HSBC announces plans to halt funding for new oil and gas developments, but Canadian unit will be exempted by Stefanie Marotta
Appeared in The Globe and Mail on December 14, 2022

Gina's Thoughts

This is our last SOTW before the holidays and we have some bad news and some good news. First the bad news: HSBC Holdings, the world's eighth-largest bank, announced earlier this week that they will no longer invest in new oil and gas projects. Now the good news: HSBC's Canadian branch is exempt from this new policy and RBC is in the process of buying them. Why is HSBC Canada exempt? Because they are going through a deal with RBC who agreed to purchase the Canadian unit for $13.5 billion at the end of November and you can't force new policy on a division that is in the process of being purchased. Could it also be that HSBC Canada is exempt because of projections for continued growth in oil and gas demand for decades to come? Merry Christmas and Happy Holidays. InvestNow's SOTW will be back in the New Year!

Watch out for ESG assets that turn out not to be by Matthew Lau
Appeared in the Financial Post on December 6, 2022

Gina's Thoughts

"The backlash against ESG investing has finally arrived." This was proclaimed in a NY Times editorial in August 2022. Fast forward to December and we have Vanguard, the 2nd largest asset manager in the world (after BlackRock) pulling out of both NZAM and GFANZ whose members have committed to reaching net zero carbon emissions by 2050. We have attorney generals (AGs) in the US divesting from the divestors by refusing to put state money in BlackRock's coffers. And, as Matthew Lau writes, we have a "recent backlash against ESG and the multiple definitions and confusing terminology, the overreliance on checklists, the potentially misleading marketing campaigns, and the frequent lack of rigour and accountability." Lau also posits that the investing backlash against ESG is due to ESG's abandonment of fiduciary duty. In a letter to BlackRock, the aforementioned AGs wrote, "BlackRock appears to use the hard-earned money of our states' citizens to circumvent the best possible return on investment." The backlash has begun in the US. Will Canada follow suit?

BlackRock, UBS Ask to Be Removed From Texas' Energy Boycott List by Shelly Hagan and Danielle Moran
Appeared in the Financial Post on November 28, 2022

Gina's Thoughts

"Don't Mess with Texas." Last year, the Texas state legislature passed a law requiring the state's comptroller to name financial institutions and funds that refuse to do business with energy companies, and potentially divest from them. Energy is a pillar of the state's economy and the state doesn't want to do business with financial institutions that have boycotted energy companies. Now, BlackRock Inc., UBS Group AG and other major financial firms are taking steps to be removed "from the list of companies that Texas has classified as boycotting the fossil fuel industry". Faced with the prospect of losing business in the booming state, these financial firms are writing letters and making submissions to prove they support the energy industry. The law allows the state to "divest from the divestors" and the divestors don't like it.

ESG Investing Hurts the Poor and Empowers Tyrants by John Murante
Appeared in the National Review on November 21, 2022

Gina's Thoughts

The author describes the current situation in the US (and Canada) where "unelected investment managers and other financial institutions make decisions based on their own political agendas with the investments, savings, and pensions of millions of Americans (and Canadians)." What is that political agenda? Divestment with ESG and Net Zero as the justification. "This means an increasing reluctance (and sometimes outright refusal) to invest in fossil fuels, an industry which has improved the lives of so many around the world. Indeed, affordable and reliable energy is a critical factor in enabling an economy to grow, prosper, and help the poor. When the production of affordable energy in the US and investment in developing countries is prevented by divestment, it empowers countries like China." Energy security and energy poverty issues are looming over us right now and divestment will only exacerbate these problems.

The banking approach to net zero is just claptrap by Stuart Kirk
Appeared in The Financial Times on November 11, 2022

Gina's Thoughts

"From the 2015 Paris Agreement emerged the idea that investors must play their part in the energy transition. From there came the concept of financed emissions -- that providing funds to a belcher of carbon is basically akin to polluting itself, and hence capital should have net zero targets too." As a result, 400 asset managers and owners that are responsible for about $70tn have rushed to join the Net Zero Asset Managers Initiative and have promised to reduce financed emissions by some percentage by a particular date. Kirk, former Head of Responsible Investment at HSBC Asset Management, writes that these numbers and pledges are "hokum". The pledges do not save the planet, they are impossible to measure, they do not adhere to fiduciary duty and are pure virtue signalling.

