Good morning.
My interview with BP CEO Bernard Looney yesterday prompted lots of feedback, so I’m following with more. There are two great debates going on right now about investment in oil and gas companies. The first is: If you really care about the climate, should you stop investing in oil and gas? I feel like the answer to that one is clear. As Looney said yesterday, oil and gas isn’t going away for decades. Disinvestment by shareholders serves no purpose except to allow investors who don’t care about the environment to earn a higher return. Better to stay in and push for change.
But that leads to the second debate, sparked by activist investor Dan Loeb. He is pushing Royal Dutch Shell to split into two pieces—“Green Shell” and “Brown Shell.” Green Shell would benefit from investor enthusiasm around clean energy, presumably have a lower cost of capital, and therefore be better able to meet the demands of rapid scaling. Brown Shell would have a higher cost of capital, grow more slowly, but reap nice dividends for those who own it…which, of course, they could always reinvest in Green Shell. In our conversation yesterday, Looney remained firmly committed to keeping both the “green” and “brown” businesses under one roof. From the interview:
