Goldman Sachs: Excluding Big Oil from ESG Portfolios is a Mistake

Alex Kimani, a finance writer, investor, engineer, and researcher for Safehaven.com, argues that it is a strategic mistake to exclude oil and gas companies from ESG portfolios. Major oil firms like Exxon, Shell, and Aramco are increasing investments in carbon capture, hydrogen, and other clean energy projects. Despite their significant global emissions contributions, Goldman Sachs and industry leaders believe that the capital, infrastructure, and innovation of Big Oil are crucial in the energy transition.

The ESG investing boom of recent years has declined following a spike in 2020 and 2021 driven by the COVID-19 pandemic and low oil prices. However, the boom has fizzled out due to the oil price surge in 2022/2023, political opposition to ESG, and accusations of greenwashing. Texas has prohibited state entities from investing in funds opposing fossil fuels, while Big Oil has reduced its ESG and clean energy ambitions.

Goldman Sachs advises that oil and gas companies should be included in ESG investing due to their substantial clean energy investments. Michele Della Vigna from Goldman Sachs argues that excluding Big Oil stocks from ESG portfolios is a mistake, as these companies play a crucial role in the energy transition. Exxon Mobil’s Darren Woods also emphasizes the importance of carbon capture technologies in global decarbonization efforts.

Exxon Mobil, Shell, and other oil giants are making strides in clean energy initiatives, with Exxon aiming to generate significant revenue from its Low Carbon business in the future. Despite their efforts, the inclusion of Big Oil stocks in ESG portfolios faces resistance due to their significant greenhouse gas emissions.