(Bloomberg) — Jeff Ubben, the veteran hedge fund manager who just shuttered his sustainable investing firm, is speaking out against what he called the “echo chamber” of traditional climate summits.
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The 62-year-old, whose Inclusive Capital Partners told clients last week was selling investments and returning their money after not being “rewarded” by the markets, said he was concerned that he describes as entrenched views preventing progress in climate negotiations.
The tone has always been “so divisive,” Ubben said in an interview. But “we all have to work together.”
Ubben has long been a proponent of bringing big oil companies to the negotiating table. He joined the board of directors of Exxon Mobil Corp. in 2021, the same year that activist fund Engine No. 1 picked up three seats. He is now part of the advisory committee for COP28 in Dubai, which hosts more oil executives than any other UN climate summit.
The backdrop to this year’s Conference of the Parties has prompted warnings from climate activists that the event risks becoming a bargaining chip for oil majors and the financial sector, with vested interests undermining a final deal. solid on the climate. This year’s COP is likely to be the busiest ever, with more than 100,000 delegates, according to a provisional list compiled by the United Nations Framework Convention on Climate Change. That’s about twice as many people as attended last year’s COP in Egypt.
Sultan Al Jaber, president of the COP28 summit and head of the UAE’s national oil company Adnoc, has denied reports he was using his position during negotiations to secure oil and gas deals. He also says he wants as many interests as possible to be represented to ensure a “successful” outcome.
On Saturday, Exxon was one of 50 oil and gas producers at COP28 to commit to reducing emissions from their own operations. Darren Woods, the first Exxon chief executive to attend a COP summit since the gatherings began in the early 1990s, said in an interview that there is “a much more diverse group of people appreciating” than the Climate change is a “hard problem” to solve. .
Woods also said there is now greater recognition that the energy transition will require a wide range of technologies, which “opens the door for us.”
The deal reached by oil and gas producers will be controversial given that none of the companies actually agree to cut production. But they will commit to reducing releases of methane, one of the most dangerous greenhouse gases, to near zero by 2030 to end the systematic flaring of natural gas.
Ubben said getting “companies like Exxon invited” was a clear goal because carbon-emitting companies “haven’t been part of the conversation yet.”
Instead, “it’s this echo chamber of diplomats who go to these conferences and lay out flowery language and goals, but it doesn’t have an impact,” Ubben said. “There’s no money behind it, which is why corporate balance sheets are so important.”
Ubben launched Inclusive Capital three years ago during a boom in green investing and after two decades of running the activist hedge fund ValueAct Capital. At the time, he told investors that his new venture would support companies focused on solving problems ranging from environmental damage to food shortages, and that his goal was to raise $8 billion for that purpose.
Inclusive Capital had assets of $2.6 billion, including borrowed money, at the end of last year, according to a March regulatory filing. Its closure coincides with one of the worst years for climate investing, as rising borrowing costs and supply chain bottlenecks hit capital-intensive green companies.
Despite historic subsidies for climate technologies in the United States, China and Europe, the S&P Global Clean Energy Index is down about 30% this year, while the S&P Global Oil Index was broadly unchanged over the period.
When Ubben created Inclusive Capital, the plan was to “collaborate with companies whose core businesses address critical societal needs with a focus on reducing negative externalities,” according to the note given to clients informing them of its closing. But it is a strategy which “has unfortunately not been rewarded on the public markets”, we can read in the note.
In reality, over the last three years, “exactly the opposite” has happened, it continues. “Stocks of companies pursuing capital-intensive projects needed to reduce greenhouse gas emissions were ‘sold off’ in public markets because they were too risky or too far away in terms of potential reward. »
For now, there is no sign that markets are about to change course. In fact, Bloomberg’s recent Markets Live Pulse survey shows that the crisis that has weighed on green stocks is expected to continue through 2024.
Oil companies like Exxon, meanwhile, are also seeing their stock prices fall as the surge in demand fueled by the energy crisis fades. Exxon’s stock price is down about 14% from its September high. Chevron Corp. is down 15% over the same period.
A key goal of the COP28 negotiations is to get governments to agree to triple global renewable energy capacity by 2030. This would require investments equivalent to around a tenth of 2022 global gross domestic product, according to BloombergNEF.
For investors trying to calibrate their climate strategies, the outlook remains difficult.
“Energy consumption will increase,” Ubben said. “And we need to keep energy affordable for people who want the right to develop.” »
Bloomberg Philanthropies regularly partners with the COP Presidency to promote climate action. Michael R. Bloomberg, founder and majority owner of Bloomberg LP, parent company of Bloomberg News, is the UN secretary-general’s special envoy for climate ambition and solutions.
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