Ross Kerber, Sabrina Valle

HOUSTON/BOSTON – The top U.S. oil companies are increasing their drilling efforts, deepening the gap with European counterparts regarding the outlook for renewables and winning the support of big investors, who don’t expect stateside firms to invest in solar and wind.

Reuters surveyed 12 U.S. managers of fund assets with approximately $7 trillion. Most said that they preferred oil companies to produce returns from the businesses they are most familiar with and to give their shareholders money to invest in renewable projects.

The U.S. major oil companies have had a strong year with higher oil prices and better dividend yields. This has fueled shareholder excitement.

“At the end of the day, you don’t invest in a company because they promise nice things,” said Adams Funds head Mark Stoeckle, who favors U.S. producers and whose funds do not currently own Royal Dutch Shell (LON:) Plc, TotalEnergies or BP (NYSE:) Plc.

Michael Liss is the senior portfolio manager at the American Century Value Fund. This may be because American corporations spend less capital on renewable energy and other fuels during a strong oil demand.

Liss stated that they believe their pace will be faster in adopting new energy sources.

Split strategies are split strategies that offer returns and a quicker energy transition. They highlight divergent investor pressures. They also show the difficulties of crafting a global plan to reduce fossil fuel use, the central topic of the coming United Nations COP26 climate change conference https://www.reuters.com/business/environment/cop26-glasgow-who-is-going-who-is-not-2021-10-15.

NONE TRUE PLANTINGS

The top U.S. oil companies Chevron Corp (NYSE : ) Exxon Mobil ConocoPhillips and Corp (NYSE 🙂 have declined to play a direct part in solar and wind, and they put less money into transition plans for energy than the Europeans. Most people anticipate an increase in oil production.

U.S. oil producers share concern about climate change. They pledge to continue producing the same amount of oil but with lower levels of greenhouse gases than they did before. They also want to make it economically feasible to bury carbon in the oilfields.

However, Chevron CEO Michael Wirth stated recently that U.S. corporations prefer to make profits for their shareholders and let them plant trees.

Wirth stated that “there are some people who believe we should be doing what European companies are doing,” after updating reporters on company’s energy transition plans. “But that doesn’t mean that the majority of shareholders I hear about are like that,” Wirth said.

Exxon’s Senior Vice President Neil A. Chapman stated at this month’s conference that Europe’s current energy crisis, which has seen electricity prices rise dramatically, partly reflects a lack of investment in fossil fuels.

The U.S. government and European governments have different views on the way they would like oil companies to reduce their emissions. While the U.S. Congress favors increased carbon storage and capture, British and German governments passed laws that require drastic reductions of greenhouse gas emissions.

Royal Dutch Shell was ordered by a Dutch court to reduce its carbon emissions by 45% before 2030. This would accelerate its transition from fossil fuels. Shell and BP both have disposed of U.S. shale assets as part of this shift. TotalEnergies, however, has committed 20% to electricity and renewables in its capital expenditures.

Shawn Reynolds, VanEck manager of funds, stated that the current high oil price supports the U.S. strategy. It also highlights the dangers associated with decarbonizing production while reducing carbon fuel demand. His words were: “There’s a gradual awakening that an energetic transition isn’t happening overnight.” He stated that companies who expand into low margin renewables are likely to lose oil and gas profits.

LIMITS ON GREEN INVESTING

The money flowing into oil stocks is contrary to climate-aware funds being more broadly supported. U.S. equity funds ranked as “sustainable” by Morningstar, meaning they largely avoid or underweight fossil fuel stocks, took in $25.7 billion this year through Sept. 30, equal to more than half the inflows into U.S. equity funds without an explicit focus on sustainability.

The XOP ETF tracks oil and natural gas stocks. Its total return was 92%, compared to the 22% return for a representative ESG fund Vanguard Social Index Fund. Over that same period, 23% was the return total of the.

These passive investors are the biggest holders of top-ranking oil companies. In order to express dissatisfaction, these firms cannot usually sell oil stock. Instead they must channel their concerns about climate change through negotiations with companies and proxy voting.

BlackRock Inc. (NYSE:) & Vanguard are the largest passive investment companies with $17 trillion between them. They supported dissident directors at Exxon and supported calls to reduce carbon emissions at ConocoPhillips’ annual meetings. The companies did not comment on the specific energy companies or influential pension funds in California and New York.

American Funds products were almost the only U.S.-based oil firm owner among all 25 U.S. mutual funds. According to Morningstar Direct data.

American Funds parent Capital Group refused to comment. Craig Beacock (Capital equity analyst) stated in July that rising oil prices might pose challenges to clean energy strategies of oil companies.

STAYING INVESTOR

Harvard University, Rockefeller Brothers, and other U.S institutions joined an effort by Norway’s sovereign wealth funds to reduce exposure to fossil fuel stocks. Recent research by activists revealed that institutions possessing a total of $39.2 Trillion in assets had committed to some type of fossil fuel diverstment.

Reuters reached out to investors and they said that they weren’t ready for the change. Bruce Duguid from Federated Hermes (NYSE) said that investors should not be pressed to make changes to their investments.

Iancu Daramus, senior sustainability analyst at investor Legal & General Investment Management, said companies generally should cut production and pay out dividends. He doesn’t believe that the emerging market will maintain high levels of oil and natural gas demand long-term.

Too many oil executives believe they will outlast others, as the world moves to alternative fuels. He said that few CEOs would like to see production cutbacks.

“Every (oil) company we speak to tends to say they’ll be the last ones standing,” said Daramus.