 of Exxon’s board.[16] In an effort to insulate itself from the challenge, the board added two new seats in the months leading up to the challenge.[17] Even if Exxon hadn’t made this defensive shift, Engine No. 1 stood to flip just 40% of the board.[18] Corporations typically stagger the terms of their boards, to prevent a majority from being up for re-election at the same time.[19]

The Difficulty of Reforming Companies with the For-Profit Model: While Exxon was ripe for reform (in terms of profitability as much as policy), it is not as clear that less environmentally harmful corporations have the same recipe for success. Take tech companies as an example. In contrast to Exxon, these companies often beat the market by significantly large margins.[20] The strategy is further complicated by the existence of dual classes of shares in companies like Google and Facebook, where common shareholders can be outvoted by those holding preferred or “super-voting” shares.[21]

This is not to say that such efforts aren’t worthwhile. Gaining even just one seat at the table has the potential to incrementally advance ESG policies, but in these cases the influence will typically be secondary, much like the effects of the divestment movement discussed above.

The Profitability Problem: Even absent the challenges posed by dual class voting structures, the key limitation to Engine No. 1’s model is that it is completely driven by profitability. This necessarily limits the type of policies that it is equipped to change. Climate change is having an impact on profitability across the globe, both in terms of the increasing costs associated with extreme weather patterns, and policies enacted to meet international commitments to limit emissions.[22] This makes it a somewhat easy target for reform. When you are looking at social and governance issues like racist coding, or the dissemination of misinformation, it is not as easy to tie the issue to profitability.

As Rhua Benjamin points out, “coded inequity” is both “desirable and profitable to a wide array of social actors,” because “it appears to rise above human subjectivity.”[23] Yet, when a historically racist system is the source of the code, that code typically reinforces the inequity that has worked to privilege its authors.[24] To meaningfully address social and governance issues in large corporations, a majority of predominantly white male shareholders would need to vote against their self-interest (even if the issue itself is not against their financial interest). For example, voting a single diverse candidate to a board of directors can be seen as “good in itself,” and thus, the good press of this type of action might advance profitability. However, one seat is unlikely to change the course of corporate directives. A more meaningful solution would be to seek a majority minority board. Yet, this would require shareholders to vote in favor of system that challenges the social hierarchy they are benefiting from.

When it comes to matters like revising algorithms that promulgate divisiveness and misinformation, the harm to profitability is even more direct.[25] Facebook has repeatedly declined to change its algorithms in order to slow down the spread of misinformation, ostensibly because its internal studies have shown that its spread increases user engagement, the primary driver of the company’s profitability.[26] Reform in this arena would likely require shareholders to vote against, not just their independent self-interest, but also against the financial interest of the corporation. Thus, in contrast to climate change, meaningful social and governance reforms here is often counter to shareholders’ financial interest.

ESG Disclosure: In addition to the issue of profitability, there is also the issue of disclosure of ESG matters. Technically, publicly traded companies are required to disclose potential liability for any pending litigation under 17 CFR § 229.103. However, the rule has been watered down with numerous exceptions for immateriality, management’s reasonable beliefs, whether the government is a party to the litigation, the amount of relief sought, etc.[27] It’s true that a growing number of public corporations are opting to provide ESG information in their annual financial statements, in a push to attract the increasing number of socially conscious investors. Issues like climate risk, the quality and diversity of the board, sustainable supply chains, and cybersecurity are now routinely included within investment advisers’ and asset managers’ due diligence.[26] Yet nearly all ESG disclosures are voluntary, and there is no standard metric for ESG benchmarks.  As such, there are significant limitations to their effectiveness.[27] While there can be serious repercussions for “material misstatements” or omissions in SEC disclosures, it is easy for corporations to paint a rosier than reality picture of their business practices with the information they voluntarily disclose. Moreover, these disclosures are routinely made in the form of internally determined forward-looking “aspirations,” “goals,” and “targets,” which are protected from liability under SEC Safe Harbor rules, and offer little by way of guidance to investors when comparing one corporation to another.[28]

