Future Energy

Green Oil?

Source: Fast Company

Newsweek recently ranked 500 U.S. companies on their environmental credentials (see The Greenest Big Companies in America, September 28th).  Only one oil and gas company, Marathon Oil, is included in the top 100 companies and it was number 100. 

After Marathon, you would have to travel down the list to the 154^th spot to find the next oil and gas company, Baker Hughes, an oil and gas service company.  Notably, the coal fired utilities grabbed 13 of the bottom 20 spots in the ranking - NRG Energy ranked 499^th.  Clean coal anyone?

Newsweek relied on three partners to construct the ranking, including:

• Trucost - calculated environmental impact scores;
• KLD Research & Analytics - calculated green policy scores;
• Corporate Register.com - conducted a reputational survey.

The overall scores combined all three of these components and from the limited information on the methodology each partner followed, the scoring looks to be fair.

Back in February 2008, Fast Company magazine went through a similar exercise and ranked the sustainability of the world's 10 largest oil and gas companies (see Fast Company Looks At Oil, February 4, 2008).  In a subsequent post I put together a table comparing Fast Company's rankings with those from the Dow Jones Sustainability Index and the Global 100 Most Sustainable Companies.  I've updated here to include the Newsweek rankings.  Not a lot of overlap.

Companies	Newsweek	Global 100	DJSI	Fast Company
BG Group		√	√
BP			√	1
Royal Dutch Shell		√	√	2
Chevron	√ (371)			3
Marathon Oil	√ (100)			4
ConocoPhillips	√ (238)			5
Total			√	6
ExxonMobil	√ (395)			7
Encana			√
Eni S.p.A.				9
Neste Oil OYJ		√	√
Nexen		√	√
Petroleo Brasileiro			√
Repsol			√	8
Saipem		√
Sasol			√
StatoilHydro		√	√
Suncor			√
TransCanada		√
Valero Energy	√ (332)			10
Woodside Petroleum			√

 

Are Energy Companies Investing in the Future?

                                         

What Do Oil & Gas Companies Know About Renewable Energy Investment Anyways?

Peter Fusaro, writing yesterday in the Risk Center's Risk Alert newsletter (see Why Energy Companies Are Not Investing in the Future?, March 3rd), laments the lack of energy company investment in renewable energy, cleantech, etc.  In the face of a a future carbon constrained world with potential peaks in conventional oil & gas reserves, Mr. Fusaro points out that the energy industry is "awash in capital but seems content on stock repurchasing and dividend boosting".  He goes on to argue that:

"the major oil companies are now in a liquidation phase of their existence.  Their reserves-to-production ratio is declining and they are now begining to peak as they now produce and monetize their depleatable assets.  Investment in a new energy future is not being pursued by nmany energy companies yet.  I see the energy companies, therefore, as the buyers of new clean energy technology, not the innovators producing them."

His arguments brought to mind last week's announcement by BP, that it was considering divesting its renewables unit, and conversations I have had with a Canadian oil & gas producer about whether they should be investing in renewable energy.

Groups such as Innovest and the SAM (Sustainability Asset Management) Group that would rate oil companies on their sustainability or green image are unequivicable on this point (see past posts, including Which Oil & Gas Companies are the Most Sustainable, February 9th, or Fast Company Looks at Oil, February 4th).  These sustainability ratings give significant marks for those companies such as Shell or BP that have put money into wind, solar or other clean energy.

However, what do oil & gas companies (and even electrical utilities) really know about renewable energy?  What do companies used to investing hundreds of millions and even billions of dollars know about deploying small-scale, distributed energy technologies?

One of the business mantra's of the past two decades has been "stick to your kniitting" and a recognition that no company can be all things to all people.  The worst case for investors and society as a whole may be relying on the existing energy giants to lead the way in iinvesting in our energy future.

Going back to Mr. Fusaro's article, he outlines the growing wave in sustainable energy investment over the past six years, reaching $5.18 billion in 2007.  Much of this is apparently coming from institutional investors, entrepreneurs and others outside of the existing energy sector.  Given the disruptive transformation that needs to take place in our energy economy, perhaps this is as it should be.

