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Engine No. 1 CEO on Exxon's lithium investments, EV play

Engine No. 1 CEO Jennifer Grancio examines Exxon's most recent investment in lithium production, conscious investing amid reshoring trends, and highlights several of Engine No. 1's own supply chain ETFs.

Video transcript

JULIE HYMAN: Exxon is jumping on the EV bandwagon or at least the EV supply chain bandwagon. The Wall Street Journal reporting that the oil giant purchased drilling rights on 120,000 acres of Arkansas land to produce lithium, which is, of course, a key ingredient in electric vehicle batteries and one that is much desired right now by the likes of Tesla and others.

Our next guest is part of the group that pushed Exxon toward a clear, clean energy strategy. Joining us now is Jennifer Grancio, Engine No. 1 CEO. Good to see you, Jen, Thanks for coming in.


So this is an interesting new frontier, if you will, for Exxon. Does it make sense for the company to sort of, I mean, obviously at some point, oil, even if the point is in the very distant future, oil will become obsolete perhaps or much less useful. So is this the next big phase for them?

JENNIFER GRANCIO: Well, I mean, the way that we think about it from an energy perspective is that we're in transition and transformation, and that takes a very long time. And so part of what Engine No. 1 one asked Exxon to do is think carefully about capital allocation in the fossil space, but then how do they apply world class engineering going forward.

And so while the lithium investment is a small one relative to their total annual CapEx, it's certainly something that makes sense for their set of capabilities when it comes to the future from an energy perspective.

BRAD SMITH: How additive could that be to their business? I mean, we've heard Elon Musk out there pounding the pavement begging for more lithium refinery companies. Not other tech companies to come about given the importance of how lithium will play a role in the future of mobility for EVs from his perspective. But for a company like Exxon, what type of net benefit could they see in their financials?

JENNIFER GRANCIO: So, again, I think it's a relatively small investment for them today. But if you think about what their business could look like in five or seven or 10 years, we need a huge amount of natural material to move towards this greener and more energy, sort of more electric future. And raw materials like lithium, copper are a big part of that. But also the technology to get better and better at sourcing minerals and better at producing them into a usable format. So I think it's great to see them moving into the space

JULIE HYMAN: Something I'm very curious about when it comes to lithium is, I mean, when it comes to getting oil out of the ground, oil itself is not clean burning, obviously. The getting it out of the ground part is not always great either, especially when you're talking about fracking. What about lithium, right? Lithium goes into "clean vehicles," quote, unquote. But the process of getting it out of the ground is not spectacular either, right? So like are we also going to see some advances in that process?

JENNIFER GRANCIO: Hopefully, we will. I mean, we need to see a lot of advances. And we need more sourcing of some of these minerals and materials locally. So one of the things we can talk about from an Engine No. 1 perspective is these mega themes, where there's a huge amount of investment. And hopefully, as we see this sort of $4 trillion a year get invested towards the energy transition, we're going to see better technology, better mining, and better production of these materials.

BRAD SMITH: What companies are doing it well and actually hitting some of their transitionary goals to hit either a 2025 target or a 2050 target, even if we can push it that far out to the future, which many of the oil and gas companies have?

JENNIFER GRANCIO: Yeah, I mean, the way we think about it, and we sort of offer strategies for investors to focus on two megatrends. One of them is the energy transition, so transform climate. Ticker NETV is a good way to play that trend. And the other is the huge opportunity of reshoring of manufacturing back to the US, transform supply chain. Ticker SUPP is a great way to play that trend.

And so to your question, whether it's in the energy space or the reshoring space, we need to see the big companies like Exxon and Occidental Petroleum focusing on cleaner kind of current legacy energy businesses, but also moving into how are they sourcing and building businesses as the world moves to more electric. And so I think a lot of these companies are making very good progress.

JULIE HYMAN: Let's dig more into reshoring a little bit because that's been a hot topic recently as well on the US government. The Commerce Department has really been pushing for that. We've seen the likes of Intel and more recently Applied Materials announced some facilities in the US. How do you pick who is going to benefit the most from a company standpoint?

JENNIFER GRANCIO: Yeah, I mean, that's the challenge, right? And so from an Engine No. 1 perspective, we actually think that these are very complicated, interconnected systems. So the way we manage a strategy like SUPP, the supply chain strategy, is we look at interconnected systems, and we're an active manager. So that we're trying to do that work every day to decide in that portfolio.

And as you're playing that trend, it's a mix of companies that are manufacturing the finished products like Deere. Deere is making tractors. During COVID, we saw supply chains break. Deere is making parts closer to home. As you move into precision agriculture, you need more chips. So you need chips to go in the tractor.

And so a way to this trend or invest in this megatrend includes the companies. And there's a lot of great North American companies. They're going to get more and more competitive, with all of the tailwinds around reshoring.

Transportation, we hold a lot of railways. So maybe people aren't as familiar with the railways. But as you move manufacturing back onshore. We're moving things around on rail, which by the way, is great for the environment, and it's great for the stock of the railway companies.

And then we talked a little bit about chips and semiconductor, high IP content. We're seeing that move back onshore too. And so this is a very, very broad theme. And there are lots of different industries and sectors that are going to benefit as we reshore manufacturing.

BRAD SMITH: Jennifer, we're going to leave things there on the day. Such a pleasure to have you here on set with us and discussing. We've got to continue this conversation because there's much more about hitting these targets. Yeah. Jennifer Grancio, who is the Engine No. 1 CEO, thanks so much.