ESG investors have been rethinking their approach to investing in energy assets like oil and gas that were once deemed taboo, said Bill Nygren, chief investment officer at Oakmark Investments.
Nygren said executives at several big energy companies in which his value fund has holdings have told him that after Russia invaded Ukraine and exposed the dependence of certain countries on Russian gas, ESG managers began to rethink their posture on total avoidance of any fossil fuel businesses.
“The companies we own say the investor set of ESG firms [that said] they have no interest in energy is starting to re-engage” with them, Nygren said at a press luncheon yesterday sponsored by Natixis, Oakmark’s parent company. This is noteworthy because energy companies are significantly “underowned,” he added.
Nygren himself was particularly upbeat on U.S. energy companies because they are far more efficient in terms of both capital allocation and producing hydrocarbons with fewer emissions. American companies are “producing energy for 50% less carbon per barrel than foreign companies,” he explained.
Looking out over a long-term timeframe, Nygren praised the measured approach U.S. energy companies were taking on both a changing environmental and investor world. “They are returning capital to shareholders and not racing to produce extra barrels of oil” even though U.S. oil production recently hit its all-time high, he said.
As a value investor, Nygren acknowledged that growth stocks led by tech shares have enjoyed a great run in 2003. But he added that some are quite expensive while many value stocks are still selling at less than 10 times earnings.
Among the industries he likes besides energy are banks and beaten-up media and cable companies like Comcast and Charter Communications.