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Incumbent firms in the energy markets need better access to capital, particularly from ESG investors, if the global shift towards greener energy sources is to stand a chance, warned Bain & Company’s chairman of energy and natural resources, Peter Parry.
Parry said yesterday at City Week 2021 that, currently, investment is lacking in the sector as energy firms are depicted as the “bad guys”, but they will ultimately be the players that will drive the scale of change necessary to tackle the global climate crisis.
“These are the players who have the capability and the capacity to drive the kind of industrial-scale change that we need. So, I wouldn’t count them out, I would in fact invite them in.”
However, Parry was concerned that, as ESG initiatives gain momentum, traditional energy firms were being blocked out.
“In 2010, the energy and natural resources companies occupied about 30 percent of the S&P 500. At the end of 2020, they were down to about 16 percent. So, capital is flowing away from the sectors where we perhaps need it the most,” Parry said.
“I would argue that ESG investors can drive more change by investing in those traditional companies than they can in some other piece of their activity,” he added.
Meanwhile, Phillipe Zaouati, CEO of sustainable investment company Mirova, said at the conference that it was obvious ESG funds should not be looking to invest in oil companies.
“We know that an oil company is emitting a lot of carbon…of course, we need accurate data, but we have a lot,” Zaouati said.
Parry argued there is a danger of the debate around ESG capital becoming too “polarised” as assets are too quickly labelled as either good or bad from an ESG perspective.
“Eighty percent of the transition [to green energy] is going to come by finding the right way to finance and drive the incumbents to do much, much better what they currently do and to do new things as they have the scale and the infrastructure to do that.
“The classification of what an ESG fund will invest in, I think also needs to be revisited,” Parry added.
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