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Hedge Fund Firm ‘Engine No 1' Takes Stake in General Motors - Betting Big on its All-Electric Future

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【Summary】San Francisco-based investment firm Engine No. 1 on Monday announced it has taken a stake in automaker General Motors and is supportive of the company’s transition to building battery electric vehicles. The announcement sent GM’s stock price up 3.2% to $55.50 on Monday morning. Engine No. 1 invests in companies with bold social and environmental commitments, such as GM’s recent commitment to transition to building only fully-electric passenger vehicles by 2035.

Eric Walz    Oct 04, 2021 3:00 PM PT
Hedge Fund Firm ‘Engine No 1' Takes Stake in General Motors - Betting Big on its All-Electric Future

San Francisco-based investment firm Engine No. 1 on Monday announced it has taken a stake in automaker General Motors and is supportive of the company's transition to battery electric vehicles. The announcement sent GM's stock price up 3.2% to $55.50 on Monday morning.

Engine No. 1 is a hedge fund manager that is driving long-term value by investing in companies with bold social and environmental commitments, such as GM's recent commitment to transition to building only fully-electric passenger vehicles by 2035. 

The fund was founded by hedge fund veteran Chris James with a goal to invest in companies that make fossil fuels and push them to minimize their environmental impact. Engine No 1 has roughly $430 million in assets under management.

In addition to its environmental initiatives, the company's portfolio includes top companies such as Tesla, Apple Inc., NVIDIA, Microsoft and e-commerce giant Amazon. 

The auto industry is currently undergoing a transformational switch to electrification that has the potential to remake entire markets, according to Engine No 1. The hedge fund manager believes that fully-electric vehicles have the potential to become the new dominant design in the industry, representing the first major transition from gasoline power in over 100 years, which makes GM an attractive long-term investment as its transitions to EVs.

"We believe that battery electric vehicle innovation will result in superior cars that are faster, quieter, cleaner, and more efficient than traditional internal combustion engine vehicles," Engine No 1 wrote in a recent white paper co-authored by John Paul MacDuffie, Professor of Management at the Wharton School. "Research shows how the auto industry must transform and how companies like GM are leading this effort and driving long-term shareholder and stakeholder value." 

The Engine No. 1 Transform 500 ETF (ticker: VOTE) was launched in June. It was built to harness the power of investors to help transform large companies.

VOTE intends to invest in 500 of the largest U.S. public stocks with the goal of helping to "instigate positive change for employees, customers, communities, and the environment," according to Engine No 1. The ETF tracks a diversified, market cap-weighted index across sectors that make up over 80% of the US equity market.

Engine No 1 made headlines in May when it won two board seats at Exxon's annual shareholder meeting. It has targeted the oil giant since last December over its need to shift away from fossil fuel dependency and embrace zero-emissions technologies, like automaker GM has committed to do.

In June, GM announced one of the biggest financial commitments in its 100+ year history.

The automaker is increasing its investments in electrification and autonomous driving technologies to $35 billion through 2025 as it plans for an all-electric future with dozens of new battery-powered models in the works, many with autonomous driving capabilities.

For investors that missed out on Tesla's rise to become the world most valuable automaker, GM's electric future could be just as transformative.

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