Climate Splits Oil Trade Group, Investors

January 22, 2021

This week’s cancellation of the Keystone pipeline is yet another strong signal that a paradigm shift in energy is well underway.
Some oil companies are seeking an off ramp from business models totally wedded to fossil fuels, coal and oil. Some seek to continue a policy of greenwashing as they hope to continue exploiting their huge base of still-in-the-ground resources.
Stress cracks appearing.

Financial Times (paywall):

French energy company Total has become the first oil major to end its membership of the American Petroleum Institute, Big Oil’s powerful Washington lobby group, citing its stance on climate change and support for politicians who opposed the Paris agreement.

The move exposes a growing rift between US and European oil supermajors on climate policy, and comes just days before Joe Biden enters the White House with a pledge to rejoin the Paris climate pact, clamp down on oil industry pollution, and launch a clean-energy supply revolution.

Total also cited the API’s opposition to electric vehicle subsidies and its support last year for the Trump administration’s rollbacks of regulations to limit emissions of methane, a potent greenhouse gas.

Total is “committed to ensuring, in a transparent manner, that the industry associations of which we are a member adopt positions and messages that are aligned with those of the group in the fight against climate change”, chief executive Patrick Pouyanné said.

Reuters:

Investors are judging how well energy companies have reoriented their businesses to cut emissions as they weigh activists’ calls for divestment, climate finance specialists said on Thursday.

Growing differences between oil majors have clarified when companies are positioned to achieve “net-zero” emissions, becoming more focused on renewable power and offsetting remaining greenhouse gas emissions with measures like carbon sequestration or conservation efforts, specialists said at a Reuters Next panel held online.

“We differentiate between companies that are genuinely trying to manage the transition, and those that are not,” said Adam Matthews, a Church of England Pensions Board officer who oversees its engagement with companies in its portfolio. The church manages funds in excess of 2.8 billion pounds ($3.8 billion).

He cited Royal Dutch Shell Plc and Occidental Petroleum Corp as companies taking positive steps, and said Exxon Mobil Corp is “at odds” with the others’ approach.

Shell and Occidental have set net-zero targets; Exxon CEO Darren Woods said in December that “we respect and support society’s ambition to achieve net zero emissions by 2050.”

Social pressures are a major motivation for the energy companies as they transition their business models, said Sven Reinke, senior vice president at Moody’s Investors Service, another panel speaker. “A company that is at odds with society will sooner or later face financial difficulties,” he said.

However investors will also watch companies’ ability to generate cash, Reinke said, noting some like Shell have cut their dividends. “The real risk for these companies is they might not be able to keep their investor base,” he said.

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