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Companies are investing heavily in ESG investments and expect long-term returns

Companies are accumulating large invoices as they invest in new facilities and products to reduce emissions and achieve other goals, and look forward to future returns.

Companies are under pressure from investors, lawmakers and regulators to demand details of spending plans and progress to reach their environmental, social and governance goals.

As a result, automakers such as General Motors

Ford motor Co., Ltd.

While boosting investment in electric vehicles to reduce emissions

Xcel Energy Co., Ltd.

And

Center point energy Co., Ltd.

It is producing more renewable energy.

However, these investments pose a challenge for the Chief Financial Officer, who oversees a company’s capital investment plans. Many of them are entering an unknown territory by having large price tags, covering long-term perspectives, and allocating funds to projects that generate returns that are sometimes difficult to quantify. Companies often make these investments before new regulations are proposed or consumer choices change, making it difficult to find the right balance.

Those who are considered to be investing too little are already paying the price. In recent months, rating agencies have downgraded or completely downgraded oil and gas companies’ credit outlooks because of risks associated with the transition to green power and other factors.Some of them

Chevron Co., Ltd.

And

Exxon mobile Co., Ltd.

,last month Lost to proxy fight For activist investors. Credit downgrades can increase a company’s borrowing costs and damage its stock price.

Xcel Energy CFO Brian Van Abel


Photo:

Xcel Energy

Minneapolis-based utility Xcel, which currently operates 14 coal plants, plans to abolish 12 of them and switch to operating two on natural gas by 2040. We also plan to increase wind and solar power generation by 2030. The company, which plans to sell renewable energy to Excel, could spend about $ 10 billion on wind and solar power, said Chief Financial Officer Brian Van Abel.

The plans being considered by the Minnesota and Colorado state committees are tied to Xcel’s goal of reducing carbon dioxide emissions by 80% over the next decade. Planned spending on renewable energy will add to the $ 5 billion a year the company normally spends on capital projects, according to Van Abel.

CenterPoint Energy CFO Jason Wells.


Photo:

Michael hardt

Houston-based utility company CenterPoint will phase out two of its three Indiana coal facilities by 2023 with the aim of reducing emissions, according to CFO Jason Wells. intend to do something. Part of the plan is currently under consideration by Indiana regulators and has also promised to increase investment in solar power, he said. Wells said CenterPoint will charge more customers to offset the costs associated with the investment, adding that “the transition is costly.”

Automakers are also spending more on less polluting technologies.General Motors said it intends to allocate at the end of last year $ 27 billion Over the next five years, we will produce electric and self-driving cars.Ford said last month it was going to be used $ 30 billion By 2025, electric vehicles will be about one-third more than expected earlier this year. Both GM and Ford declined to comment.

These investments come when policy makers pay more attention to environmental, social and governance issues.President Biden as part of him Infrastructure proposal We want to build more charging stations and generate more renewable energy. U.S. securities regulators are considering introducing mandatory disclosure requirements for climate-related risks, but California and Massachusetts lawmakers recently said. Gasoline car sales ban From 2035.

Still, these and other investments can take more than a decade to generate profits, said Gregg Lemos-Stein, chief analyst at rating agency S & P Global Ratings.

Bombardier Recreational Products Co., Ltd.

The company, which manufactures snowmobiles, boats and personal watercraft, will spend a total of $ 300 million over the next five years developing electric vehicles. BRP, which generated approximately $ 1.8 billion in revenue in the last quarter, has allocated R & D expenses as 4.5% of its revenue and has no plans to increase R & D expenses for this purpose.

The company’s CFO, Sébastien Martel, said: Even if only 10% of customers decide to buy an electric car 10 years later, it’s still worth it, he said.

Philip Morris CFO Emmanuel Babo.


Photo:

Philip Morris International Inc.

Tobacco maker

Philip Morris International Co., Ltd.

We have already seen the so-called rising demand Non-smoking tobacco products, Claims to be less harmful to smokers. Philip Morris accounted for 28% of its $ 7.6 billion in first-quarter net sales, compared to about 22% in the year-ago quarter. Philip Morris expects to generate half of its net sales from these products in 2025. This is shifting against the backdrop of tightening tobacco regulations around the world.

However, early investment in the product (Philip Morris has spent about $ 8 billion since 2008) has hurt the company’s performance, said Emmanuel Babo, the company’s chief financial officer. And it remains difficult to identify the potential benefits of socially responsible investment, Babo said.

“Someday[s] I just realize that it’s very difficult to number, “he said.

Write to Christine Broughton Kristin.Broughton@wsj.com And Mark Maurer mark.maurer@wsj.com

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Companies are investing heavily in ESG investments and expect long-term returns

Source link Companies are investing heavily in ESG investments and expect long-term returns

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