You are using an outdated browser.
Please upgrade your browser
and improve your visit to our site.
Skip Navigation
Cake Games

What Fossil Fuel Executives Really Think About ESG

Oil and gas execs don’t actually think “woke” investors are starving them of cash. So why are they funding Republicans’ anti-ESG crusade?

Scott Sheffield speaks while seated.
Aaron M. Sprecher/Bloomberg/Getty Images
Scott Sheffield, chief executive officer of Pioneer Natural Resources, speaks during the 2023 CERAWeek, hosted by S&P Global in Houston, on March 7.

Last week, the “anti-ESG” movement coursing through red- state legislatures extracted its highest-profile win yet: The House and Senate passed a continuing resolution to peel back a new Department of Labor rule affirming that federal pension funds can consider environmental, social, and governance, or ESG, factors in their investment decisions. President Biden is expected to use his first-ever veto to block the resolution. But the vote could be ammunition for litigation targeting ESG and the administrative state.

Republicans backing the resolution argue that, by factoring sustainability into their investment decisions, asset managers are gambling other people’s money on radical politics. (The data suggest otherwise.) “ESG means you can’t invest in things like oil, gas, coal, American energy. It means less American energy for people in our country,” Wyoming Senator John Barrasso bellowed on the Senate floor. 

I asked oil and gas executives attending CERAWeek by S&P Global—the annual energy conference being held in Houston this week—whether that story is true. Pioneer Natural Resources CEO Scott Sheffield gave a concise, representative answer: “No.” Yet while they may disagree with a core premise of the right’s crusade against ESG—and are keen to tout their own ESG credentials—oil and gas executives are still more than happy to fund it.

As Sheffield went on to explain, producers are holding back fossil fuel production because increasing it is bad for business, threatening to flood the market with excess supply and crash oil prices. Had the industry gone along with the Biden administration’s request to drill more last year, he estimates oil prices would be sitting around $50 per barrel, making the prices drivers pay at the pump lower too. “In the last 10 years, every time we do that,” he said of expanding production, “the price collapses, and the price would have collapsed again today. We sort of subsidized the world consumer in my opinion. We don’t want to get in that cycle again.”

Devon Energy Vice President David Harrison agreed “woke” investors, despite the rhetoric from Republican politicians, weren’t the problem. “I don’t think we see much of it,” he said of the idea of woke investors blocking production, adding a bit of spin. “What our investors are focused on is what we’re focused on: improving our emissions profile across our operations.” On his panel a few minutes earlier, Harrison had explained that his company and others were in the process of attempting to rebuild trust with investors after burning through their cash in the shale boom. The same companies are now raking in cash and delivering lots of it back to shareholders still sore from past spending binges. “We spent 10 years prior to that eroding the trust, and two good years is not a long enough track record to earn that back,” he said.  

Whether fossil fuel executives agree with the anti-ESG movement or not—or are merely reluctant to be associated with its seedier elements—plenty are quietly supporting it through their paid memberships in trade associations and campaign contributions to politicians backing the push. In 2021, for instance, Sheffield donated $5,800 to West Virginia Senator Joe Manchin, who provided a decisive Democratic vote for Republicans’ use of the Congressional Review Act, or CRA, last week. Two-thirds of Pioneer Natural Resources’s congressional campaign donations last year went to Republicans. Nearly 90 percent of Devon Energy’s federal donations were to Republican candidates and leadership PACs. Devon is also a member of the American Petroleum Institute, which has worked closely with groups, including the State Financial Officers Foundation, that are leading the charge for state-level anti-ESG bills.

Even the American Petroleum Institute walks a careful line to the press, declining to spout anti-ESG adherents’ more colorful talking points. In a brief conversation this week, API’s Frank Macchiarola said, “The factors that go into ESG do not pose a threat to our industry. In fact, tackling the climate challenge in our view presents an opportunity for our industry to continue to lead.” Asked if he supported the anti-ESG bills that are going around state legislatures, Macchiarola said he had to attend the next session. In a follow-up email, API executive vice president and chief advocacy officer Amanda Eversole said the group supports “this bipartisan legislation that would require investment decisions by pension funds to prioritize financial returns for Americans,” referring to the resolution passed last week.

