Energy Shares Will Benefit If Paris Accord Upheld

President Donald Trump announced last week that the US would withdraw from the Paris climate accord, saying that America bears too much of the burden and that he will seek better terms.  

It would be myopic to assume, however, that all US energy companies backed Trump’s decision. In fact, Exxon Mobil, Conoco Phillips and Occidental Petroleum, among others, wanted the US to remain in the Paris agreement, Bloomberg reported. The backlash by the energy industry and the business community against Trump’s decision is actually good for their stock prices. The reason for heeding to climate change is clear, as it is less about a sense of moral responsibility than it is about the price of doing business globally.

Also, allocating more assets to renewable energies, a potential $6 trillion market and one of the highest growth sectors in the nation, can help both their bottom line and reputation.  

It is not that the big exploration and production companies have awakened to the reality that climate change is a material concern. Rather, they acknowledge the need to be players on the international energy negotiation field and to be in the room making deals when decisions are made.

The energy industry has faced a massive stock disinvestment by environmentally sustainable and socially responsible funds ranging from indices, exchange traded funds, mutual and hedge funds.  Shareholders are demanding more prudent financial and environmental stewardship from all industries, particularly energy.

Regardless of whether Trump is able to negotiate what he views as an accord that is more favorable to the US, the stocks of US listed energy companies and other businesses supporting greenhouse gas reduction are poised to see some upside.

Business as usual is no longer an option for them. Investors are voting on the imperative to the risks of climate change. They believe that the business case for climate action is real and that the gradual transition to a low-carbon economy not only can drive economic growth, but is a fact of life.