Search this website. You can use fund codes to locate specific funds

Delta: a credit investor's guide to the energy transition

Why are firms so focused on achieving net-zero emissions by 2050 and what paths are available to them in a low-carbon era? What qualities do we look for in the credit profiles of energy companies, and how do we use stewardship to drive change in the industry?

In this episode of Delta, Andrew ‘Jacko’ Jackson is joined by his colleagues to discuss how oil and gas debt issuers can transition to a low-carbon economy. He talks to Audra Deport, Deputy Head of Credit Research, Bertie Nicholson, ESG and Engagement Associate, and Nick Spooner, Climate Change theme lead at EOS at Federated Hermes.

Joe Biden’s victory in the US election is set to have a considerable impact on the energy industry. As Bertie points out, Biden is trying to “achieve a carbon-free generation economy by 2035 and also… carbon neutrality by 2050… What this means for these fossil-fuel producing companies is that first of all there will be a huge rise in competition from renewable energy firm, and also there will be less demand for fossil fuels”.

This could trigger change in the US energy industry. As Jacko points out, there is currently “a very large difference between how US and European companies are approaching the energy transition”. Audra agrees, saying that “European companies are a lot more advanced and have done a lot more thinking about climate change and how they will tackle the energy transition, while US companies are only starting to do this.”

But it seems that change is on the horizon. EOS at Federated Hermes, out stewardship business, uses engagement to drive positive change the energy industry. Audra highlights the importance of stewardship, saying that it “allows us to better understand how serious and strategic these companies are” in addressing the energy transition.

Nick retains a  positive outlook, arguing that “the momentum is clearly there, which is a really positive thing, and we only see that going in one direction, catalysed by the Biden administration in the US and the increasing social awareness of the climate crisis… While there’s still a long way to go, and while these companies still have a lot of risk in their portfolio, its really pleasing to see the progress that they have made”.

To take a deep dive into our views on how energy companies are navigating the energy transition, read our latest edition of Spectrum. Or to hear Audra talking about the issues, watch a recording of our recent Credit Pulse webcast.

Got a question?

In each episode of Delta, Jacko and his guests answer a front-of-mind question from listeners in a regular feature, ‘All options on the table’. Enter yours below.

Featured Insights

All eyes on Sustainability this Earnings Season
Industry Insights: how have US homebuilders fared in 2020?
Without a ‘Blue Wave’, will US energy companies steer towards a green future?
Weekly Credit Insight: a week of good news for credit markets
Credit: Industry Insights (energy transition)
Weekly Credit Insight: a world of negative yield and high duration