Only a minority of institutional investors in oil and gas seem to believe that Big Oil will be able to pull off a green transition, the Financial Times has reported, citing research from Procensus.
The company surveyed 64 institutional investors with some $11 trillion in assets under management and found that only 17 percent of them believed that Big Oil could become Big Energy with its pivot to renewables.
“Big Oil’s greening efforts have moved into overdrive but investor consensus remains unconvinced about their ability to reinvent themselves,” the FT quoted the chief executive of Procensus, Alastair Walmsley, as saying.
Going green has become the leitmotif for Big Oil majors under growing pressure from environmental activists and investors, and ambitions by national governments to build an energy future that is less reliant on fossil fuels.
However, while this pressure has certainly spurred Big Oil in the direction of diversification, the question remains whether it is worth it if investors remain largely unconvinced that they can indeed swing it.
“Invariably, some companies will make the transition while others will not,” said Fiona Reynolds, CEO of the Principles for Responsible Investment—an investor network backed by the UN—as quoted by the FT. “Investors need the right information and data from companies about their net zero commitments and how these will be achieved so they can make informed decisions about whether to hold these companies in their portfolios over the longer period.”
Yet some non-ESG investors who have been with Big Oil for years may still be wary of whether it will actually pay to diversify. When BP announced its green plans, for instance, its stock fell sharply. Then, this quarter, Big Oil reported a string of solid results but not because it has started to diversify into renewables but because oil prices were higher and this, in turn, meant higher dividends for shareholders. There seem to be sound reasons for investor skepticism, whether investors want or do not want Big Oil to diversify away from its core business.
By Irina Slav for Oilprice.com
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