BCG Survey Finds Investors Question the Future of Oil and Gas
Over the course of 2021, prices on crude oil skyrocketed, leaving fossil fuel investors questioning whether the oil and gas industry will provide strong returns on shareholder investment moving forward. According to a new survey by Boston Consulting Group (BCG), investors remain optimistic about the short-term future of oil and gas, but less so when it comes to long-term viability. Of the 250 institutional investors surveyed by BCG, 57% "feel pressure to divest from fossil fuels”; 65% “feel pressure to reduce those fuels' weighting in their portfolios"; and 75% "feel pressure to invest in 'green' funds and companies." Almost two-thirds believe that oil demand will peak in 2030.
Why This Matters
Increasingly, investors are acknowledging that the initial steps oil and gas companies have undertaken are not enough -- nearly 80% of total investors now want to see the results of sustainability-oriented action, a notable increase from the previous year's survey. Indeed, 2021 set the stage for change in courtrooms and boardrooms across the world.
Popular opinion among oil and gas investors still diverges from the demands of science on several fronts: 70% of investors feel that companies should actively pursue natural gas production, while 85% see natural gas as "a bridge fuel" between traditional fossil fuels and renewables. However, investors remain largely uncertain about investment in emerging technologies, such as carbon capture and storage.
Yet according to BCG, this year may usher in an increase in shareholder activism. The firm states, "Investors continue to seek clarity regarding emissions reduction in the industry, along with a clear strategy for the energy transition." And further, that investors believe the industry should take the following actions:
- Set and meet targets for emissions reductions (per 80% of investors).
- Invest in clean energy now, to ensure viability in the long-term (per 82% of investors).
- Work alongside other sectors to set emissions targets stretching across industries (per 73% of investors).
The BCG report states that the present moment's high prices and strong returns on shareholder investment combined with long-term uncertainty mean that companies are entering a "critical window to make changes." If investors are feeling the pressure, it is only a matter of time until the leadership of oil and gas companies feels it, too.