Fossil fuel fear is creating a shortage of supply

 

Fossil Fuels, ESG, and Investor Activism

The question remains however, if renewable energy is so inefficient and uneconomic why have energy giants like Shell (LSE:RDSA) and BP (LSE:BP) shifted so heavily toward green energy?

Fergus believes that investor activism and ESG (Environmental and Social Governance) mandates are the cause.

He highlights the recent actions of BlackRock and several other investor activist groups against ExxonMobil’s management, due to beliefs that the oil giant was not committed to action against climate change. Fergus sees this as a prime example of companies being forced into renewable energies against their best interests.

“By sheer shareholder force, the management can’t toe the line of the actual business”

However, this extends much further than just BlackRock, with the Norwegian Sovereign Wealth Fund, the California Public Employees' Retirement System, Vanguard, and many other funds targeting fossil fuel businesses.

Fergus believes, however, that this turn toward solar and wind power by large fossil fuel companies is permanent, as opposed to the greenwashing by Shell and BP in the late 1990s. With BP committing to selling $25bn of its oil assets by 2025, regardless of a post-COVID oil market recovery, at a record low in the market whilst simultaneously buying into renewables which are trading at a premium.

“They’re going to get burned by what they’re doing, they need to be doubling down on fossil fuels because it’s going nowhere”

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