Oil vs. ESG

NEW YORK, Sept 13 (Reuters Breakingviews) – This year, all 10 of the top performers in the S&P 500 Index are fossil fuel companies, with Occidental Petroleum up 123% while the index is down 16%. That has made eschewing oil and gas companies a hard decision to defend. But a 10% drop in the price of oil in the past two weeks, and a 30% drop since mid-summer, might dampen pushback against environmentally based investing.

Nineteen state attorneys general sent a letter earlier this month criticizing investment firm BlackRock (BLK.N) for its position on energy investment. BlackRock, in a letter shown to Reuters, replied that its environmental, social and governance involvement was “consistent with our fiduciary responsibilities”.

But desire by officials to derail ESG investing, or jump on the trend, will probably track the price of oil. It’s easier to make the case that betting on decarbonization is bad – or inevitable and should be supported – when investment performance is on your side. Oil prices are volatile, and may become more so as demand peaks, prices fall, and producers prioritize returning capital over investment. The real bull market may be in controversy. (By Robert Cyran)