However, with Brent crude oil over US$110 a barrel, Russian exports and supply chains constrained, economies rebounding and energy at 13.4% of the Canadian equities market, investors who lack exposure are underperforming.
Divestment shifts ownership to investors less concerned about emissions, while any chance to influence managements via proxy voting is lost.
Planet-friendly power sources should eventually overtake carbon-based ones as higher oil and gas prices make more technologies viable.
Although Canada’s 13.4% energy weight versus the S&P 500’s 3.6% has penalized long-term performance, active managers have underperformed both indexes over time, so passive exposure is better.
Traditional oil and gas businesses may end up like tobacco: highly profitable with attractive dividends but shunned by ESG investors.