European energy companies have taken a stand this week against foreign oil and made investments to secure independent energy supplies in the near future. We use our ESG Safeguard platform to highlight the actions European energy companies are taking to secure independence through renewable energy asset expansion and divestment.

Sam Leavitt
February 28, 2022

ESG Spotlight: European Energy Majors Accelerate Independence From Oil

ESG Spotlight: European Energy Majors Accelerate Independence From Oil

As the war in Ukraine wears on, never has the importance of reducing dependence on foreign energy assets been more apparent. On our ESG Safeguard platform we are highlighting stories of European energy companies who are going lengths to secure independence through renewable energy asset expansion and divestment.

Russian Oil Assets Crash

Russian energy shares tumbled last week upon news of the escalating war in Ukraine. Last week Gazprom (GAZP:RU) shares dropped 40% on news that the Nord Stream 2 pipeline from Russia to Germany was to be canceled. BP (BP:GB) and Equinor (EQNR:NO) announced this week that they would be divesting their Russian oil assets. As the Russian economy is further isolated from global financial markets, assets like Gazprom and Rosneft will continue to lose value.

ESG Safeguard Platform: Environmental Scorecard, Past 14 Days

Renewable Energy and National Security

Companies are also making moves to shore up renewable energy capabilities, so in the future dependence on fossil fuels will not put national security at risk. BP and Equinor have made their plans quite known when it comes to offshore wind and clean hydrogen, which may be part of the reason they feel comfortable to divest from their Russian oil assets.

RWE (RWE:DE), based in Germany, has been particularly busy in recent weeks. At home the company recently announced a new wind development in Lower Saxony that will provide clean energy for 13,000 homes. The company also announced last week that they won a 10-year contract to operate a 630 MW wind farm off the coast of England. RWE is the largest investor in the project that will be online for 2023 with a 30% majority stake.

The most exciting news for RWE last week was the Memorandum of Understanding (MoU) they signed with Tata Power (500400:IN) to bring offshore wind to India, a move that will create an entirely new market for renewable energy. As a country directly affected with the cancellation of the Nord Stream 2 Pipeline, German companies like RWE will be scrambling in the near future to secure energy from other sources, developing wind capabilities with other like minded companies who are eschewing Russian assets is a good starting point.

More Regulations

Many see these events as a boon for oil companies in the short-term, but it is important to remember the big picture here. Climate change is still happening and recent regulation supports the idea that fossil fuels are on the way out. In the wake of the Russian Invasion into Ukraine, Singapore announced that the carbon tax will be increasing fivefold by 2024. The EU last week also unveiled new regulations that place a greater emphasis on due diligence in value chains in line with Paris Agreement objectives.

The events in Ukraine could further sway governments around the world to reconsider the importance of renewable energy not just from an environmental standpoint, but from a national security aspect as well. As a closing note it is important to say that Ukraine is a major exporter of grain to countries around the world as well and recent disruptions from the Russian invasion will begin to have an impact on food supply chains too.

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Amenity Analytics is the industry leader in providing insights from unstructured text by using Natural Language Processing (NLP) assisted by Artificial Intelligence (AI) and Machine Learning (ML). Amenity’s NLP system is a sector-agnostic, language-dependent tool for quantitative text analysis that is deployed across the financial services industry and beyond.

This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.

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