Developing economies energy vs ESG

By trying to restrict investments in oil and gas ventures, is the ESG movement going to have the effect of reducing supply of oil as global demand increases? With this scenario the price of energy will increase and developing countries will find it even more difficult to provide its citizens with electricity, water etc which requires energy in the form of oil, gas and to some extent coal. Developing countries will need significant financial help from the developed world if they are going to grow in a sustainable and environmentally favourable way. The concern is the reliance on oil and gas and the ever increasing demand – see graph:

Environmental, social, and governance (ESG) investing is used to screen investments based on corporate policies and to encourage companies to act responsibly. There has been a lot of anti ESP feeling as a focus on environmental and social issues conflicts with the corporate duty of maximising the return for shareholders. Banks in particular have indicated that they may withdraw from corporate alliances that have promised to cut carbon emissions across entire industries. Oil companies are following suit as both Shell and BP, after years of headline-grabbing management changes, splashy deals and ambitious attempts to woo ESG investors with forays into low carbon businesses, have promised to focus on their core business and return as much cash as they can to shareholders – see video from the FT below. But as Gillian Tett points out:

The challenges around sustainability and business are not going to disappear. On the contrary, they’re becoming more urgent than ever.

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