Institutional investors dramatically scaled back efforts to defund oil and gas companies in 2022, as asset managers deemphasized environmental, social and governance (ESG) investing, Axios reported Friday, citing research from Goldman Sachs.
On a year-over-year basis, Goldman researchers found that new assets committed to fossil fuel divestment — when an investor pulls all support for a particular investment — declined by roughly 99% in 2022, according to Axios. In 2021, investors divested nearly $15 trillion from fossil fuels, bringing total international divestment to roughly $39.2 trillion across nearly 1,500 investors, according to climate advocacy group Stand.earth’s Divestment Database. (RELATED: Oklahoma Blacklists Over A Dozen Major Financial Firms For Boycotting Oil And Gas)
Goldman analysts noted that firms are increasingly taking a “more nuanced and engagement-oriented approach” to their fossil fuel investments, preferring to use their stakes to push high-emission industries towards green technology, instead of divesting, Axios reported.
Today @SenGonzalez33 introduced #SB252, which will require @CalPERS and @CalSTRS to divest the $11 Billion they have invested in oil and gas companies. Proud to be partnering with @FossilFreeCA and @CFA_United on this important legislation! pic.twitter.com/BEkOEhzJ8g
— Trevor Taylor (@thetrevortaylor) January 30, 2023
Republican political pressure has also made investments in ESG funds less appealing to investors, after several red states pulled billions worth of retirement funds from BlackRock’s management in 2022, Axios reported. Oklahoma took particularly strict action Wednesday by barring 13 major financial institutions — including BlackRock, Wells Fargo, Bank of America and JPMorgan Chase — from doing business with the state government over allegations that they were engaging in a boycott of the traditional energy industry.
The record-breaking financial success of oil and gas firms in 2022 also contributed to investor’s “shifting views” on the sector, Goldman researchers said, according to Axios. Accounting firm KPMG anticipates that big oil companies will use their fresh billions to invest heavily in U.S. shale production, buying out smaller competitors and securing long-term supplies of oil.
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