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Blackrock is in the unusual position of marketing two funds which offer polar opposite views for the future of the global energy industry.
Determined to cater for all tastes, Blackrock has equally thoughtful offerings for black and white in the energy sector.
The Black Global Fund (BGF) World Energy Fund invests in companies whose business is the exploration, development, production and distribution of conventional energy, and mostly oil and gas.
The fund’s top 10 holdings are, in descending order of investment size: Exxon Mobil; Royal Dutch Shell; Chevron Corp; Conocophillips; BP; Total; Andarko Petroleum Corporation; Marathon Oil Corp; Devon Energy Corporation; and Endbridge Inc.
The BGF New Energy Fund invests in companies specialising in energy efficiency; biofuels, and wind and solar power.
Its top 10 holdings are: Novozymes; Johnson Controls; Nextera Energy; Johnson Matthey; Schneider Electric; EDP Renovaveis; Vestas Wind Systems; Regal-Beloit Corporation; ITC Holdings; and Archer-Daniels-Midland Company.
To be sure, the present stage in the commodity cycle may not seem a fair time to weigh the fossil fuel industry.
Across every investment horizon to the present day, from year-to-date to the past five years, BGF New Energy Fund outperforms its fossil fuel counterpart.
The past three years may be the most useful accounting period, to remove for the effect of the global financial crisis.
Since 2012, the BGF New Energy Fund is up 20.3 percent, and the BGF World Energy Fund down 15.4 percent.
The percentage return comparisons are as follows:
|% Returns||YTD||3 months||6 months||1 year||2 year||3 year||5 year|
|BGF World Energy Fund (Fossil fuel energy)||-4.7||-4.7||-20.7||-19.9||-13.2||-15.4||-12.2|
|BGF New Energy Fund (Clean energy)||1.3||1.3||-1.1||-5.7||16||20.3||-2.5|
Blackrock points out that its fossil fuel fund is under-performing the equivalent MSCI World Energy Index; but the latter is still down, by 1.5 percent, over the past three years.
Of course we should not get carried away. A big part of the reason for slumping shares in oil and gas companies is a supply glut, rather than structurally weaker demand. That glut will disappear as investment falls.
Nevertheless, there are structural hazards out there for fossil fuels, including: falling costs for wind and solar power, the scourge of air pollution in emerging economies, consistent climate science and hopes pinned on low-carbon innovation for global gains in productivity, returns and growth.
One of the central objections to fossil fuel divestment among institutions such as Harvard University has been the potential negative impact on investment returns. Evidence that such an impact may be smaller than feared may give a further boost to clean technology stocks.