Capital costs rise on sustainability concerns
An intensifying investor focus on sustainable investing and the climate emergency is impacting the oil and gas sector
Investors are increasingly focused on the threat of global warming and the need to rapidly decarbonise the global economy, with up to $118tn of funds committed to making climate risk disclosures by 2020. And they are responding by divesting oil and gas holdings, or, at a minimum, fully integrating sustainability into their investment process, driving an incrementally negative view of the sector. Consequently, the sector's weighted average cost of capital (WACC) has risen, causing a valuation derating, reduced capital availability and low market liquidity. Devaluation This negative increase in the industry WACC occurs in several ways. Firstly, capital flows out of the sector as new issua
Also in this section
16 April 2026
Demand for oil is falling because supply cannot meet it, not because it is no longer required
16 April 2026
The continent has an immediate opportunity to make the most of its energy resources by capturing gas that is currently slipping away
15 April 2026
The continent is seeing political pushback to climate plans, corporate reassessment of transition goals and rising supply risk in a fractured global order
15 April 2026
The Middle East energy crisis may turn out to be pivotal to the industry’s long-term expansion, but significant challenges still stand in its way