There has been a push for the passage of uniform global ESG metrics over the last several years, with the World Economic Forum releasing a whitepaper on the creation of consistent reporting metrics in 2020.[29]  These metrics are centered around four primary pillars: 1) Principles of Governance: with metrics assessing a company’s purpose, strategy, and accountability,” including “criteria measuring risk and ethical behavior”; 2) Planet: with metrics assessing “a company’s dependencies and impact on the natural environment,” including criteria for “greenhouse gas emissions, land protection, and water use”; 3) People: with metrics assessing “a company’s equity and its treatment of employees,” including “diversity reporting, wage gaps, and health and safety” disclosures; and 4) Prosperity: with metrics assessing “how a company affects the financial well-being of its community,” including “employment and wealth generation, taxes paid, and research and development expenses.”[30]

Since Biden’s inauguration, there has been a push to enact similar disclosure rules here in the United States. Around the same time as Engine No. 1’s debut, the House of Representatives passed the ESG Disclosure Simplification Act which, if passed by the Senate, would require corporations to provide annual disclosure of SEC defined ESG metrics (likely in line with those proposed by the World Economic Forum), and the way that these correlate with the corporation’s long-term business strategy.[31] Legislators hope that these disclosures will equip investors with the information needed to exert pressure on corporations that are not advancing these prerogatives. While the prospect of the bill passing under the current Senate isn’t particularly inspiring, SEC Chair Gary Gensler has signaled that the SEC plans to promulgate ESG disclosure standards, with or without Congress’s help.[32] The European Union is also in the process of implementing its own ESG disclosure standards, based on “new rules setting out minimum technical requirements for the methodology of EU climate benchmarks” that were adopted by the European Commission in July of 2020.[33]

In the meantime, a growing number of industries are adopting their own ESG standards. For example, a group of Private Equity investors with more than $4 trillion in combined assets “has agreed on what it expects will become the first standardized set of ESG reporting metrics for the private equity industry.”[34] While there is reason to be skeptical of the robustness of the standards set forth by the very industry they’re aimed at regulating, this is still a significant step away from the voluntary ESG disclosure regime of the last decade. In competitive markets, we can expect corporations to self-regulate these disclosures to some degree, which is likely to result in even greater disclosure over time. However, we are typically not dealing with highly competitive markets.  This limits the potential for self-regulation from the major players in a particular industry.

Unfortunately, Engine No. 1 has been lukewarm regarding the prospect of mandatory disclosures based on World Economic Forum’s proposed metrics, calling them “too detached from the financial value assigned to companies,” and advocating instead for its own “Total Value Framework” which seeks to monetize ESG performance in order to “integrate ESG factors into mainstream financial analysis.”[35] However, two years later, the firm has done little to explain just how its metrics like “Human Rights” and “Diversity/ Inclusion” will be monetized.[36] A metric that seems particularly ill-suited for issues like racist coding, where the “downstream” and “upstream “costs” of the harm to marginalized communities is difficult to quantify.[37]

Shareholders Access & Engagement in the Corporate Voting Process: While Engine No. 1 argued that “the problem isn’t passive investing, it’s passive ownership,” when the market cut a loss, so did its penchant for ESG activism.[38] For a firm that argued that other ESG investment strategies “shift an investor’s exposure away from companies that need to change,” Engine No. 1 has done little to “ harness the power of investors in a new way” as it promised back in 2021.[39] Engine No. 1 appears to have been hamstrung by the same metric that has limited the divestment movement’s potential. 

It will always be easier to predict the costs of tangible ESG reforms than their savings. The unpredictability of weather patterns, and how/when/where storms will strike is a prime example. Such unpredictability renders the costs of climate change difficult to project.  Conversely, the costs associated with a clean energy transition are far easier to quantify.  Yet, if we can inspire donors to environmental nonprofits, niche investment funds, and other passive investors to get on board with a long-term activist strategy, we might be able to use investor activism to hasten the passage of meaningful corporate reforms. Greater ESG disclosure would work to aid these groups in assessing the appropriate targets.

Absent a large-scale organization of likeminded environmental organizations and investment groups, the greatest challenge to investor activism is getting passive investors to vote their corporate shares.

