Oil-and-gas holdings are a topic of debate in the responsible investing space.
Some funds exclude the fossil-fuel sector, and many investors avoid it, typically citing concerns about climate change. On the flip side, industry players have been making progress toward becoming more sustainable, and shareholders are often in a position to hold them accountable, which appeals to some investors.
“ESG (environmental, social and governance) investment is a mindset that will eventually make the world a better place,” says Alex Nayyar, vice-president and portfolio manager with Toronto-based Treegrove Investment Management Inc. “There is no doubt that the transition to a sustainable future will take time, and investors will play a critical role in ensuring that companies strive to meet their carbon emission targets.”
Fossil-fuel companies are among the largest emitters of greenhouse gases and they are often shut out of responsible investing portfolios. A landmark report from the Climate Accountability Institute and the Carbon Disclosure Project found that just 100 active fossil-fuel producers were linked to 71 per cent of industrial GHG emissions since 1988.
However, a November, 2022 survey by S&P Global Commodity Insights found that two-thirds of the world’s largest oil-and-gas companies now have net-zero emissions targets.
When it comes to investment decisions, the issue isn’t black and white. GHG emissions are just one of many factors that investors and fund managers assess around ESG performance, alongside such things as labour practices and board diversity. Through shareholder engagement, investors can use their voices to influence better emission and other ESG practices.
Mr. Nayyar says he believes he has a fiduciary responsibility to invest in companies, primarily large cap, that have a good return on investment. He recognizes that many of these companies have ESG mandates too. For some investors, that might be enough. If others have particular concerns about emissions or other aspects of performance, “we will carve out customized portfolios which meets their objectives.”
Robert Duncan, senior vice-president, portfolio manager and lead ESG officer with Toronto-based Forstrong Global Asset Management Inc., adheres to a strict ESG investment policy, but he says he cautions investors who want to omit a sector.
“By restricting certain asset classes, they might be subject to a sub-optimal portfolio that doesn’t deliver the highest risk/adjusted return. Some clients might be willing to accept the trade-off, as they believe it’s their contribution to make a difference,” he explains.
Investors do not necessarily have to make a financial sacrifice if they abandon the oil-and-gas sector, or if they focus on ESG generally. Companies with higher ESG ratings usually have a higher shareholder return, notes Benoit Gervais, senior vice-president, portfolio manager and head of the Mackenzie Investments resource team in Toronto. He adds that the cost of capital can be higher for companies with lower ESG scores.
Oil-and-gas companies face that risk, and they need to stay ahead of investor expectations regarding sustainability and ahead of the regulatory curve. As part of Mr. Gervais’ investment process for any sector, “we engage with companies to discuss their plans for decarbonization, go through their plans seriously and scientifically, and make comparisons to find best-in-class companies.”
In a recent post, the United Nations Development Programme stated that “we cannot address the climate crisis without looking at the true cost of our addiction to oil, coal and gas.” Societies and many investors are taking heed. While renewable energy may be the future, “breaking up with fossil fuels,” as the UNDP titled its post, will take time.
Given the pace of the energy transition, some investors don’t want to lose out on this sector, especially one that’s a hallmark of a diversified Canadian portfolio. As they make plans to reach net-zero emissions by 2050, many oil-and-gas companies are being seen in a more positive light.
Investors of all sorts, including responsible investors, will come to different conclusions about reducing or restricting a given sector. But when investing in fossil fuel or any other companies, “the only way to generate profits is to insert an ESG lens based on a set of universal values,” Mr. Gervais says.
Zacks Investment Ideas feature highlights: Alphabet, Tesla, Shopify, Amazon and Palo Alto
For Immediate Release
Chicago, IL – February 2, 2023 – Today, Zacks Investment Ideas feature highlights Alphabet GOOGL, Tesla TSLA, Shopify SHOP, Amazon AMZN and Palo Alto Networks PANW.
Which of These Stocks Has Been the Best Buy, Post-Split?
Stock splits have been a regular occurrence in the market over the last several years, with many companies aiming to boost liquidity within shares and knock down barriers for potential investors.
Of course, it’s important to remember that a split doesn’t directly impact a company’s financial standing or performance.
In 2022, several companies performed splits, including Alphabet, Tesla, Shopify, Amazon and Palo Alto Networks. Below is a chart illustrating the performance of all five stocks over the last year, with the S&P 500 blended in as a benchmark.
As we can see, PANW shares have been the best performers over the last year, the only to outperform the general market.
However, which has turned in a better performance post-split? Let’s take a closer look.
We’re all familiar with Tesla, which has revolutionized the EV (electric vehicle) industry. It’s been one of the best-performing stocks over the last decade, quickly becoming a favorite among investors.
Earlier in June of 2022, the mega-popular EV manufacturer announced that its board approved a three-for-one stock split; shares began trading on a split-adjusted basis on August 25th, 2022.
Since the split, Tesla shares have lost roughly 40% in value, widely underperforming relative to the S&P 500.
Palo Alto Networks
Palo Alto Networks offers network security solutions to enterprises, service providers, and government entities worldwide.
PANW’s three-for-one stock split in mid-September seemingly flew under the radar. The company’s shares started trading on a split-adjusted basis on September 14th, 2022.
Following the split, PANW shares have struggled to gain traction, down roughly 15% compared to the S&P 500’s 3.3% gain.
Shopify provides a multi-tenant, cloud-based, multi-channel e-commerce platform for small and medium-sized businesses.
SHOP shares started trading on a split-adjusted basis on June 29th, 2022; the company performed a 10-for-1 split.
Impressively, Shopify shares have soared for a 50% gain since the split, crushing the general market’s performance.
