“Oil must face its future as a declining industry”: Legal & General Investment Management in the FT

Anton Eser, chief investment officer, and Nick Stansbury, fund manager and commodity specialist, suggest that rather than transition to renewables, oil companies stop investing and return cash.

“We think the industry faces two choices. The first is to try and totally reinvent themselves as renewables businesses. We are sceptical about this.”

“…The second option looks to us a better one — be ready to invest less and return more cash. The time to stop investing is not today. But that point is coming. The industry needs to be clear that its future is one of long-term decline.”

“…The best thing that management teams could do today is make a pledge that when the time comes, it will face its future as a declining industry. On balance we believe that the emphasis should be on us as investors, not on oil companies, to allocate the $29tn of incremental capital that is needed to finance the new energy system.

We, like many other investment managers, are managing ever increasing assets in environmental and social governance strategies, particularly those with a climate focus. To maintain a place in those funds the oil industry needs to articulate a much clearer long term strategy and the role they have to play in the energy transition. The momentum behind the divestment movement demonstrates that today the industry is losing both arguments.

Image: Bloomberg interview screenshot

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