Any ESG disclosure regime is based on the premise that common shareholders have access to, and are engaged in, the corporate voting process. Thus, the thinking goes, providing the public with more meaningful ESG disclosures will equip them with the information to make informed decisions about the companies they invest in.  In reality, only a small proportion of the population votes on the shares that they own. Individual investors owned 29% of shares in 2020, compared to 71% held by institutional investors. However, while institutional investors voted 92% of the shares they held in 2020, just 28% of individual investors voted their shares during the same period.[40] What’s more, these institutional investors often vote the shares held in pension funds and 401k plans, the average beneficiary of which has no input on the way that these shares are voted.[41] While certain groups have successfully lobbied their retirement plans to divest from fossil fuels, it is not as easy to lobby for more nuanced activist investor voting strategies.

Lack of Competition in Big Companies: Perhaps the greatest obstacle to investor activism is the lack of competition between companies. Big tech is perhaps the most poignant example. A decade ago, innovators dreamed of being the “next Facebook.” Today, the typical tech startup dreams of being “acquired by Facebook.” This shift has been driven in large part by the Federal Trade Commission (“FTC”) and Department of Justice’s (“DOJ’s”) reluctance to enforce antitrust laws against vertical integration.

Historically, vertical integration was a strategy used by companies to “control their own suppliers, distributors or retail stores in order to control their value or supply chain.”[42] Vertical integration can occur through mergers, acquisitions or research and development (creating your own system) where you would have otherwise outsourced the goods and services in question.[43] This is typically not considered an antitrust violation, which, in more traditional corporations, tends to make sense. If you are Walmart, and decide to acquire two small-scale shipping companies, it is hard to say that this threatens competition in the same way that acquiring Target and Kohl’s would.

However, with large tech companies and their ever-increasing business models, it is not as easy to draw lines between what is, or might one day be, competition. These companies are typically defined by the free services they provide to their users. For example, when Facebook acquired Instagram, it ostensibly did so to broaden the “services” that it provides to its users. However, if you look at it from a business model perspective, the purpose of both companies was essentially the same: to provide their “paying customers,” with personalized advertisements from the information that they harvest from their users (or, in some cases, providing them with that information for their own personal use).[44] In these acquisitions, the acquired company is young enough that this goal has not yet been realized. For example, at the time Facebook acquired Instagram, Instagram was not yet “competition.” Despite having a similar business model for paying customers, Instagram had not yet realized its full business model. The FTC and DOJ have opted not to view this practice as an antitrust violation, so tech companies are able to buy out potential competition with impunity.

In addition to the issues posed by vertical integration, there are also issues with actual lack of alternatives. Search engines are made better by the amount of people using them. Google has been the clear frontrunner in this arena, so while there are other search engines they are generally found less effective by users.[45]  Until the recent boom in Bing’s AI and Chat GPT, the most commonly searched term on Bing was “Google.”[46] If we accept that the best way to improve users’ experience is to have more people use the search engine in order for it to improve over time, then for there to be effective competition users would need to settle for a sub-par user experience in the interim. To make matters more challenging, companies like Google and Facebook make it exceedingly difficult to untether your life from their services. For example, if you used your Facebook account to create your Venmo account, or your Google account to establish an account with Nike, deactivating or deleting these accounts comes with the added complication of being unable to access these other accounts.

This lack of competition hurts incentives for these companies to create their own ESG disclosure regime, let alone improve on it competitively over time. Even if there were robust and meaningful ESG disclosure within the Big Tech Space, without meaningful competition, it is not clear that negative disclosures on social and governance issues would depress profitability. Without depressed profitability, it is unlikely that a company like Engine No. 1 would be able to exact the same outcome as in the Exxon scenario (and even that, feels more like smoke and mirrors now that so little has changed, nearly three years later). Without dramatic changes to the antitrust enforcement regime, it is left to the users of these platforms to boycott unethical companies / develop ethical companies to evolve to one day compete with them.[47]

Some Concluding Thoughts: While there is potential for activist investing to hasten corporate environmental reforms, for-profit models are constrained by the projected financial burden of meaningful changes. Unfortunately, the cost of inaction on social and governance issues is even more difficult to quantify. Convincing a majority of shareholders to vote against their self-interest, either directly via costs to the entity (as in slowing the flow of misinformation), or indirectly via the risk to an average shareholder’s social status (as in combatting issues of racist coding through seeking to have majority minority board control), is an equally difficult feat.

