There’s a growing list of institutional investors in Europe who are stripping oil and gas stocks out of their portfolios, in a move they say reduces the risk of ending up with stranded assets and financial losses.
Other institutional investors also are losing patience with oil and gas holdings. Stichting Pensioenfonds ABP, Europe’s biggest pension fund with about $550 billion of assets under management, said in May that it exited all its liquid assets in oil, gas and coal — a portfolio that was worth about $11 billion. It has said it plans to divest a further $5 billion of less liquid fossil-fuel assets.
Sweden’s AP7 fund, which manages more than $100 billion, has exclusion policies targeting a range of oil producers, including Saudi Aramco and India’s Oil and Natural Gas Corp. It blacklisted Exxon Mobil Corp.. But looking down the road, there’s a transition risk “and that will materialize for a number of companies,” Børrild said. “It’s not priced in at the moment,” but as regulations take their toll, low-carbon portfolios are poised for “even more positive” risk-adjusted returns, he said.
Just this week, Venkatakrishnan characterized as unrealistic any calls to go “cold turkey” on fossil fuels. KKR & Co. founder Henry Kravis recently accused climate protesters of not understanding the economics of the energy transition. Meryam Omi, Climate Arc’s CEO, says too many investors are shying away from the “murky part” of climate finance. In other words, the finance industry needs to move into the highest-emitting sectors to effectively bring about a low-carbon energy transition, she says.