There are few winners from the global economic upheaval sparked by Donald Trump’s tariff war, but Florida-based hedge fund Elliott Management is certainly one of them – if more by chance than intention.
Last month, regulators revealed that Elliott had taken short positions in two oil multinationals – a position in Shell amounting to 0.5% of its stock, and in its French rival, TotalEnergies. Investors with short positions do well when stocks fall – and this is precisely what happened after Trump’s growth-dampening trade tariffs saw the oil price plunge to about $60 per barrel.
The result: Shell’s shares lost more than a 10th of their value within days, while TotalEnergies tumbled 11.5%.
The hedge fund is now in the money. But don’t be fooled into thinking this gain is due to an enlightened bet that stocks in oil majors will inexorably trend downwards as the world transitions to renewable energy.
Elliott, if anything, has been betting against the energy transition – and its short positions in Shell and TotalEnergies are designed to cover its losses for an activist campaign it has been mounting at another such firm, BP.
In November, the asset manager known for taking “activist positions” in companies, which it uses to push executives to unlock value, began buying shares in BP. At last count, it had built up a 5% stake, worth $4.6bn, which it used as leverage to push BP to retreat from its 2020 pledge to spend more on green energy and cut spending on oil by 40%.
BP responded embarrassingly quickly to Elliott’s pressure, announcing a strategic “reset” last month to refocus on oil and gas, while adopting a “capital-light” commitment to renewable energy. At a capital markets day on February 26, BP CEO Murray Auchincloss announced he is selling BP’s share in its wind business, and looking to scale back on solar projects.
It’s the sort of timorous U-turn that has vindicated the view of cynics who argued that BP’s bid to rebrand itself as “Beyond Petroleum” in 2000, on the basis that it would be a “steward to the planet”, was simply greenwashing.
While BP’s unseemly haste to ditch renewables makes nonsense of its thousands of pages of sustainability reports, it is not the only multinational to swing 180° with the political wind.
US banks like JPMorgan, Citigroup, Bank of America, Morgan Stanley, Wells Fargo and Goldman Sachs – most with operations in South Africa – fell over themselves this year to quit the Net Zero Banking Alliance (NZBA). And asset managers have similarly cooled on the Net Zero Asset Managers initiative.
“The sudden exodus of these big US banks out of the NZBA is a lily-livered effort to avoid criticism from Trump and his climate denialist cronies,” said Paddy McCully, a senior analyst at Reclaim Finance.
Identity crisis at BP
For Elliott’s founder, the 80-year-old hedge fund billionaire Paul Singer, this gambit is in line with his reputation as one of Wall Street’s more formidable vulture capitalists. Singer built his reputation by buying sovereign bonds that Peru had defaulted on, then forcing the Latin American country to make good its obligations – a playbook he repeated with Argentina.
Elliott, the Financial Times reports, has embraced the Trump “anti-climate” agenda so completely that its energy team in New York now has T-shirts with “Gulf of America” emblazoned on the front with a picture, fittingly, of Trump as a pirate.
Singer himself donated at least $8m to super PACs supporting Trump last year, even though his loyalty has never been absolute. Bloomberg reported that at a private event hosted by Goldman Sachs in Abu Dhabi last week, Singer warned that Trump’s tariff war could lead the US dollar to lose its reserve currency status, and even boil over into war.
But amid the swiftly changing mood in Washington, Singer is exploiting the fault lines of an oil industry in the throes of an identity crisis – pulled between a Trump administration that has pledged a return to the era of “drill, baby, drill”, and pressure from other shareholders to embrace renewable energy to mitigate climate change.
There is a clear geographical split too: while US asset managers have largely retreated, European investors have doubled down on climate imperatives.
This ideological schism was most eloquently expressed at BP’s AGM last week, when 24.3% of investors voted against the re-election of its chair, Helge Lund – but for opposing reasons.
While Elliott has demanded a far quicker pivot back to oil and gas, British asset manager Legal & General, which has 1.8% of BP, said its vote against reflected the fact that it is “deeply concerned” about BP’s decision to move away from renewables.
“Climate change represents a financially material and systemic long-term risk to our clients’ portfolios,” L&G said, expressing its disappointment with Lund’s decision to pivot without consulting investors.
Shareholder advocacy group the Australasian Centre for Corporate Responsibility said the vote against Lund was no surprise. Investors in BP had been “concerned about the threat to value from successive rollbacks on climate”, said the group’s Nick Mazan, and voted to send a clear message.
Lund, who will leave BP within the next few months, may be the first casualty of the great climate U-turn, but he won’t be the last.
And the damage BP has done will linger long after he has gone; the next time an oil giant makes a pledge on the energy transition, it will be that much harder to convince investors and the public that this is not just political posturing.
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