With that said, the creation of a robust mandatory ESG disclosure regime will provide the public with information that has the potential to make social and governance issues less profitable. For example, if disclosures of serious mismanagement encourage large swaths of the population to stop using Facebook, this has the potential to link these issues to profitability in a way that the Engine No. 1 model requires. The difficulty of this strategy is that, unlike in Exxon where there are competitors that consumers can choose, the lack of antitrust enforcement against tech companies, and the difficulty of disentangling your online presence from these entities, makes boycotting these companies incredibly difficult for the average user.

Short of breaking up big companies, the onus will remain on the general public to try to effect better social and governance practices. Investor activism has the potential to drive these changes, if we can find ways to circumvent the profitability problem. Recently there have been efforts to make the Proxy voting more accessible to retail investors. More individual engagement on corporate proxy voting is one strategy available to the public. Enabling individuals to vote shares, and fractional shares held on their behalf by mutual funds would also equip the public with the ability to effect more meaningful social and governance reforms.  However, the best strategy likely lies in the creation a coalition of cross border stakeholders to hasten the adoption of meaningful ESG reforms. Non and not-for-profit companies are arguably the best equipped to hasten the adoption of these changes, by advocating for share voting agreements and the creation of nonprofit activist funds. 

[1] David Carlin, The Case For Fossil Fuel Divestment, Forbes.com (Feb. 20, 2021, 12:11PM), https://www.forbes.com/sites/davidcarlin/2021/02/20/the-case-for-fossil-fuel-divestment/?sh=fe59ebe76d22.

[2] Id; As you Sow, Comparative Tool of Mutual Funds and ETFs Comparing Fossil Fuel Investments, Fossil Free Funds,  https://fossilfreefunds.org/funds?dsc=false&q=morgan+stanley&srt=c2f5coogutweight (last visited Dec. 14, 2021); Alana Benson, Best ESG Funds: High-Rate and Low-Cost Options, NerdWallet (Nov. 5, 2021), https://www.nerdwallet.com/article/investing/best-esg-funds.

[3] Todd Schifeling & Andrew J. Hoffman, How Bill McKibben’s Radical Idea of Fossil-fuel Divestment Transformed the Climate Debate, TheConversation.com (Dec. 11, 2017, 9:50 PM), https://theconversation.com/how-bill-mckibbens-radical-idea-of-fossil-fuel-divestment-transformed-the-climate-debate-87895.

[4]  Id.; See also Todd Schifeling & Andrew Hoffman, Bill Mckibben’s Influence on U.S. Climate Change Discourse: Shifting Field-Level Debates Through Radical Flank Effects, ResearchGate   (Nov. 2017), https://www.researchgate.net/publication/321410116_Bill_McKibben%27s_Influence_on_US_Climate_Change_Discourse_Shifting_Field-Level_Debates_Through_Radical_Flank_Effects Publication, 2017, discussing the “positive radical flank effects,” of divestment strategies, whereby the existence of a “radical extreme” on a particular position works to normalize the policy’s more moderate counterpart, making the latter more likely to achieve its objectives.

[5] Engine No. 1, https://etf.engine1.com/?_ga=2.261339662.243504454.1639371724-1143142297.1639371723 (last visited Dec. 14, 2021) on the strategy behind the Transform 500 ETF (ticker: VOTE); Bob Pisani, A New ETF is Trying to Make a Movement Out of Activist Investing, CNBC (Jun. 23, 2021, 6:34 AM), https://www.cnbc.com/2021/06/23/a-new-etf-is-trying-to-make-a-movement-out-of-activist-investing-.html.

[6] Cornell Law School, https://www.law.cornell.edu/wex/hostile_takeover (last visited Dec. 14, 2021).

[7] CompaniesMarketCap.com, Exxon Mobil (XOM) - Market capitalization (companiesmarketcap.com) (last visited Jan. 24, 2024); CompaniesMarketCap.com, BP (BP) - Market capitalization (companiesmarketcap.com) (last visited Jan., 24, 2024).

[8] Cornell Law School, https://www.law.cornell.edu/cfr/text/17/240.14a-8 (last visited Dec. 14, 2021); DEL. Code Ann. tit. 8, § 211; Model Business Corporation Act § 7.01. MBCA § 7.01.

