Investing in oil and gas might be something of a controversial topic in 2023, but with profits widely reported to be on the rise for some of the world’s major providers as supplies become more limited and thus, more valuable, it remains a profitable choice for many that could see them make some sizable returns in the future.
Despite the fact that specialist online trading platforms like Oil Profit continue to draw in new sign-ups by the day, it doesn’t negate the fact that the ongoing use of fossil fuels like these is damaging our environment, so if you’re finding yourself wrestling between your heart and your head and your conscience is telling you to look elsewhere, then you’re likely not alone. But by looking at the environmental policies of oil and gas companies when seeking to invest in the industry, you can go some way towards making better choices and striking what feels like more of a reasonable balance.
A company’s commitment to Environmental, Social and Governance (ESG) criteria is telling and will give you some insight as to whether a company is operating as ethically as it can without sacrificing its core business. Sustainability has become an increasingly prominent topic in the industry over the past two decades as our understanding of its environmental impact grows.
And, although there are growing global efforts to minimise carbon emissions and some ambitious targets agreed upon by the 70 countries currently partaking in the Net Zero Carbon Coalition to cut greenhouse gases to almost zero by 2050, business-as-usual trends have seen experts forecast that global carbon dioxide emissions could be set to increase to some 43.08 billion metric tonnes by the same date.
Still, some of the world’s biggest oil companies have been vocal about their desire to align with environmentalism. European countries like BP and Shell have had little choice, coming under increasing pressure from European governments to shift towards alternative types of energy production, but it remains very much a work in progress, and even then, one in its early stages.
In part, this is because alternative energy sources are far less profitable – something that is seen as such a problem that Shell has hit the pause button on its efforts for the foreseeable. It’s a disappointing move for environmentalists, and reinforces the belief that money will always come first to huge producers such as these. But still, it’s possible for investors to make better choices without giving up on potentially lucrative opportunities in the field – so if you need some clarification on how to proceed, then here’s what to pay attention to.
Commitment to ESG
ESG is a set of standards that measures the impact of a business on society and the environment, as well as its level of transparency and accountability surrounding both.
As an investor, you’ll want to look out for what a company is doing to commit in these areas and whether they are walking the walk as opposed to simply just talking the talk. However, in order for the most committed companies to remain profitable, they must not sacrifice their core operations, so be prepared to do some digging to get to the truth before you part with your cash.
Investment in exploration
On that note, remaining profitable long-term also means planning ahead, and in this particular industry that means investing in a long-term exploration plan.
If you’re investing in oil and gas equities, then this is a key factor to consider, as those companies looking only at making short-term gains whilst neglecting the bigger picture might not be such a great choice to add to your portfolio.
Investment in alternative energy
On the topic of thinking long-term, there will almost invariably come a time when oil and gas production becomes all-but obsolete, owing largely to those ambitious global carbon emissions targets we touched upon earlier. With this in mind, it’s important to look towards companies that have a ‘plan B’, and that are ahead of the curve when it comes to exploring and investing in alternative energies.
The development of biofuels, tidal power and carbon capture is a hot topic in the industry at present and the players that are already making moves in such fields are likely to be better long-term bets than those that aren’t. Look for companies that aren’t just now beginning to discuss such topics, but those that have been investing in new technologies for some years already, as these are likely to come out of the next few decades the best and remain more profitable than those that have failed to do so.
Disclaimer: Investing money carries risk, do so at your own risk and we advise people to never invest more money than they can afford to lose and to seek professional advice before doing so.