Alphabet has evolved from primarily being a search engine into a company with operations in cloud computing, ad-based video and music streaming, autonomous vehicles, and more.
Last February, the tech titan announced a 20-for-1 split, and investors cheered on the news – GOOGL shares climbed 7% the day following the announcement. Shares started trading on a split-adjusted basis on July 18th, 2022.
Alphabet shares have sailed through challenging waters since the split, down 10% and lagging behind the S&P 500.
Amazon has evolved into an e-commerce giant with global operations. The company also enjoys a dominant position within the cloud computing space with its Amazon Web Services (AWS) operations.
AMZN’s 20-for-1 split was a bit of a surprise, as it was the company’s first split since 1999. Shares started trading on a split-adjusted basis on June 6th, 2022.
Following the split, Amazon shares have lost roughly 18% in value, well off the general market’s performance.
Stock splits are typically exciting announcements that investors can receive, with companies aiming to boost liquidity within shares.
Interestingly enough, only Shopify shares reside in the green post-split of the five listed.
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$13 million investment in Campbellford Memorial Hospital
The Campbellford Memorial Hospital will be receiving a $13 million investment from the Ontario Government to address infrastructure concerns.
The announcement was made at the hospital by Northumberland—Peterborough South MPP David Piccini.
The $13 million is broken down as follows:
- $9,639,900 will be going to CMH as one-time capital funding to address the HVAC and generator
- $1,874,929 for reimbursement of CMH’s COVID-19-related capital expenses
- $771,797 in COVID-19 incremental operating funding
- up to $600,000 in one-time funding to support the hospital’s in-year financial and operating pressures
- $163,600 in pandemic prevention and containment funding
- $81,132 through the Health Infrastructure Renewal Fund
- $46,884 in health human resources funding.
Interim President and CEO Eric Hanna welcomed the news, saying much needs to be done about the HVAC and generator.
At the announcement, Hanna spoke of the issues with the generator.
“I’ve got the wee little generator up at the lake and then I’m thinking well, everything should be going well at the hospital,” Hanna told the audience in attendance.
“You get a call from the person in charge who says, ‘Guess what Eric? Generator didn’t start. Oh, so what does that mean? There’s no power in the hospital.’ That’s happened a couple of times in the past year and the generator is over 30 years old.”
Hanna says the solution was not as easy as replacing the generator.
“You can go buy the generator and that may be about a million dollars. But then when we found out afterwards, we came to hook up the new generator to the electrical distribution system and said it won’t work with that because your electrical distribution system is 1956. You can’t plug this generator into that. So now we’re putting close to $5 million into a whole electrical distribution system so the generator will work. It’s part of that ongoing thing and that’s why these costs continue to go up.”
The HVAC system was also something addressed by Hanna.
“It’s a contract close to $7 million to replace that. This wing, for example. There’s no fresh air in this wing. It hasn’t worked in here for 15 years. So now this is administrative areas and the concern was that in some of the patient carriers, it wasn’t working either. So – having those discussions with David (Piccini) and saying what we have to do to correct this.”
Chile’s Enap Set to Slash Debt Burden That Weighed on Investment
(Bloomberg) — Enap, Chile’s state oil and gas company, plans to use near-record earnings to slash its debt burden, while increasing investment in its refineries and in exploration and production.
The company aims to reduce its debt load to about $3 billion “medium term” from the current $4.3 billion, Chief Executive Officer Julio Friedmann said in an interview. Plans include a bond sale in the first half of this year to refinance some securities.
The improved financial position — with 2022 profit surging to $575 million — comes after Enap’s oil and gas operations in Egypt, Ecuador and Argentina got a boost from high crude prices, while healthy international refining margins benefited plants in Chile. Those trends are expected to extend into this year and next, enabling the company to pre-pay some short-term obligations. About half of the current debt burden matures in the next three years.
“We are going to issue bonds,” the MIT-trained executive said Wednesday from the Aconcagua refinery in central Chile. “We are closely evaluating the local and international markets.”
At the same time, Friedmann, who took the reins at Enap in November, plans to increase capital expenditure to about $700 million this year from $550 million last year.
The increase comes after underinvestment in the past few years because of Covid restrictions and the heavy debt load. Spending will focus on making treatment processes cleaner and upgrading infrastructure, as well as a more aggressive approach to increasing gas reserves in the far south of the country, he said.
Enap plans to expand in both liquefied petroleum gas and natural gas markets in Chile, focusing on the wholesale business and eventually selling directly to large-scale consumers such as mines. Organizational changes to enable the expansion will be announced soon. There are no plans to enter the final distribution business, Friedmann said. The company wants to supply more gas to southern cities as a way of replacing dirtier fuels such as wood and diesel.
Enap and its partners are also preparing pipelines and a refinery near Concepcion to start receiving crude from Argentina’s Neuquen basin sometime this year in an arrangement that could supply as much as 30% of its needs.
While there’s plenty of potential do collaborate more with energy-rich Argentina, particularly in the Magallanes area, that would require greater long-term visibility on supplies from the neighboring country, Friedmann said.
He sees a role for Enap in the development of green hydrogen in Chile. It’s in talks with three companies to enable its facilities in Magallanes to be used to receive all the wind turbines, electrolyzers and other equipment that will be needed to make the clean fuel. Enap is also evaluating its own small pilot plants and will consider whether to take up options to enter other green hydrogen projects as an equity partner.
While the company will maintain its focus on meeting rising demand for traditional fuels, it anticipates new regulation that will require lower emissions. It’s also looking closely at clean-fuel options for aviation, Friedmann said.
(Adds clean fuel plans in last paragraph. I previous version corrected spelling of CEO’s surname.)
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