Big Oil, flush with cash, is failing on climate pledges

By Allison Morrow, CNN Business

In the peak of 2020 lockdowns, giant oil companies had a wake-up call. Demand had cratered, sapping profits, and it wasn’t clear when it would end. That gave environmentally minded investors an in. The pitch: Get on the clean and green path or perish.

Fossil fuel companies, especially in Europe, responded to pressure from shareholders, customers, activists and governments with bold plans to invest in clean energy. Wall Street, for its part, said it would start holding these companies to account for their pledges on the climate.

But half way through 2022, as fossil fuel prices surge and restore oil giants to their pre-pandemic profitability, the push toward green reform appears to have taken a back seat.

Exxon shares are up 54% this year. Shell is up nearly 44%. BP, which took a huge loss on its Russia business, is up more than 28%.

Much of that is thanks to record profits and soaring energy prices. It’s little surprise, then, that their report cards on the environment look abysmal.

Despite their pledges, major oil companies “still fail to meet the bare minimum for alignment with the Paris Agreement,” wrote researchers for Oil Change International, an anti-fossil-fuel advocacy group, in a report released Wednesday. Eight of the major oil producers’ plans are “grossly insufficient,” they wrote.

Outrage is boiling over. But whether shareholders feel the same pressure, when the times are this good, is another question.

See here: On Tuesday, Shell’s annual shareholder meeting in London was delayed by nearly three hours as protesters chanted “We will stop you,” (to the tune of Queen’s “We Will Rock You.”) A day earlier, one of Shell’s safety consultants quit, posting on LinkedIn that she “can no longer work for a company that ignores all the alarms and dismisses the risks of climate change and ecological collapse.”

A representative for Shell didn’t immediately respond to a request for comment.

Another protest on Wednesday targeted Total’s shareholder meeting in Paris.

Despite the disruptions, the meetings carried on. A whopping 80% of shareholders approved Shell’s climate resolution. An independent resolution from a group of climate activist shareholders garnered just 20% support, down from 30% last year, Reuters reported.

Total secured 89% support on its climate plans, a spokesperson said.

Look ahead: Pressure is coming from other quarters, too.

The United Kingdom is widely expected to announce a windfall tax that would redirect billions in profit from Shell and BP, among others, to help ease households’ energy bills. While talk of the one-off tax shook British energy stocks on Tuesday, most were trading higher Wednesday in London.

Meanwhile, several officials at Davos, including US climate envoy John Kerry, have warned the business community not to let the disruptions from the war in Ukraine become an excuse to lean on fossil fuels as they scramble to meet demand.

Davos Dispatch

Here’s Julia Horowitz, the lead writer of Before the Bell, with a dispatch from Davos, Switzerland, where she’s reporting on the World Economic Forum.

This morning, I sat down with Neil Murray, the CEO of Work Dynamics at JLL, the commercial real estate giant.

Murray flew from Chicago to attend the forum. It’s his third time here. He conceded that this time around, emotions are darker.

“The general feeling is quite muted,” Murray told me. “It’s the confluence of challenges that we’re faced with, whether it’s the war a thousand kilometers away, inflation, climate, food and a falling stock market. I probably feel an air of less excitement, more concern.”

Market turbulence has beaten down JLL’s shares this year. Its stock is down almost 31% after skyrocketing 82% in 2021.

Real estate is often viewed as a hedge against inflation. But rising borrowing costs have made companies and investors more tentative about signing new deals.

One trend in JLL’s favor is that people are going back to their offices, though the pace of return varies by city and industry. The number of people in offices in the United States was at 43% in recent weeks, up from 25% in January when Omicron was surging, according to the firm’s research. That figure is expected to rise to 55% in July.

“People are steadily coming back,” Murray said, though he acknowledged something does need to be done to overcome the “inertia” of recent years. Many JLL clients are spending more on renovations with this in mind, Murray added. Yoga studios and wellness spaces have become the perks “du jour.”

“We have to make space commute-worthy,” he said. Vacancies persist in big cities. Yet increasingly, the industry is seeing a “flight to quality.” Top tenants are favoring certain buildings that are more sustainable and have better amenities.

Could this create a divide, as less money flows to neighborhoods and buildings that are seen as less desirable? Murray said there’s “always demand for space.” He’s hopeful that as flows of money shift, it could open up new opportunities for smaller companies to move in.

Travel’s hot summer is looking a bit tepid

This third summer of the Covid era was supposed to be a boom time for travelers and for the industries that cater to them. It may be over before it even gets going, my CNN Business colleague Paul R. La Monica writes.

At least, that’s the story of travel stocks so far.

Shares of major hotel chains, including Hilton, Wyndham and Hyatt are all down nearly 20% this year. Casino stocks Las Vegas Sands, MGM and Wynn Resorts also have plunged. Ditto cruise operators Carnival, Royal Caribbean Cruises and Norwegian Cruise Line.

Airlines, which have held up better than the broader market this year, have been losing altitude lately. Shares of American, United, Delta and Southwest all fell sharply Tuesday and are now in the red for 2022.

Airbnb is trading near an all-time low, more than 50% below its IPO price from late 2020. Vrbo owner Expedia has lost more than a third of its value in 2022.

It’s still early, of course. Last year, leisure companies’ second and third quarter earnings were strong as consumers threw Covid caution to the wind.

Travel companies may be facing difficult comparisons to last year’s results. And inflation’s certainly not doing them any favors. The “revenge spending” that spurred consumer demand last year is getting tempered this year by relentless sticker shock, according to analysts. Labor shortages are compounding those headaches.

Despite all of that, CEOs are still cautiously optimistic pent-up demand will make this summer a lucrative one.

Heck, inflation may not be so bad after all. As Norwegian Cruise Line’s CEO said in an earnings call this month: “Inflation is an ugly word, but … there’s a pretty side to it, which is pricing power.”

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