Should ESG investors give the oil and gas sector a second look? That’s certainly the opinion of a panel at this week’s Energy Intelligence Forum.
“ESG is unequivocally front and centre in the conversation but I think it’s becoming more nuanced in terms of how people think about it. That’s been reinforced by some of the alpha that investors may have missed out over the last six to nine months,” Bank of America executive vice chairman Julian Mylchreest said.
The executive cited Bank of America research as saying technology, which has long been a mainstay of ESG funds, may not be as green as thought.
“Look at some of the oil and gas companies, if they continue doing what they say they’re going to do, why wouldn’t you include them in the portfolio.”
Mylchreest went on to note challenges for suppliers of materials for electric vehicles as needing to do more to demonstrate their ESG credentials.
Direction of travel
Selling off companies is an easy way to cut emissions, Carlyle Group head of impact Meg Starr said.
“If we sold around a dozen of our portfolio companies, we could reduce on paper our emissions by 95%.” This easy way would not reduce the amount of carbon emitted, though.
“The hard way is to look at individual companies and their assets. We need a reckoning about how to do that math in the investment world,” Starr said.
“The world needs us to say we’re staying invested in these companies and what matters is the delta of the individual asset. That’s actual emissions in the atmosphere.”
Investment is moving away from a binary, she continued, and towards working with companies “where they are” and “guide them on the trajectory down. What matters to me is the rate of change, not so much where they are the day we invest in them.”