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Published: August 2019 (2 Min Read)

I have a quandary with climate change investing. Not as to whether I believe in it or not, but rather as to whether to invest in Saints or Sinners. Reforming Sinners, that is.

Take Equinor for example. Equinor used to be called Statoil, Norway’s giant, majority state-owned, oil and gas producer. Oil made Norway rich, but now oil appears to be something of a dirty word, so the company decided to change its name to Equinor to reflect its shift towards cleaner energy. Equinor combines words such as equal, equality and equilibrium with Norway. Is this more than just marketing? Is it an example of “green-washing”?

It is a fair question. At the AGM in April this year three proposals were put forward to test their commitment. The proposals were as follows: that Equinor should refrain from oil and gas exploration and production activities in certain areas; that Equinor should set medium and long-term quantitative targets that include Scope 1, 2 and 3 greenhouse gas emissions; and that a new direction for the company should be adopted, including phasing out all exploration activities within two years.

None of the proposals was adopted.

Nevertheless Climate Action 100+, an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change, acknowledged that the Norwegian oil company is one of the most progressive in the industry on climate change. The initiative is designed to implement the investor commitment first set out in the Global Investor Statement on Climate Change in the months leading up to the adoption of the historic Paris Agreement in 2015.

The company argues that they will create lasting change in terms of how the industry works by innovating through radical change and technological development. The future of energy will be low carbon, and so they aspire to be a leading company in carbon-efficient oil and gas production.

They also recognise that demand for renewable energy will grow and offer new business opportunities, and thus an increased portion of their new investments will be allocated to building a new energy business to support their long-term future as a leading global energy provider.

Equinor is the largest gas producer on the Norwegian continental shelf, and the second-largest gas supplier in Europe. Although natural gas is a fossil fuel, its emissions from combustion are 50-60% less than from a typical new coal plant . Their offshore wind farms provide renewable energy to 650,000 homes in the UK, and they are building further large-scale wind farms offshore in the UK, Germany and the US, including “HyWind”, the world’s first floating offshore wind park.

They are also investors in solar energy production and in carbon capture and storage (CCS). They have invested in CCS since the 1990s.

Finally, their venture capital fund is dedicated to investing in growth companies specialising in renewable energy and supports their strategy to grow their exposure to new energy solutions. The fund is expected to invest up to $200 million in four to seven years.

Whether or not this will provide a good return to shareholders in the medium term I cannot say, but to me it looks like a firm commitment to sustainability.

I think Reformed Sinners can make a substantial positive difference to climate change portfolios, but I accept that there are others who prefer to stick with Saints. Happily we are able to find specialist fund managers who take both routes.

Sources:
https://www.globenewswire.com/news-release/2019/05/15/1825563/0/en/Equinor-ASA-Annual-general-meeting-approved-dividend-of-USD-0-26-per-share-for-fourth-quarter-2018.html
Climate Action 100+ control investments valued at over $33 trillion. Their 320+ members include AustralianSuper, California Public Employees’ Retirement System (CalPERS), HSBC Global Asset Management, Ircantec and Manulife Asset Management
https://www.equinor.com/en/about-us.html#shaping-the-future-of-energy
https://www.ucsusa.org/clean-energy/coal-and-other-fossil-fuels/environmental-impacts-of-natural-gas

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Article written by
Simon James