U.S. oil majors feel heat as climate divide widens with European competitors
In his column in the new Sustainable Business Review, Oliver Balch analyses the latest sustainability news affecting companies, from climate risk to supply chain standards.
With the divestment movement gaining pace and the regulatory noose tightening, oil and gas companies are finding their climate records under scrutiny like never before. Burned by historic write-downs (Shell wrote off assets worth $22bn in 2020) and with the threat of future stranded assets looming, investors increasingly expect assurance that fossil-fuel firms’ climate risks are under control.
The fact that U.S. oil major and sector straggler ExxonMobil should at last see fit to disclose its product-related emissions (equivalent to 730 million metric tonnes of carbon dioxide) and commit to reducing upstream emissions by 15-20% reveals the extent of this rising pressure. French oil giant Total has placed an even more symbolic stake in the ground by walking out of the American Petroleum Institute, citing its obstruction of climate measures such as the landmark Paris Agreement.
Such steps are welcome, but what investors really want – especially those of a more environmental hue – are meaningful steps towards business-model transition. Think: investments in clean energy, research into alternative fuels, experimentation in carbon capture, and so forth. Here, an emerging Europe-U.S. divide can be seen, according to Bloomberg Intelligence. In a new paper, the market analysis firm singles out Europe-based firms such as Shell, Total and Equinor for their support of renewables and electric vehicle charging points. Its study of 39 global oil firms finds fewer bright spots, although mention is made of Chevron, in part because of its $100m Future Energy Fund, a cash-pot that recently helped the California-based oil major snap up Blue Planet Systems, a U.S. startup involved in carbon capture.
Government policy could feasibly turn the tide on boardroom opinion. In this respect, the decision by the new Biden administration to re-engage with the Paris Agreement is a welcome step. If serious federal finance for energy transition follows, the U.S. oil industry might just lend an ear. Here, the White House might want to look to the Hague, where the Dutch government has promised €5bn in subsidies in 2021 for technologies that advance its climate goals (a stimulus, incidentally, that has already attracted the attention of an innovative carbon storage scheme led by, among others, Shell and Exxon).