Shareholder representative As You Sow today released a report “Plastics: The Last Straw for Big Oil?”, addressing the financial and environmental, social, and governance (ESG) risks of over investment in petrochemical infrastructure.
“The Last Straw for Big Oil?” raises questions about the potential for a shift toward plastic and petrochemical development, and analyses what is at stake in terms of environmental, social, and financial impacts if such investments are locked into place.
As the world transitions to cleaner sources of energy in response to climate change, the energy sector is facing a reduction in demand for fossil fuels. To hedge against shrinking demand from the power and transportation sectors, oil and gas companies are allocating resources to boost petrochemical operations. Proposed investments in expanded petrochemical infrastructure, however, require enhanced scrutiny by investors as the potential for competitive, ESG, and stranded asset risk grows.
“In the face of crises like climate change and global plastic pollution, shareholders must scrutinise whether investments in the production of plastics and other petrochemicals will live up to inflated expectations,” said Lila Holzman, report coauthor and senior energy program manager at As You Sow. “Investors are likely to find that companies’ reliance on plastics to recoup lost demand for fossil-based energy is problematic.”
This report reveals how the proliferation of petrochemical infrastructure contributes to distinct risks that threaten shareholder value. The report examines the growing risks facing the energy sector’s bet on petrochemicals (especially plastics) — including stranded assets, climate change impacts, plastic pollution of land and oceans, greenwashing of “circular” solutions, community health impacts, and a loss of social license to operate, as well as the oversupply of plastic production capacity.
“Plastic waste flowing into oceans is a global environmental crisis,” said Conrad MacKerron, senior vice president of As You Sow. “Major users of single-use plastic realise their use of plastic must decline substantially; some large consumer goods companies like Unilever and Procter & Gamble have already agreed to reduce use of virgin plastic by hundreds of thousands of tonnes. This report highlights how pressure to reduce the use of virgin plastics may deflate overly optimistic demand growth assumptions for the sector.”