An oil pump is seen in a field on April 08, 2025 in Nolan, Texas.
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Just like many mission -based fund managers have reconsidered their defense policy following the invasion of Russia on the scale of Ukraine, analyst at Goldman Sachs Said it is now time for sustainable investors to reassess their approach to oil and gas companies.
This comes at a time when European energy majors have reduced renewable expenses and doubled on fossil fuels in order to stimulate shareholders’ short -term yields.
Investments focused on environmental, social and governance factors (ESG) tend to promote companies that obtain a strong score on certain criteria, such as climate change, human rights or business transparency.
Tobacco giants, fossil fuel companies and weapons manufacturers have generally been among those who have been detected or excluded from sustainable portfolios.
“In the same way that the feeling of defense societies has changed with the Russian-Ukraine war, I think that the feeling of petroleum and gas ownership should change,” said Michele Della Vigna, research manager Emea Natural Resources in Goldman Sachs, in CNBC by video.
A persistent reluctance to have energy majors is biased by a “major error” in the evaluation of the energy transition from the point of view of European investors, said Della Vigna – an approach that he expects to change.
We see record temperatures, an increase in greenhouse gas emissions, warming oceans and elevation of sea level. I mean, why would we want to see more fossil fuels? Most ESG investors would not.
Ida Kassa Johannesen
Chief of the Commercial ESG in Saxo Bank
Della Vigna de Goldman described three reasons to safeguard his point of view on the reasons for which ESG investors should provide stocks of oil and cold gas.
“Let’s be clear, this energy transition will be much longer than expected. We are going, we think that the demand for peak oil in the mid -2030s [and] The maximum gas request in the 2050s, “said Della Vigna.
“And we clearly show that we need the development of oil and green gas in the 2040s. So, if we need new development of oil and gas, why did we not have these companies?”
The International Energy Agency, on the other hand, said that it expects the demand for fossil fuels to peak by the end of the decade. The energy guard dog has also warned several times that no new oil and gas projects is necessary to meet the demand for global energy while making zero net emissions by 2050.
The second point of Della Vigna was that oil and gas companies represent some of the largest energy investors with low carbon issues in the world, adding that a non-compliance with the actions of oil and funded gas would ultimately serve as a barrier for the energy transition.
In addition, Della Vigna said that unlike public services, which he described as infrastructure manufacturers, oil and gas companies are “market manufacturers” and “risk takers”.
A range of solar panels create electricity at the BP Lightource solar farm near the Village d’Anglesey in Rhosgoch, on May 10, 2024 in Wales.
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“So we need their capacities, balance sheets and risk -taking. They are some of the biggest investors with low carbon content and that we like it, we also need their main oil and gas activities,” said Della Vigna.
“Otherwise, we will not have affordable energy, especially for emerging markets, and we will have energy poverty, which does not think is acceptable in an ESG setting,” he continued.
“I think that energy companies that direct the energy transition should be an cornerstone of ESG funds – not a divestment target,” said Della Vigna.
“Some stand out on the edges”
Not everyone is convinced that stocks of oil and gas should follow defense companies in an ESG portfolio.
“I think it’s a bit extreme,” Ida Kassa Johannesesen, head of the Saxo Bank Saxo, told CNBC.
“It is not because defense stocks have been favorable that oil and gas should also become favorable. I do not think we should compare the two directly,” said Kassa Johannesese.
“We can see the negative impacts of oil and gas. The current climate situation is Not good. We see record temperatures, Growing greenhouse gas emissionsWarming oceans and elevation of sea level. I mean, why would we want to see more fossil fuels? Most ESG investors would not do it, “she added.
Scientists have repeatedly pushed rapid reductions in greenhouse gas emissions to prevent the increase in average temperatures. These calls continued with an alarming series of temperature records, with the planet registration His hottest year in human history in 2024.
Extreme temperatures are fueled by the climate crisis, the main driver of which is the Fossil fuel burn.
Allen Good, a principal stock market analyst covering the oil and gas industries in Morningstar, said it was difficult to predict a period when there will be total acceptance of oil and gas in ESG.
However, he added that a slightly more relaxed approach to investors is possible on the grounds that energy majors considerably increase the amount they invest in renewable and low carbon technologies.
An Exxon service station was seen on August 05, 2024 in Austin, Texas.
Brandon Bell | Getty Images
“I mean ESG, for me, that’s all the reason for being the energy transition [and] Climate change. So, I had trouble believing that they would say that they will start investing in oil and gas companies, “GOOD told CNBC by phone.
“Now, I think what you might start to see is a design on the edges, by which they reach an agreement where a company is investing x amount in renewable energies, or their profits will be X in 10 years, so perhaps a Total[Energies] Enter the wallet. But someone like a Exxon or even a Chevron … I would find it difficult to see how it happens in ESG, “he added.