Opinion: The energy transition is transitioning -- to energy security by Henry Geraedts
Appeared in The Financial Post on November 10, 2022

Gina's Thoughts

This week's author writes that "the current supply crisis has revealed surprising global demand for hydrocarbons." This should not come as a surprise to anyone. Oil and Gas still makes up 80% of the global energy mix and will continue to do so for the next 25 years. "The International Energy Agency projects a 50 per cent increase in global energy demand by 2050, while OPEC recently increased its global oil forecast for 2030 from 100 to 108 million barrels a day, with its market share expanding because of politically constrained Canadian and U.S. production." The author outlines all the reasons why hydrocarbons are front and centre on the world stage right now. Unless things change on the political and energy policy front, Canada and Canadians will lose out on the oil and gas global resurgence.

Cenovus CEO takes aim at oil and gas critics; says sector pays billions in taxes by Amanda Stephenson
Appeared in The Canadian Press on November 2, 2022

Gina's Thoughts

This week's article features another CEO standing up for the energy industry. A couple of weeks ago our Story of the Week featured an article about Chevron's CEO and his unapologetic promotion of oil and gas. This week, a Canadian CEO is standing up for the sector. Alex Pourbaix, CEO of Cenovus Energy "cited a recent analysis by investment firm Peters & Co. that predicts the oil and gas sector will return approximately $50 billion in the form of royalties and taxes to Canadian federal and provincial governments this year. "That's money that pays for health care, education, arts and culture and much more across this country," Pourbaix said." A thriving oil and gas sector is good for Canada and Canadians.

Why We're Bullish on Energy Stocks by Vivek Ramaswamy and David Sokel
Appeared in the Wall Street Journal on October 24, 2022

Gina's Thoughts

"JP Morgan estimates that by 2030 oil and gas companies will require an additional $1.2 trillion to $1.3 trillion in capital expenditures to meet demand. Chronic underinvestment in production now leaves the world at risk of sustained oil and gas shortages." Is a perfect storm in the oil and gas investment space taking place? The authors are bullish on US energy stocks and believe that if oil and gas companies invest in greater production and meet long-run demand, US energy companies can outperform. Ditto for Canada and Canadian energy companies.

Will the energy crisis crush European industry? by Peggy Hollinger, Sarah White, Madeleine Speed and Marton Dunai
Appeared in the Financial Times on October 19, 2022

Gina's Thoughts

This article underscores how almost every industry in the world relies on oil and gas. Building materials, ceramics, cement, chemicals, glass-making, pharmaceuticals, plastics, fertilizers, steel, paper-making, and automotive are some of the industries that are facing hardship this coming winter due to the energy crisis in Europe. There is a real fear of a deindustrialisation wave hitting Europe. "Soaring energy prices and a lack of supply are currently precipitating an alarming decline in the competitiveness of Europe's energy-intensive companies." Divestment proponents should look at what is happening in Europe to understand that a vote for divestment is a vote against every other industry on our exchanges.

Chevron chief blames western governments for energy crunch by Derek Brower
Appeared in the Financial Times on October 13, 2022

Gina's Thoughts

This week, the CEO of one of the biggest companies in the world spoke out against the effort to transition from fossil fuels. Mike Wirth, Chevron's CEO said "this premature transition has resulted in "unintended consequences," including energy supply insecurity from crisis-hit Europe to California." He went on to say "despite heavy global investment in renewables in the past 20 years, fossil fuels still met about 80 per cent of global demand. "The reality is, oil and gas is what runs the world today. It's going to run the world tomorrow and five years from now, 10 years from now, 20 years from now." Another reality Wirth talked about is the fact that "the source of the energy crunch predated Russia's invasion and followed years of under-investment in new oil supply." Demand for energy has continued to rise and investment in oil and gas projects is about half the rate it used to be. Chevron will continue to operate as an oil and gas company and as such, will continue to increase oil supply. Wirth does not apologize for supplying a product that society wants and needs and that improves quality of life around the globe.