[9] Id.

[10] See Jessica Camille Aguirre, The Little Hedge Fund Taking Down big Oil, N.Y. Times (Jun. 23, 2021), https://www.nytimes.com/2021/06/23/magazine/exxon-mobil-engine-no-1-board.html; Matthew J. Belvedere, How the Icahn-Ackman ‘Battle of the Billionaires’ on CNBC Became a Defining Moment of the Decade, CNBC (Dec. 13, 2019, 10:33 AM),  https://www.cnbc.com/2019/12/13/reliving-the-carl-icahn-and-bill-ackman-herbalife-feud-on-cnbc.html.

[11] Jessica Camille Aguirre, The Little Hedge Fund Taking Down Big Oil, N.Y. Times (Jun. 23, 2021), https://www.nytimes.com/2021/06/23/magazine/exxon-mobil-engine-no-1-board.html.

[12] Samantha Subramanian, Engine No. 1: The Little Hedge Fund That Shook Big Oil, Quartz (May 28, 2021), https://qz.com/2014413/engine-no-1-the-little-hedge-fund-that-shook-exxonmobil/.

[13] Svea herbst-Bayliss, Little Engine No. 1 Beat Exxon With Just $12.5 mln-Sources, Reuters (Jun. 29, 2021, 3:45 PM), https://www.reuters.com/business/little-engine-no-1-beat-exxon-with-just-125-mln-sources-2021-06-29/.

[14] Jessica Camille Aguirre, The Little Hedge Fund Taking Down Big Oil, N.Y. Times (Jun. 23, 2021), https://www.nytimes.com/2021/06/23/magazine/exxon-mobil-engine-no-1-board.html.

[15] Id.

[16] Id.

[17] Id.

[18] Id.

[19] WestLaw.com, https://content.next.westlaw.com/7-382-3831?__lrTS=20210211144601058&transitionType=Default&contextData=(sc.Default)&firstPage=true (last visited Dec. 14, 2021).

[20] Paul R. La Monica, Proof Big Tech is Way Too Big: It’s a Quarter of Your Portfolio, CNN (Jan. 6, 2021, 8:37 AM), https://www.cnn.com/2021/01/06/investing/stocks-sp-500-tech/index.html; Timothy Green, S&P 500 Index Rises Thanks to Big Tech, The Motley Fool (Jul. 31, 2020, 4:52 PM), https://www.fool.com/investing/2020/07/31/sp-500-index-rises-thanks-to-big-tech.aspx.

[21] Corporate Financial Institute, What are Dual-Class Stocks?, CFI, https://corporatefinanceinstitute.com/resources/knowledge/finance/dual-class-stocks/ (last visited Dec. 14, 2021).

[22] Jessica Camille Aguirre, The Little Hedge Fund Taking Down Big Oil, N.Y. Times (Jun. 23, 2021), https://www.nytimes.com/2021/06/23/magazine/exxon-mobil-engine-no-1-board.html.

[23] Ruha Benjamin, Race after Technology: Abolitionist Tools for the New Jim Code, p 109. Polity Press, 2019. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ucla/detail.action?docID=5820427

[24] Id. https://ebookcentral.proquest.com/lib/ucla/reader.action?docID=5820427&query=Race+After+Technology+Abolitionist+Tools+for+the+New+Jim+Code#

[25] Sheera Frenkel, Key Takeaways From Facebook’s Whistle-blower Hearing, N.Y. Times (Oct. 5, 2021), https://www.nytimes.com/2021/10/05/technology/what-happened-at-facebook-whistleblower-hearing.html; Daniel E. Slotnik et al, Whistle-Blower Unites Democrats and Republicans in Calling for Regulation of Facebook, N.Y. Times (last updated Oct. 5, 2021),  https://www.nytimes.com/live/2021/10/05/technology/facebook-whistleblower-frances-haugen/whistle-blower-tells-congress-that-facebook-is-not-able-to-effectively-police-anti-vaccine-misinformation; Jeremy B. Merrill & Will Oremus, Five Points for Anger, One for a ‘Like’: How Facebook’s Formula Fostered Rage and Misinformation, The Washington Post (Oct. 26, 2021 at 1:04 PM),  https://www.washingtonpost.com/technology/2021/10/26/facebook-angry-emoji-algorithm/; Adrienne LaFrance, ‘History Will Not Judge us Kindly’, The Atlantic (Oct. 25, 2021), https://www.theatlantic.com/ideas/archive/2021/10/facebook-papers-democracy-election-zuckerberg/620478/.

