The Importance of Green Energy Investment by Oil and Gas Firms

The shift towards green energy generation is currently encountering a significant obstacle owing to the limited funds designated for renewables. Government finances worldwide are diminishing, rendering it challenging to allocate adequate investments towards green energy. To address this issue, oil and gas companies need to intervene and provide financial support for the transition to green energy.

Geopolitical instability often disrupts the flow of funds into green technologies, threatening progress in renewables and compelling oil and gas companies to increase investments in fossil fuels to compensate. While resorting to fossil fuels may provide a temporary solution during supply shocks, it is not a sustainable approach.

In order to achieve the objectives outlined in the Paris Agreement and limit the global temperature rise, it is essential for energy investments to grow annually by two to four per cent, in line with global GDP growth. Projections indicate that energy investment should reach between $2 trillion and $3.2 trillion by 2040. Furthermore, carbon dioxide emissions must be curtailed to avert the most severe impacts of climate change.

In order to ensure energy security and stability at a global level, European economies must increase their investments in renewables and decarbonisation technologies. Currently, they allocate only around 20 per cent of their overall EU share of energy investments to renewables and low-carbon solutions, underscoring the substantial gap that impedes the world from achieving a green energy transformation.

The urgency of transitioning away from non-renewable sources is significant. Relying on non-renewables in organizational strategies presents both micro- and macro-level challenges in the form of climate change risk. While major oil and gas firms are increasing investments in low-carbon and renewable energy sources, this investment remains modest in comparison to fossil fuel projects.

According to a report by BNP Paribas, corporate investments by the top 7,148 publicly listed global companies should increase to $1.07 trillion in a scenario aligned with the UN Sustainable Development Goals (SDG), in contrast to $611 billion in a business-as-usual scenario. Nearly one-third of these SDG-aligned investments are anticipated to originate from the global oil and gas sector, indicating the potential for substantial investments in green energy.

In conclusion, the transition to green energy is imperative, and oil and gas firms, in collaboration with the financial services sector, must acknowledge the necessity for transformative action and actively participate in funding green and transition finance initiatives. Without this concerted effort and forward-looking collaborative approach, the transition to green energy is at risk of stagnation.