Profits from oil and gas industry offers scope for climate investments
Dutch investors with nearly 1500 billion euros under management are asking the global listed oil and gas industry for serious transition strategy plans to start acting in line with the Paris Climate agreement within two years. That is the essence of a joint statement that they recently issued. With so much capital, this is more than a drop in the ocean. Furthermore, this group of investors no longer stands alone internationally.
Their appeal comes at a precarious moment, in which the security of our energy supplied from Russia is at stake. Our society naturally first looks for solutions among the well-known listed oil and gas companies - the companies in which we as investor also have a say.
The short-term need for the security of our energy supply now coincides with the long-term policy for sustainable energy. Pension fund PFZW, whose policy is implemented by PGGM, wants the big fossil energy producers to speed up the energy transition and deliver the climate solutions which the world needs. That doesn’t happen by itself, which is why active ownership is needed: using out vote and engaging in discussions with the executive boards.
So, on behalf of PFZW, this spring PGGM is supporting the Follow This resolutions in which seven companies in the oil and gas industry are being asked to draw up carbon reduction plans in line with the Paris Agreement.
With the goal of fossil energy producers being fully committed to 'Paris', the PFZW portfolio would include less climate risk and more sustainability, in combination with dividends for the participants.
The question whether the well-known oil majors will produce this golden combination of financial returns and climate solutions in the coming years has only become more urgent following the Russian invasion of Ukraine. In Europe, we want to be less dependent on controversial suppliers of fossil energy and tackle the climate problem.
In the boardrooms of these companies, the question needs to be asked: do we invest the current super profits, which are the immediate result of the geopolitical situation, in sustainable energy like green hydrogen or battery technology, or do we give in to shareholders eager for short-term profits from oil and gas?
However, contributing to security of our energy supply, i.e., ensuring sufficient oil and gas in the short term, does not need to conflict with the long-term necessity to improve sustainability, particularly if the industry remains so profitable due to the current market conditions. These conditions offer a small window to speed up sustainability and, as a business, act in line with 'Paris'.
This coincides with the time that PFZW has given the industry to convincingly embark on the path to Paris. The security of our energy supply may now be attracting a lot of attention, but the climate problem remains - and its urgency is increasing by the day.
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