Which Oil & Gas Companies are the Most Sustainable?

      

Comparing the most popular sustainability ratings for oil and gas companies.

Earlier this week, I talked about Fast Company’s ranking of the world’s 10 largest oil companies based on sustainability criteria (see Fast Company Looks At Oil, February 4^th).  Out of curiosity, I compared Fast Company’s ranking with thrre of the best known lists of “sustainable” companies, including the Global 100 Most Sustainable Companies in the World, the Dow Jones Sustainability World Index and the FTSE 4Good Index.  The following table is the result.

The list makers.

The Global 100 is a project initiated by Corporate Knights Inc. in association with Innovest Strategic Value Advisors Inc.  Using research and analysis prepared by Innovest, the revised list has been launched each year at the World Economic Forum in Davos since . 

Launched in 1999, the Dow Jones Sustainability World Index is a joint effort of the Dow Jones Indexes, STOXX Limited and SAM (Sustainability Asset Management) Group.  The Sustainability World Index (one of    Sustainability indexes compiled by the partners) comprises more than 300 companies that fall in the top 10%, based on environmental, social and economic performance, of the largest 2500 companies in the Dow Jones World Index.  The list is reviewed annually.

The FTSE 4Good series of indexes are derived from FTSE’s larger Global Equity Index Series.  Based on social, ethical and environmental criteria, the FTSE4Good companies are selected from the more than 2000 included in the Global Equity Index Series.  FTSE4Good was launched 2001.

	Fast Company	Global 100	DJSI	FTSE 4Good
BP	1		√	√
Royal Dutch Shell	2	√	√	√
Chevron	3
Marathon Oil	4
ConocoPhillips	5
Total	6		√	√
Exxon Mobil	7
Repsol YPF	8		√
Eni	9			√
Valero Energy	10
Neste Oil		√	√
Encana			√
Nexen		√	√
OMV AG		√
Petroleo Brasileiro			√
StatoilHydro			√
Suncor			√
Woodside Petroleum			√

Does it all mean anything?

The fact that BP and Shell each show up on at least three of the four lists isn’t a surprise since both have invested a great deal of time and money on developing their “sustainable” reputations.  That Total shows up only sixth on the Fast Company rating and yet is included in the DJSI is perhaps a bit of a surprise, but then the DJSI list is not all that exclusive. 

Having been involved in developing sustainability/environmental reports and applications to DJSI, etc. for a large Canadian energy company for a number of years, I am often sceptical that these lists make any difference in the level of environmental and social impacts that the oil & gas companies have in the world.  To its credit, Fast Company, addresses this concern in part by separating the scores it gave each oil company between “management” (i.e. what they say they will do) and “impact” (what they actually do). 

I’ll be interested to see how the scores for leading companies such as Shell and BP evolve as they ramp up investments in oil sands projects. 

Fast Company Looks At Oil

How Sustainable Are The World's Biggest Oil Companies?

Fast Company's most recent issue (February, 2008) examines the sustainability of the world's 10 largest oil companies.  "Oil" looks at the dilema facing "clean, green consience" investors when they come face to face with big oil and the profits it has earned in the past five years.

The magazine asked HIP Investor and the Social Venture Technology Group to rank the 10 companies.  As might be expected, BP came first and Royal Dutch Shell a close second.  Valero Energy came a distant tenth.

The folks at HIP and SVT put together a methodology that looks at both management practices (the promise) and actual impacts (the result).  Categories included environmental, health, wealth generation and accountability.

I applaud the exercise and think the contributors did a good job of the ranking.  The article demonstrates that there are some significant differences between the companies (they give the example of emissions per 1,000 barrels of oil produced).  And perhaps most importantly for me, they did remind us to take sustainability claims with at least a grain of salt:

"...there is also plenty of window dressing that can obscure the overall impact of these businesses.  Shell was recently forced to pull ads touting its green efforts by British regulators who found it had exaggerated.  BP has paid massive fines for health and safety violations.  Typically, Big Oil companies invest less than 1% of their capital budgets in alternative energy sources."

Take a look at the magazine or better yet, the web edition, which provides additional background.