“Drill, baby drill”, was an enthusiastic refrain from Donald Trump during the US presidential election campaign. Now that the dust has settled, how much of this rhetoric will be met by action on the ground – and, in the case of fossil fuels, in the ground – remains to be seen.
The wider issue here of how the US administration’s rowing back on the so-called progressive agenda across a swathe of policy issues squares with the global trend towards responsible and sustainable investment will be fascinating to watch in the months and years ahead.
Support for the fossil fuel industry and a hostile view of climate change and green initiatives have certainly played well with Trump’s base. Whether much will actually change remains doubtful, however.
There are several flaws in Trump’s central premise. The first is whether there will actually be a clamour by the oil and gas companies to drill. Increasing oil production lowers prices and profits at a time when energy costs have been decreasing. A resolution of the war in Ukraine will likely lower prices further.
Deloitte’s 2025 Oil and Gas Industry Outlook notes that over the past year oil prices ranged between $74 and $90 a barrel, leading energy companies to prioritise restraint over aggressive expansion. Industry sources suggest that the break-even point for new drilling in 2024 ranged between $59 and $70 a barrel.
The second is a mistaken belief that sustainable energy is more expensive to produce. As technology has advanced in recent years, renewables have become increasingly cost competitive with fossil fuel production, a trend that is likely to accelerate.
Eileen Rowsome, director in responsible investment at Davy, notes that during Trump’s first presidency the US saw an increase in renewable capacity and a reduction in coal production, and agrees that energy production companies are driven by hard economics rather than political ideology.
Turning to the wider issue of responsible investing in general, she notes huge differences in attitudes between the US and Europe, with Ireland caught somewhere in the middle in areas such as environmental, social and governance (ESG) policies.
Davy is a signatory to the United Nations Global Compact and uses it as a base in its responsible investment portfolios. The compact covers areas such as human rights, labour conditions, anti-corruption and environmental policy, controversial weapons, and tobacco.
“There has been a move away from exclusion-based [policies] towards positive impacts, favouring companies with better scores or policies from a social perspective, including good practices throughout the supply chain, plus good diversity, equity and inclusion [DEI] policies,” says Rowsome.
“Sitting in Europe, a lot of these things are taken as a given. But in the US we are seeing a row back on some of these things. It will be up to individual companies to assess what will be best for their workforce and it is hard to know how it will impact as [the presidency] is a four-year term. From an investing point of view, we’re not seeing wholesale changes in how things are managed day to day at this point.”
Rowsome says there is no evidence that there is premium for responsible investing, even though economic events such as oil and gas price spikes can affect market performance in the short-term. However, responsible investing includes having a portfolio of companies that should be able to weather the impacts of climate change, she notes.
“What we have found with our clients is that socially responsible investment portfolios are on par with others. There have been years when inflation and high energy prices meant energy – including fossil fuel-based – did very well. We don’t promise better performance through responsible investing but we have found that it hasn’t impacted on client performance.”
One area in which Rowsome says she has seen some change is a move by some clients towards rebalancing their portfolios, with an eye to including a more sustainable or responsible element in the overall mix.
In some cases they may be influenced by the issue of intergenerational wealth transfer; in others the core part of their investment portfolios will remain the same but they are also looking at including an element such as that provided by a climate change fund, she explains.
Political posturing will continue and the language and definitions around ESG and DEI may change, but the outlook for responsible investment remains strong.
