How Investment Firms Influence Energy Sector Choices

Investment hates uncertainty—when tax rules change, investments change with them.   And a recent survey shows that this is particularly true in the energy sector   Last week, the American Council on Renewable Energy (ACORE) released their “Tax Stability for Energy Dominance” report which surveyed clean energy investors and developers representing over $15 billion in investments.   The good news is most investors expect to increase their investments over the next three years if there are no policy modifications to federal energy tax credits. This makes sense. Energy demand is rising, project costs are stable, and domestic clean energy supply chains are building out rapidly.   However, if tax policy shifts, investors will drift.   The ACORE survey finds that if tax credits go away or uncertainty is injected into markets, 84% of investors and 73% of developers anticipate decreasing their activity in clean energy.   And of course, this makes sense too. The deals, contracts, and investments that these investors planned were built on the expectation of stable policy. When that policy is changed, investors and developers will reconsider their actions.   To be blunt, America cannot afford to undercut clean energy’s momentum right now.   We are facing the largest increase in energy demand since World War 2, and we need every electron on our grid to meet this challenge. Pulling the rug out from under these projects will only reduce investment, destroy jobs, and raise energy costs.   Read more from this timely survey: https://lnkd.in/exzbR6Xy

Out now in print, open-access for free: "What Drives Carbon-Reducing Investments? A Vignette Experiment on Managers' Decision-Making From a Multilevel Perspective" (link to free text in the comments) In our latest article published in the latest issue of "Business Strategy and the Environment", Frank Schiemann, Daniel Reimsbach and Thomas Pioch explore why managers choose to invest in reducing their company's carbon emissions. We examines how personal values, company circumstances, and external pressures influence these decisions. Through an experiment with professional managers, we found that individual beliefs—such as a strong sense of business ethics or environmental responsibility—can increase the likelihood of making carbon-reducing investments. However, financial factors at the company level and regulatory or investor pressures at the institutional level play a much stronger role. Our study highlights that managers are most influenced by whether an investment in carbon reduction will be financially beneficial. If an investment is expected to bring financial returns quickly, managers are far more likely to commit to it. Additionally, companies with more investors who care about environmental impact are more likely to make these investments. Regulatory frameworks that require businesses to disclose their carbon strategies also push managers toward greener decisions. Interestingly, we found that the influence of personal values is limited when financial or institutional factors point in a different direction. This suggests that policy measures such as carbon pricing, stricter disclosure requirements, and investor activism are more effective in driving corporate sustainability than relying on managers' ethical commitments alone. These findings are particularly relevant in the context of growing political and economic headwinds against sustainability efforts in many parts of the world. Respective deregulation could significantly weaken the incentives for businesses to invest in carbon reduction. This is especially concerning given the rise of anti-ESG sentiment in certain markets, where businesses may deprioritize climate initiatives if they are not legally motivated to act. The study underscores the importance of strong institutional frameworks and investor activism in sustaining corporate climate action, suggesting that in a deregulated environment, voluntary commitments alone are unlikely to drive substantial carbon reductions.

Goldman is finally saying the quiet part out loud: “I think the oil companies that lead the energy transition should be a cornerstone of ESG funds - not a divestment target.”   The report makes a strong case that oil and gas stocks shouldn’t just be tolerated in ESG portfolios - they should anchor them. Why? - GHG intensity per unit of energy is declining - Energy firms are pouring billions into carbon capture, hydrogen, and renewables - Some of the best governance in public markets lives in this sector now   And here’s the kicker: Goldman points out these companies are also beating the market on returns.   At some point, large capital allocators have to reconcile with this: the risk-adjusted returns in O&G are too compelling to ignore. Especially when you realize energy transition success is a function of traditional energy players, not a repudiation of them.   The market is already voting with capital. ESG frameworks will either evolve or get left behind. #OilandGas #Energy #ESG #Investing #EnergyTransition #PrivateEquity #FamilyOffice #MergersAndAcquisitions https://lnkd.in/gffctXJf

Through my decades of investment experience at Farallon Capital and now Galvanize Climate Solutions, I have seen how investment has the unique ability to influence policy and regulations. Investors have the power to advocate for policies that support clean energy and sustainability. By directing capital toward companies and projects that align with climate goals, investors can shape the market and create a demand for sustainable practices. This, in turn, can encourage governments and policymakers to implement regulations that promote clean energy and reduce carbon emissions.