[26] Id.: see also Danielle K. Citron & Neil Richards, Four Principles for Digital Expression (You Won't Believe #3!), 95 Washington University Law Review 1353 (2018), 1366-67. https://scholarship.law.bu.edu/cgi/viewcontent.cgi?article=1624&context=faculty_scholarship (last accessed Nov. 27, 2021) for further discussion of polarization being more likely to attract higher engagement, and further radicalization.

[27] 17 C.F.R. § 229.103.

[28] Kerie Kerstetter, Climate and Boards Part 1: Navigating the Challenges, Diligent.com (Mar. 5, 2021), https://insights.diligent.com/esg/climate-and-boards-challenges/; Mary Fetherolf, 14 Ways to Recruit for Board Diversity, Diligent.com (Oct. 2, 2020), https://insights.diligent.com/board-diversity/14-ways-to-recruit-for-board-diversity/; Kezia Farnham, 9 Benefits of Supply Chain Sustainability for Baords, Diligent.com (May 17, 2021), https://insights.diligent.com/esg/supply-chain-sustainability/; Diligent, How to Run an Advisory Board, Diligent.com (Jun. 23, 2021), https://insights.diligent.com/cybersecurity-best-practices/.

[29]Commissioner Hester M. Peirce, U.S. Securities and Exchange Commission, Rethinking Global ESG Metrics, (Apr. 14, 2021), https://www.sec.gov/news/public-statement/rethinking-global-esg-metrics.

[30] See Walmart, Fiscal Year 2021 ESG Summary, https://corporate.walmart.com/esgreport/media-library/document/walmart-2021-esg-annual-summary/_proxyDocument?id=0000017a-82c5-d7dc-ad7a-bac574130000 “This ESG reporting contains certain forward-looking statements based on Walmart management’s current assumptions and expectations, including statements regarding our ESG targets, goals, commitments and programs and other business plans, initiatives and objectives. These statements are typically accompanied by the words “aim,” “hope,” “believe,” “estimate,” “plan,” “aspire” or similar words. All such statements are intended to enjoy the protection of the safe harbor for forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended” (emphasis added); see also Wesley Bricker, U.S. Securities and Exchange Commission Investor Advisory Committee Panel Discussion, Competition and Regulatory Reform at the PCAOB, PricewaterhouseCoopers (Sept. 9, 2021), https://www.sec.gov/spotlight/investor-advisory-committee-2012/bricker-iac-written-statement-090921.pdf “PwC aspires to hire 10,000 Black and Latinx students into roles at the firm by 2026. Our goal is to help enable students from all backgrounds to have an equal opportunity to succeed, changing students’ trajectories and uplifting their communities” (emphasis added).

[31] Javier Allegue Barrios et al., Measuring Stakeholder Capitalism Towards Common Metrics and Consistent Reporting of Sustainable Value Creation, World Economic Forum (Sept. 2020), https://www3.weforum.org/docs/WEF_IBC_Measuring_Stakeholder_Capitalism_Report_2020.pdf.

[32] Id; Ken Tysian, New ESG Reporting Metrics Released by World Economic Forum, Journal of Accountancy (Sept. 22, 2020), https://www.journalofaccountancy.com/news/2020/sep/esg-reporting-metrics-environmental-social-governance.html.

[33] H.R. 1187.

[34] Isa Mirza, Congress a Step Closer to Making Corporate ESG Disclosure Mandatory, JDSupra (Jun. 28, 2021), https://www.jdsupra.com/legalnews/congress-a-step-closer-to-making-9721287/; Jason Halper et al., Investors and Regulators Turning Up the Heat on Climate-change Disclosures, Harvard Law School Forum on Corporate Governance (Oct. 4, 2021), https://corpgov.law.harvard.edu/2021/10/04/investors-and-regulators-turning-up-the-heat-on-climate-change-disclosures/ ; see also Alexandra Thornton & Tyler Gellasch, The SEC Has Broad Authority to Require Climate and Other ESG Disclosures, Americanprogress.org (Jun. 10, 2021), https://www.americanprogress.org/article/sec-broad-authority-require-climate-esg-disclosures/ discussing the arguments for and against whether the SEC can unilaterally authorize such a broad expansion of “materiality” under its current rulemaking authority.

