Energy sectors in the transition to net zero

In the latest of our stories that look beyond profit, Schroders’ Peter Fullerton explains the critical role that energy companies like Ampol play in the transition to net zero.

How does the world move to a more sustainable future? One school of thought is that we need to divest from companies with a high exposure to fossil fuels. But at Schroders, we strongly believe it’s better to remain invested in traditional energy companies. That’s because they have the expertise and infrastructure to support a net zero economy – and we can engage with them to encourage their decarbonisation efforts.

One good example is Ampol, a leading Australian retailer of fuel. The company has already earmarked at least $100 million to invest in opportunities like electrification, green hydrogen and other alternative energy sources. And by 2040, it plans to reach net zero from its Scope 1 and 2 emissions – that is, those emissions under its direct control, and those that it purchases indirectly, such as electricity.

Schroders Senior Credit Analyst, Peter Fullerton, says Ampol is keen to share what it’s doing to manage its Environmental, Social and Governance (ESG) performance.

“The corporates we invest in that have the biggest Scope 1 and 2 emissions know they’re in the firing line of investors,” says Peter. “That’s why they’re putting the most effort into disclosing what they’re doing to reduce their emissions.”

Peter points out that as the ‘natural owner’ of energy assets, Ampol has the necessary skills, knowledge and expertise to transition to low-carbon fuels like renewable electricity, green hydrogen and biofuels.

“Ampol has close to 2,000 retail sites across Australia and is currently buying sites across New Zealand. Its fuel stations are located on major arterial roads, already zoned for retail and fuel storage.”

What’s more, Ampol has supply chain experience, with strong manufacturing, distribution, shipping and trading capabilities. It has strategic partnerships with other large companies, like Woolworths, and a growing presence in international markets. In addition, it has access to supply chains to safely move flammable fuels like liquid hydrogen around, as well as the brand recognition to attract customers.

“This positions the company well to pivot to future needs like electric charging stations and green hydrogen in whatever capacity the market demands,” says Peter.

Investors can also benefit from Ampol’s investment in climate research and development, where it’s looking into better ways of producing energy.

“It’s an investment that will ensure the company is part of the transition to net zero,” says Peter. “This will help Ampol understand how it’s positioned for different future scenarios – helping it to avoid risk and to profit from future opportunities.”

Originally published by Senior Credit Analyst, Peter Fullerton, Schroders