The future of energy investment: Insights from the 2024 election webinar

The 2024 election is set to have a substantial impact on the energy investment landscape, and a recent webinar titled “Election 2024: Shaping the future of energy investment in natural resources,” underscored how critical this shift may be. The event brought together industry thought leaders to address how the energy sector has changed under the Biden administration and how an election could continue to influence these investments in the future.

Key takeaways from the webinar

1. 01

   Political landscape influences energy investment

   Our webinar began with a look at how the 2024 election might affect energy markets and investments. We agreed that the election’s outcome could have a big impact on the way we produce, use and regulate energy. The Biden administration has already brought significant changes to U.S. energy policy over the past four years.

   Before 2020, our sector had been characterized by open access to capital and a focus on growth through production. Then the COVID-19 pandemic and the resulting global recession led to significant capital destruction and a resetting of investor attitudes. Investors began to demand a return of capital to shareholders, which was a significant change in the way the sector had attracted investment. This demand was driven by a recognition that the traditional model for investing in oil and gas had to change to ensure long-term profitability and sustainability.

2. 02

   Private market drives energy sector changes

   In addition to the political landscape, the private market has played a significant role in shaping the energy sector's current state. By instituting more disciplined investment strategies and capital discipline, stakeholders—from investment banking to private equity—have propelled meaningful change within companies.

   Having experienced significant market losses in 2020, investors are now demanding high return, low risk, and no technology risk opportunities. This market reality has driven substantial change in the private markets, regardless of political decisions. The private sector’s focus on more disciplined investment strategies has led to a more thoughtful and cautious approach to energy investments, ensuring that capital is allocated efficiently and effectively.

3. 03

   Inflation Reduction Act stimulates energy transition investments

   The Inflation Reduction Act has vastly expanded the investment landscape for a variety of energy transition technologies. This has led to an array of investment opportunities, from familiar renewables like solar and wind to emerging areas such as carbon capture and biofuels.

   The Act has spurred investment in a wide range of technologies, including renewable natural gas, biogas, hydrogen, and carbon capture. While the evolving political landscape may still play a role in the implementation of these credits, the broad approach of the Act to supporting a variety of technologies has created a robust investment environment that appeals to both traditional and new market participants in the renewable energy and technology space.

Insights surfaced

• Shift towards shareholder capital return: The investment community is placing great emphasis on returning shareholder capital, reflecting a more discerning approach to investments. This evolution highlights the need for our investments to be vehicles for sustainable, lucrative returns for our shareholders.
• Inflation reduction act impact: The Act has spurred substantial investments in renewable energy and carbon capture technologies. This has led to remarkable opportunities for innovation and advancement, propelling the energy sector forward to a more sustainable future.
• Reckoning in energy expansion: Investors are increasingly attracted to high-return, low-risk opportunities in the energy sector, and we see a movement toward more careful and thoughtful investment, driven by the need to protect capital and provide consistent, reliable returns.
• Responsible operations: Strategic adjustments by oil and gas companies now emphasize responsibility in operations and the creation of shareholder value. These include the adoption of more sustainable practices and the elevation of environmental, social, and governance (ESG) factors in the operational landscape.
• Disciplined acquisitions: The days of acquisitions for the sake of acquisitions are behind us, with a more strategic, thoughtful approach prioritized to ensure deals are value-accretive and contribute to the achievement of long-term objectives.

Conclusion

The 2024 election will play a significant role in shaping the future of energy investment. While political decisions are important, we understand that the private market has been the primary driver of change in the energy sector. The Inflation Reduction Act has led to more investment in various energy transition technologies, and investors are increasingly prioritizing capital return and responsibility in their operations. As the election approaches, it is important to remain educated on these trends and to understand how they might impact the energy landscape. The future of energy investment is rapidly changing, and being able to understand these changes will be crucial for successful market navigation.

Disclaimer

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