Investors in the oil-and-gas industry want companies to get greener, and they’re losing faith that the sector, which is underperforming broader market indices, is a good long-term bet, per a new Boston Consulting Group survey of investors.
Why it matters: The investor views come as the industry is facing its highest levels of uncertainty and environmental pressure in a long time, if ever.
The coronavirus pandemic’s unknown duration and evolving government policy responses making gauging the near- and long-term future of oil consumption very hard.Some analysts see global demand peaking or at least hitting a plateau within the next decade (if it hasn’t happened already). Meanwhile, policymakers in Europe and, if Joe Biden wins, in the U.S. are vowing to impose tougher climate policies. China, the world’s largest oil importer, is also promising an aggressive long-term carbon-cutting effort.The big picture: Just a quarter see oil-and-gas stocks playing a more prominent role in their portfolios in the future, and less than a third see the industry as a more attractive investment than renewables.
They also typically want to see international oil companies undertake more aggressive overhauls to improve total shareholder returns and provide more clarity on their climate posture.A few more takeaways:
80% want to see companies set long-term emissions-cutting targets, something that big U.S.-based companies have resisted that’s now standard among European-headquartered giants like Shell.52% agree it’s “extremely important” for currently healthy companies to strengthen their balance sheets, compared to 21% who say it’s “extremely important” to maintain or increase shareholder payouts.49% say it’s “extremely important” for companies to build up a portfolio in renewables and other fossil fuel alternatives, while another 33% say it’s “somewhat” important.63% say it’s very or somewhat important for companies to pursue an environmental, social and governance (ESG) agenda even if that means lower earnings per share.Only a third of investors say it’s important for companies to increase hydrocarbon reserves.