A Deutsche Bank senior ESG executive is arguing that ESG funds should not exclude oil shares and other traditional energy. On Tuesday, the bank’s Private Bank chief investment officer, Markus Müller, said that those share options are vital for investors.
Why ESG funds need traditional energy—for now
According to Müller, ESG funds need to take advantage of traditional shares if they want to properly serve their investor clients. Indeed, he argues those stocks will be an important way to manage investors’ portfolios during any transition to renewables.
In remarks to Reuters, Müller noted:
“When we think about clean energy, these are business models which are quite new and sensitive to interest rates…Investors are looking for traditional [energy] companies that have capex in renewables… They prefer the transition than to exclusions.”
Why it matters
Some political and social forces have pushed for excluding traditional energy from investment opportunities in recent years. However, banks and other investment professionals have obligations to their clients that transcend political concerns. And recent declines in renewable stocks—during a time in which oil stocks have risen sharply—have not gone unnoticed.
It also appears as though investors have noticed too. Müller referred to a recent Deutsche survey that showed investors losing confidence in the use of ESG concerns for investment portfolios. In fact, the percentage of investors who are confident in ESG’s impact on their portfolios has declined from 48% in 2021 to 37% this year.
The survey suggests that some investors are committed to so-called sustainability goals. Still, there are signs that support may be losing strength. The renewable industry has been significantly impacted by inflation, slow adoption, and high interest rates.
Ultimately, investors seem to be making it clear that they want value in their portfolios. If Müller is correct, that may require ESG funds to avoid exclusionary decisions and find a balanced mix between traditional and emerging energy opportunities.
