You’ve heard it in the news, you’ve heard it at your job, and you’ve heard it from your neighbor: fossil fuels bring nothing but harm and will be phased out in the very near future. Investing in fossil fuels is investing in the past!
This narrative permeates the investing, media, and policy landscape. The White House is committing trillions to the clean energy transition through the Infrastructure Investment and Jobs Act. Asset management behemoth BlackRock is divesting from fossil fuels, and the Norway sovereign wealth fund (essentially the world’s largest pile of oil money) is gradually divesting from, well, oil.
As we’ve outlined in our Rebuild and Renew Thesis and in several prior reports, once partisanship and political bias are taken out of the picture, the ESG agenda misses three crucial facts:
- The demand for fossil fuels will persist (and grow) for decades to come because the clean energy transition, while laudable and inevitable, will take much longer than estimated, regardless of headlines and ribbon-cutting ceremonies.
- The clean energy transition, itself, remains one of the most bullish drivers of the fossil fuel industry. Re-designing and rebuilding the way we produce, utilize, and save energy will take unthinkable amounts of energy, as it is a full-on overhaul of the way we live our lives.
- The clean energy transition will require a vast amount of basic materials: steel for wind turbines and solar equipment, copper for rebuilding our outdated HVAC systems, uranium for clean nuclear energy. The energy required to mine, extract, manufacture, and ship these materials will come from – you guessed it – fossil fuels.
Let’s dive in.