INVESTING/PORTFOLIO STRATEGIES

Investor group calls on oil, gas companies to cut spending on finding fossil fuels

A group representing institutional investors called for oil and gas companies to cut back on capital spent to search for more fossil fuels over concerns about climate change risk, return capital to shareholders and pursue more clean energy projects, said speakers on a teleconference Thursday hosted by Ceres, a coalition of institutional investors promoting sustainable investing.

But the group rejected divestment of fossil-fuel companies as a course of action to reduce climate change risks and encourage transition to low-carbon energy.

“From the position of the New York State Common Retirement Fund … in our judgment it is far better to have a voice to try to change corporate behavior than to divest and not have a voice and watch things unfold with a company we have no interest in, no say in,” said Alexander “Pete” Grannis, first deputy comptroller of New York, who assists in overseeing the $178.3 billion Albany-based pension fund, during the teleconference.

“We have opted to retain our voice and use it constructively and try to bring about changes in corporate behavior,” Mr. Grannis said. “This is far more effective we think in the long run than divesting.”

Andrew Logan, oil and gas program director at Ceres, said during the teleconference, “We believe that many of the highest cost, most risky carbon projects — whether it’s the oil sands of Alberta or the Arctic — should be on the chopping block.”

“Our concern is the industry … is fully intent on forging ahead with major capital spending based on … an assumption today’s (low oil) prices are an anomaly and high prices will return,” Mr. Logan added.

“We haven’t yet seen any real indication the industry is ready and willing to transform itself by transition to a low-carbon economy,” Mr. Logan said.

“Many of us would like to see the industry use that cash (from fossil-fuel projects) to transition to a lower-carbon mix” of capital investment, Mr. Logan said. “But there are other uses for that case as well,” such as “simply return it to investors … increase the dividend, do more share buybacks.”

“There is not always a link between production growth and value growth,” Mr. Logan said.