Gunasekara and Isaac cited figures on high gas and electricity costs, as well as an increase in utility disconnects. Isaac also cited research from industry data provider Preqin Ltd. that found a 94 percent reduction in dollars raised for oil and gas production between 2015 and 2021.
Neither provided research or data that directly attributes those trends to ESG. Experts say they are unaware of any such evidence at all.
‘It makes no sense’
Conservatives have based most of their criticism on one claim: that investors, banks and other financial entities are boycotting traditional energy companies for ESG-related reasons, making it harder — and more expensive — for companies to access loans, bonds and other types of financing.
Some experts acknowledged that some investors in recent years have started to sour on the fossil fuel industry. But that hasn’t happened because of ESG, they said.
Pavel Molchanov, the managing director for renewable energy and clean technology research at investment bank Raymond James & Associates Inc., said the energy sector was the “worst-performing sector” for stock investors between 2010 and 2020.
During that time period, the industry faced two “near-death experiences,” he said: between 2014 and 2016, and again in 2020 amid the Covid-19 pandemic.
“As a result of how badly oil and gas stocks performed during this time, it is obvious why so many institutional funds soured on energy as a result,” he added. “It makes no sense to ‘blame’ ESG for that.”
University of Texas law professor David Spence, who specializes in the law and politics of energy regulation, echoed that point, noting that investors are heavily influenced by the price of oil, projections of future demand and availability of better returns from other investments.
Another researcher, Gautam Jain of Columbia University’s Center on Global Energy Policy, specifically looked into the industry’s cost of borrowing money.
He set out to determine whether it has become more expensive for oil and gas companies to borrow money via issuing debt — a trend that would indicate lower investor interest in oil and gas bonds.
“We looked at the amount of financing being provided to oil and gas companies by banks. That has stayed very steady. And we looked at the cost of debt. And that is close to the [low] end of the historical range, compared with the broad credit market and accounting for the increase in U.S. interest rates,” Jain said. “So it doesn’t bear out that ESG is playing a role.”
Experts also dismissed the argument that ESG is driving energy shortages and higher prices for consumers.
Clark Williams-Derry, an energy finance analyst with the Institute for Energy Economics and Financial Analysis, said those challenges had little to nothing to do with ESG — and everything to do with other factors.
Two key drivers: the Covid-19 pandemic, when energy prices plummeted due to a major drop in demand, and Russia’s invasion of Ukraine, which sent oil and gas prices skyward amid uncertainty around sanctions and global supply shortages.
“Prices were going crazy, and it was specifically because of the war,” Williams-Derry said.
That gave ESG critics “a toehold to say, ‘Oh, look, ESG is raising prices,'” he added, ignoring the “global war in Europe involving one of the world’s three largest oil producers. And that’s on the heels of the Covid whipsaw.”
Asked for comment, Gunasekara said in an email that ESG is the “corporate version of Team Biden’s regulatory assault to ‘end all fossil fuels,'” which “makes drawing a direct line of financial action to financial consequence difficult.”
During a phone interview, Isaac referred E&E News back to his congressional testimony and repeated the argument that a deluge of financial firms are “sanctioning” oil and gas companies. Financial firms including BlackRock Inc. and JPMorgan Chase & Co. have denied those allegations and affirmed their commitment to their oil and gas clients.
The criticism further falls apart when one considers industry trends over the past decade, Williams-Derry and Molchanov said. Natural gas production is at an all-time high, and oil production is near its pre-pandemic peak in the United States and still rising. Both natural gas and oil prices, meanwhile, are well below where they were for most of the past decade.
“Energy prices only seem high if we compare them to the crisis period of 2020, when prices of practically everything temporarily dropped amid lockdowns,” Molchanov said.
“The rhetoric may be ‘Let’s help consumers,'” Williams-Derry said. “But the substance of the rhetoric is unrelated to consumer concerns.”
Reprinted from E&E News with permission from POLITICO, LLC. Copyright 2023. E&E News provides essential news for energy and environment professionals.
