Fear Not: ESG Does Not Spell Doom For Energy Funds

Traditional energy funds that target investments in fossil fuel industries continue to face strong and increasing Environmental, Social and Governance (ESG) pressures, especially from institutional and European-based investors. With increasing ESG regulation from the European Union, possible ESG disclosure guidelines from the U.S. Securities and Exchange Commission and heightened focus put on ESG by world health issues, there is little reason to believe that ESG scrutiny will abate.

While there is pressure in the area, there is also an opportunity for traditional energy funds to open themselves to the market of ESG investors without abandoning their traditional areas of investment focus. Since energy investment funds generally own and help operate underlying energy companies as opposed to acting directly as an energy company, there is potential for energy funds to present and position themselves as "good actors" with respect to their portfolio companies and to present