Oil and Gas Windfall Profits Could Be Reinvested in Renewables, Says MSCI

Data, analytics and research services provider MSCI has published new research which outlines how investors can help to avoid the derailment of the world’s net zero ambitions by Russia’s invasion of Ukraine. It noted that investors can influence where windfall profits of energy companies are reinvested, and can therefore direct capital towards the development of clean energy capacity and aid the transition away from fossil fuels. Investors could either use their leverage to persuade energy firms to distribute windfall profits as dividends, which they could then reinvest, or they could “urge” the firms to directly reinvest into renewable energy. Governments may also step in and tax windfall profits to finance renewables and provide financial relief to households struggling with the higher energy costs. Reinvestment makes financial sense for two key reasons, MSCI said. Firstly, higher energy prices for fossil fuels makes investing in cheaper renewable energy more compelling, and, secondly, “if windfall profits were to flow into private gains, political pressure could lead governments to simply tax these gains to increase subsidies for renewable-energy supply or to alleviate the immediate financial pressures on households coping with higher energy prices”, the study noted.

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