ESG investing in the energy sector

In the early 2000s when renewable prices - solar and wind - did not make economic sense, most of the investment discussion around energy investing were centered on coal, oil and gas, and to some extent nuclear. As renewable prices became more competitive through various legislations, coal became a target. I remember so well when during this time any transaction that supported coal was stopped in its tracks at our investment committee.

Coal is no longer the favored child. Nuclear plays its role when it is needed. The attention has shifted in the past decade to renewables although oil and gas prices are relatively cheap. One will think that anything renewable - from tidal energy to solar - should be accepted. That is, however, not the complete story.

Investors are looking at the energy sector and are asking questions such as what are are the environmental attributes of the project? What are the social or societal impact of the project? What governance structures are governing the project?

Globally, these factors, E - Environmental, S - Social and G - Governance are being used to evaluate energy projects and investments and it is important that those of us who happen to manage assets understand the dynamics at play. ESG is not just for the millenials.