[35] The official EU website where user can find links to implementing and delegated acts for Regulation (EU) 2016/11 on benchmarks, including equivalence decisions, https://ec.europa.eu/info/law/benchmarks-regulation-eu-2016-1011/amending-and-supplementary-acts/implementing-and-delegated-acts_en#200717

[36] Chris Cumming, Private Equity’s Biggest Players create ESG Reporting Standards, Private Equity News (Oct. 5, 2021 at 11:35 AM), https://www.penews.com/articles/private-equitys-biggest-players-create-esg-reporting-standards-20211005.

[37] Engine No. 1, A New Way of Seeing Value: Introducing the Engine No. 1 Total Value Framework, p. 26, (Sept. 2021) https://assets.contentstack.io/v3/assets/blt7a9750132fc00c75/blt59f684ce4e9f8a38/613ef6a6dadef826b2db4b2c/Engine_No._1_Total_Value_Framework.pdf; Ross Kerber, Exclusive Engine No. 1 Aims to Tie Company Valuations to Climate Impact, Reuters (Sept. 13, 2021 at 9:09 AM), https://www.reuters.com/business/sustainable-business/exclusive-engine-no-1-investment-framework-aims-tie-company-valuations-climate-2021-09-13/.

[38]Engine No. 1, A New Way of Seeing Value: Introducing the Engine No. 1 Total Value Framework, p. 30, (Sept. 2021), https://assets.contentstack.io/v3/assets/blt7a9750132fc00c75/blt59f684ce4e9f8a38/613ef6a6dadef826b2db4b2c/Engine_No._1_Total_Value_Framework.pdf.

[39]The volatility of the market has led to near radio silence from Engine No. 1 founders over the last two years. See also Businesswire, Engine No. 1 Transform 500 ETF (Ticker: VOTE) Will Launch to Drive Positive Impact Through Voting and Active Ownership, Businesswire (Jun. 22, 2021, 7:30 AM), https://www.businesswire.com/news/home/20210622005330/en/Engine-No.-1-Transform-500-ETF-Ticker-VOTE-Will-Launch-to-Drive-Positive-Impact-Through-Voting-and-Active-Ownership.

[40] Id.

[41] ProxyPulse, 2020 Proxy Season Review, https://www.broadridge.com/_assets/pdf/broadridge-proxypulse-2020-review.pdf.

[42] Id; see also Jeff Benjamin, Proxy Voting Adds ESG Leverage to Retirement Plans, Investmentnews.com (May 4, 2021), https://www.investmentnews.com/proxy-voting-adds-esg-leverage-to-retirement-plans-206081 “Mutual fund investors, as indirect investors, do not directly own shares of a publicly traded company inside a fund and are not allowed to cast proxy votes on shareholder proposals..”

[43] Elijah Ajuwon, Apple Silicon: Why Tech Giants Engage in Vertical Integration, tcsnetwork.co.uk (Sept. 8, 2020), https://www.tcsnetwork.co.uk/apple-silicon-why-tech-giants-engage-in-vertical-integration/.

[44] Id.

[45] BBC, Facebook’s Data-sharing Deals Exposed, BBC.com (Dec. 19, 2018), https://www.bbc.com/news/technology-46618582.

[46] Aoife White & Stephanie Bodoni, Google Tells Judges It’s so Popular It’s Bing’s Top Search Term, Bloomberg (Sept. 28, 2021 at 9:31 AM), https://www.bloomberg.com/news/articles/2021-09-28/google-tells-judges-it-s-so-popular-it-s-bing-s-top-search-term.

[47]There seems to be a push in this direction with a growing number of states enacting public benefits corporation statutes, where the business model permits weighing shareholder profits against the overall public good. This comes with the problem of less ethical parent companies forming “public benefit” subsidiaries, an issue that warrants analysis that is outside of the scope of this paper.