Energy CEOs hit mute button on ESG, hinting at fading interest

Gerson Freitas Jr and Raeedah Wahid, Bloomberg November 30, 2022

(Bloomberg) — The top bosses of US oil and gas companies are speaking less and less about climate and carbon emissions, a signal that the industry’s public focus on ESG over the past couple of years may be fading.

That, at least, is according to a Bloomberg analysis of quarterly conference calls held by 172 American oil and gas companies. The data shows how terms such as “climate change”, “energy transition” and “net zero” have come up with gradually less frequency in the most recent rounds of conversations with analysts and investors.

In fossil fuel suppliers’ conference calls this quarter, the use of language alluding to environmental, social and governance topics, or ESG, was down by more than 40% from the peak levels seen in 2021. Mentions of the terms “emissions,” “climate change,” “renewables” and “energy transition” have all decreased. 

The analysis is based on an automated search of terms related to environmental, social and governance issues in transcripts of quarterly earnings calls, from the publicly traded energy companies that regularly hold calls in English. The transcripts include questions and comments from analysts and investors.

Oil and gas companies went into the pandemic under fierce pressure from investors and environmentalists to come up with plans to slash greenhouse gas emissions and prepare for a low-carbon future. That led to a spike in discussion about ESG, pushing companies to commit to emission-reduction targets and increased investment in cleaner energy, even as they initially struggled with massive losses amid plunging demand.

Fast forward to now, and management teams are operating in a radically different environment where they’re no longer on the back foot. Fossil-fuel profits have soared this year, energy stocks are the best performers in the S&P 500 and shale drillers and refiners are fielding calls from the White House to boost output to help ease a global energy crunch that’s helped drive inflation to the highest levels in four decades. 

Fossil fuel executives “are gleeful that the world is admitting they need fossil fuels. It’s very much an ‘I told you so’ moment for them,” said Jim Murchie, CEO of the investment adviser Energy Income Partners.

John B. Hess, the chief executive officer of Hess Corp., said on a recent call that global policymakers “need to get a dose of reality that we need to invest more in oil and gas to have an affordable, just and secure energy transition.”

The president and chief operating officer of crude refiner HF Sinclair Corp., Timothy Go, said in a conference call with analysts earlier this month that the energy transition “is really proving out to be more of a longer-term evolution.” “We see that the demand for our products is going to continue to be strong,” Go said. 

ESG has also become more controversial recently, with Republican politicians pushing back on it. “There is this narrative now that ESG is part of the nefarious ‘woke,’ leftist agenda, and that was gaining steam ahead of the election,” said Bloomberg Intelligence analyst Rob Du Boff. “So no surprise a lot of corporates were a little more mum on their ESG initiatives.”

The drop-off in call time devoted to environmental topics follows some concrete steps taken by the industry, according to Rob Thummel, a senior portfolio manager at Tortoise, a firm that manages roughly $8 billion in energy-related assets. “The big ESG push a couple years ago had a pretty amazing impact on encouraging oil and gas companies to participate in the energy transition,” Thummel said.

Even as their climate-related rhetoric has faded, companies including Exxon Mobil Corp. have started to move into emissions reduction and clean energy technologies like carbon capture and hydrogen, taking advantage of federal incentives under the Inflation Reduction Act.

The energy sector is the world’s biggest source of greenhouse gas emissions, which nations must reduce urgently to avoid the most damaging impacts of climate change, the UN’s Intergovernmental Panel on Climate Change says. Slashing emissions through 2050 will require huge declines in the use of coal, oil and gas and massive adoption of renewable energy sources, according to the International Energy Agency.



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