-- For TotalEnergies SE Chief Executive Officer Patrick Pouyanne, the difference in the performance of his company’s stock and that of Exxon Mobil Corp., the largest US producer of oil and gas, is in no small part explained by an acronym: ESG.Exxon’s aggressive oil and gas strategy has been rewarded by investors, with its shares more than doubling in the past three years.
Faced with diverging ESG rules between the US and Europe, some companies have weighed their options. Commodities trader Glencore Plc, which recently said it’s abandoning plans to exit coal, has been touted as a potential candidate to ditch its London listing for New York. German utility RWE AG is among businesses directing more investments across the Atlantic than its home market, while Norwegian battery company FREYR Battery Inc. has moved its headquarters to the US.
The US has reams of environmental-protection rules, but its overall framework is dwarfed by the breadth and depth of the EU’s, particularly around disclosure. Also, the anti-ESG movement has thrived in the US, and if former President Donald Trump returns to the White House, his “drill, baby, drill” mantra looks set to lower the regulatory burden for producers.
But the appeal of the US program is sucking up investment, with more than 60 European and Asian companies announcing projects in the year after the IRA was passed, an analysis by Bank of America Global Research showed. For Estelle Brachlianoff, the CEO of French water-treatment company Veolia Environnement SA, “the US wins.” Dutch Bank ING Groep NV’s CEO, Steven van Rijswijk, said the US is doing better on luring investments. European regulations are “out of touch, they put a break on investments,” said Repsol CEO Josu Jon Imaz San Miguel, an oil and gas producer shifting toward cleaner energy. He wants Europe to “learn a lot from what’s being done in the US.
The Corporate Sustainability Due Diligence Directive mandates detailed corporate transition plans and opens businesses to lawsuits if there are ESG violations in their value chains. For companies with hundreds of global suppliers, that can get “very complex,” says Sophie Tuson, head of the environmental unit at the London law firm RPC.
Despite the protestations, though, there are some who warn of a climate reckoning further down the road. The fund will only invest in companies that “are on a pathway in the transition to a sustainable economy and companies that don’t harm climate or biodiversity,” Harmen van Wijnen, chairman of ABP’s board of trustees, told Bloomberg.