Big Oil Prospers Even As Investors Flock To Green Startups

Sometimes two seemingly contradictory ideas can both be true at once. Last year roughly 1,200 privately held sustainability startups raised a record $45 billion, according to Pitchbook, nearly doubling 2020’s total as part of a strengthening green wave. But the world’s largest oil producer Saudi Aramco said Sunday that it made a $110 billion profit in 2021 – more than double what it earned the year before.

Even as green-focused firms begin to prosper, global energy consumption habits have yet to turn a new leaf. 2021 made clear there’s a difference between raising money and earning money.

Red Light, Green Light

In addition to startup fundraising, the green energy space raised another $45 billion via public listings last year. While some wary heads may remember a rush in the sector in the early 2010s abruptly ending with multiple high-profile bankruptcies, insiders say there’s one critical reason to believe this wave will bear more fruit: money. “That’s the distinction this time,” Eli Aheto, climate-focused fund lead at investment firm General Atlantic, told The Wall Street Journal. “You’ve got these businesses that are properly funded.” And with more money comes more time and resources to achieve necessary technological breakthroughs in areas like energy storage and sustainable products.

At the same time, Saudi Aramco’s most recent earnings report on Sunday revealed the state-backed group is making hay today while planning to increase oil production in the future. As oil booms, investors are pressuring green firms to make tangible gains:

• The iShares Global Clean Energy ETF is down about 26% since the start of 2021, while Aramco’s stock is up nearly 24% since it went public in the biggest IPO ever in December 2019.
• “We have to build credibility,” Freyr CEO Tom Jenson told the WSJ, of renewable battery and energy storage firms; Meanwhile, Aramco said it is increasing production capacity from 12 million barrels a day to 13 million by 2027, and its CEO called swift plans to transition away from fossil fuels “totally unrealistic.”

Surprise Team-Up? Oil and green energy aren’t totally separated. Last summer, Energy Vault gained a splashy investor from Aramco, as part of its $500 million venture fund to back renewables and energy efficiency technologies.