BlackRock’s take on the Energy Transition... In his latest annual letter, BlackRock’s CEO Larry Fink reaffirms that the energy transition is one of the most powerful forces driving investment opportunities and risks.  However, he does acknowledge that the topic has become increasingly contentious in the U.S. Some key takeaways from the letter: ✅ BlackRock continues to invest in traditional energy - with over $300B in fossil fuel firms - while also backing clean energy and decarbonization projects. ✅ Fink highlights the need for “energy pragmatism” - balancing renewables with hydrocarbons to ensure energy security. ✅ Despite political pressures (including Texas pulling $8.5B in funds), net-zero remains a priority for many global investors, especially in Europe. ✅ BlackRock recently invested $550M in carbon removal tech, reinforcing the view that oil & gas companies are also key players in decarbonization. The energy transition isn’t black and white - it’s complex. It's about balancing energy security with decarbonization. The future of energy isn’t about choosing between renewables and hydrocarbons - it’s about investing in both to drive a sustainable and pragmatic transition forward.

Pleased to share key findings from the KPMG International report, "Energy transition investment outlook: Energy sector insights." This timely analysis, drawing on a survey of 1,400 senior executives, including 420 from the energy sector, offers a clear view of the current investment landscape. Key Takeaways 1️⃣ The global push to decarbonize is accelerating, with 7 out of 10 energy industry respondents confirming that investment in energy transition assets is increasing rapidly. The focus is diverse, reflecting a pragmatic, multi-faceted approach to the transition. 2️⃣ Over the past two years, investments have been spread across energy efficiency and electrification (65%), renewable and low-carbon energy (55%), and energy storage and grid infrastructure (54%). However, a significant 69% still invest in fossil fuels, highlighting the need to balance legacy systems with transition goals. 3️⃣ Top Investment Areas for the Next Two Years: The forward-looking priorities are clear: ✅ Renewable and low-carbon energy ✅ Energy efficiency (including electrification) ✅ Transport and related infrastructure ✅ Energy storage and grid infrastructure ✅ Critical minerals and materials 4️⃣ Investment is concentrated in major markets, with East Asia (targeted by 54%), Europe (51%), and North America (43%) being the top regions for investment. Challenges: The Policy Paradox ✴️ While policy is a key driver, it is simultaneously seen as a major barrier. ✴️ Regulatory and policy risks are the #1 barrier to pursuing investments in energy transition assets (cited by 38% of respondents), followed by technology performance uncertainty (35%) and market volatility (32%). ✴️ Regulatory compliance is the top reason for energy transition investments. 68% believe government policy is critical for profitability, and 67% say an effective carbon tax attracts investment. ✴️ 58% state that government policy creates unnecessary risks or complications, and 56% feel it adapts too slowly to market needs. Opportunities ✳️ The reality is that 82% of the world’s energy still comes from fossil fuels. The transition requires a blend of interim solutions (like reducing methane emissions) and ultimate goals (zero-carbon technologies). Acknowledging the current system's reliance on hydrocarbons is key to a balanced transition. ✳️ No single organization or government has all the skills and resources needed. The transition demands teamwork. Partnerships with financial investors (37%) are the most common strategy, followed by green bonds (30%) and power-purchase agreements (29%). ✳️ While current investments focus on mature technologies, emerging areas like carbon capture, green hydrogen, synthetic fuels, and small modular reactors hold compelling future benefits but face significant hurdles like high costs and long development times. #EnergyTransition #Investment #Sustainability #RenewableEnergy #Decarbonization #EnergySector #DueDiligence #EnergyBankability