Asked what he made of the anti-ESG movement, Harrison shot a look at Devon’s Corporate Communications head, Lisa Adams, who was standing beside him. She equivocated, saying, “I don’t see a lot of pro- or anti-ESG in our business.” As we were being ushered out of the room so organizers could rearrange the chairs, I asked Harrison whether—as a member of API—Devon supported that trade association backing the effort to kill the Labor Department rule in Congress. Harrison paused, then beckoned to a colleague before politely excusing himself.

Not all of Devon’s top brass have been so reticent to declare their side in the ESG war. Devon CEO Rick Muncrief sits on the board of directors of the Domestic Energy Producers Alliance. Earlier this year, DEPA urged board members of the American Legislative Exchange Council to adopt the “Eliminate Economic Boycotts Act” as an official model policy. Modeled on legislation first passed in Texas, the bill would require state comptrollers to stop doing business with banks and asset managers they deem to be boycotting energy companies.

The group’s rationale for backing the model policy directly contradicts what Harrison told me about “woke” investors not being a major problem. “Banks are increasingly denying financing to creditworthy companies solely for the purposes of marketing their environmental or social justice credentials, to the detriment of their clients and shareholders,” reads a letter from DEPA to ALEC board members that was obtained by the Center for Media and Democracy, a nonprofit watchdog group. “Institutional investors are divesting from entire industries and pressuring companies to commit to environmental goals, such as reducing greenhouse gas emissions to zero by 2050, or social goals, such as diversity quotas, at the expense of investor returns.” 

DEPA has also published more outlandish views on climate than you’re likely to hear at CERAWeek, where executives emphasize that an energy transition is happening and that climate change needs to be dealt with. “There is no climate crisis, and we’re not in the midst of an energy transition either. Humans and all complex life on earth is simply impossible without carbon dioxide hence the term carbon pollution is outrageous,” DEPA CEO Chris Wright said in a LinkedIn video that was taken down by the platform as “false and misleading content.” DEPA also signed a letter supporting the continuing resolution against the administration’s Labor Department rule. 

So what explains the discrepancy between fossil fuel execs denying in person that ESG is a threat to their business and their companies continuing to fund an anti-ESG crusade premised on the idea that it is? 

That oil and gas executives say one thing and do another isn’t exactly new. During the cap-and-trade fight in 2009, companies that joined the coalition to pass a carbon-pricing bill—including BP and ConocoPhillipssimultaneously funded the politicians and trade associations working to kill it. But their Janus face on ESG reflects more than rank hypocrisy. Where a decade ago the spectacle of fossil fuel execs praising decarbonization might have been dismissed as pure greenwashing, today fossil fuel companies talk a green game partly because they see technologies like carbon capture and storage and hydrogen as tidy new revenue streams. Whether or not they invest in those at scale—most are not—they can collect a new batch of tax credits provided by the Inflation Reduction Act, extracting financing from investors eager to take advantage of the coupon that new subsidies provide on returns. Best of all is that none of this has to come at the expense of oil and gas companies’ bread and butter: to extract and burn as many hydrocarbons as possible.

Companies know full well that anti-ESG crusaders’ line about woke investors starving them of capital is bunk. If that campaign is too unseemly to want to appear too close to, it does hold an exciting promise: bringing a challenge to the administrative state, and its ability to enact environmental regulations, before a receptive Supreme Court. Twenty-five Republican state attorneys general have already filed suit against the Labor Department rule on the grounds that it violates the so-called “major questions doctrine.” That shaky idea was boosted in Chief Justice John Roberts’s majority opinion in West Virginia v. EPA this summer. While that ruling did not broadly gut the EPA or agency rulemaking, as many feared, Roberts laid out the red carpet for right-wing legal entrepreneurs to bring future cases that would. He offered up the major questions doctrine, which holds that federal agencies should not overstep the narrow instructions provided by federal statutes, as a weapon of choice. The resolution passed last week adds fuel to that fire—even if Biden vetoes. The rare display of bipartisan unity may well be grounds for the Supreme Court’s conservative majority to argue that agencies are running afoul of their mandate from Congress.

To have their cake and eat it too, fossil fuel companies must walk a fine line on ESG. Customers and investors in Europe, in particular—a much more important market since Russia invaded Ukraine—want companies they buy from and invest in to have something good to say about decarbonization. And oil companies must talk a particularly green game if they want to ink contracts that stretch into the next several decades, well past the time when most climate models suggest fossil fuel use should plummet. If these companies fund the anti-ESG crusade at the same time, it’s because, while cashing in on the climate zeitgeist would be nice, dismantling the state’s power to regulate them would be nice too.