Survey Reflects Cultural Differences On Climate Solutions
“The data from a December 2020 survey of attitudes toward climate change and its solutions highlights why European-based oil companies are more aggressively switching from fossil fuels to renewables. Is it right? ”
In December 2020, the European Investment Bank (EIB), the lending arm of the European Union, reported on the results of its latest survey of climate related activities and attitudes. In 2020, the EIB provided €24.2 ($28.8) billion, or 37% of its lending, to fighting climate change, with €1.8 ($2.1) billion, or 3% dedicated to environmental sustainability efforts. The EIB hired market research firm BVA to conduct the survey. We found some of the results illuminating, as they help explain the dichotomy between European-based and U.S.-based international oil companies regarding their managements’ willingness to revamp their business models to address climate change.
Exhibit 15. Attitudes That Shape Climate Energy Policies SOURCE: EIB
The specific survey question we thought key to this issue was captured in a chart showing the views of Europeans, Chinese and Americans regarding their priorities for solving climate change. According to the survey, in Europe, 39% of respondents believe radical change in habits (consumption, transport, etc.) is the most appropriate way to fight climate change. In contrast, for Chinese people, only 32% considered this option to be the best, with Americans at 31%. On the other hand, the Chinese (35%) and Americans (34%) believe technological improvements (innovation, digitalization, and development of renewable energy) are the best solution. Only 29% of Europeans named technological improvements as the best way to tackle the climate crisis.
The survey results for European Union countries show that many of the member countries rated well above the overall percentage favoring behavioral changes as the optimal way to address climate change. We found it interesting that Sweden and Finland favor technological improvements over behavioral changes as the preferred way to address the issue. Although Norway is not a part of the EU, we suspect its people would be voting with their Scandinavian neighbors for technological improvements rather than behavioral changes, despite the Norwegian government’s substantial electric vehicle subsidies.
Exhibit 16. How The EU Countries See Climate Solutions SOURCE: EIB
As one thinks about the direction international oil companies BP, Shell, ENI, and Total are going with their business strategies – committing more to renewables and less to fossil fuels – it is easy to infer that corporate strategy is being shaped by the views of company employees, customers, and host governments. That position contrasts with the strategies ExxonMobil, Chevron, ConocoPhillips, and Hess, for example, are following. They are continuing to invest heavily in their traditional oil and gas businesses, while also stepping up investments in renewables. Whether the relative split between investments represents “greenwashing,” as Chevron is being accused by several green energy groups in a claim filed with the U.S. Federal Trade Commission, is a stretch. Chevron, like its fellow oil companies, believes in renewables and the need to reduce carbon emissions. But, in management’s reasoned analysis, oil and gas will play a significant role in meeting the world’s energy needs for several more decades, therefore, abandoning their fossil fuel businesses would hurt financial returns, and conceivably lead to higher oil and gas prices just when consumers are faced with few energy alternatives. Chevron believes the day for renewables will come, and it will be a player, but that long-term outlook should not dominate their near-term investments. In our view, neither business strategy is wrong. The different strategies largely reflect the cultural environments in which each company operates. Which strategy will prove correct? Only time will reveal the winner.