Why ESG investors and energy and natural resources companies should collaborate

Shareholder pressure to set climate targets, link compensation to outcomes, and adopt resolutions at annual meetings has increased, and companies are looking for ways to manage them. These shareholder challenges are becoming more common across the energy and resource sectors as carbon emissions, water use, and transparency become higher profile issues.

However, if we think about the relationship between ESG investors and the ENR sector as progressing in waves, it may be time to declare that this first, adversarial wave has run its course.

The adversarial wave has achieved a great deal. Executives have a better understanding of the scale and urgency of the challenge before us, and most have committed to greater sustainability in their operations and products.

Pilot programs are well underway, but to achieve scale industrialisation of these transitions, we’ll need to take a different tack. Both sides, companies and investors, must begin to realise that they’re more likely to achieve their objectives through collaboration rather than confrontation.

First wave: Confrontation

Over the years, ESG investors sharpened their focus on corporate and investor responsibility, adopting one or more of these strategies.

1. Activism –  Investors are pressing companies to raise their game on ESG matters through specific targets, measures, and portfolio shifts, and to adopt specific resolutions, such as linking executive compensation to outcomes.
2. Avoidance –  Investment funds are announcing policy guidelines and have divested from companies that failed to meet their expectations.
3. Articulation –  Investors are requiring companies to redouble their efforts and shift communications from low-impact vanity projects to fully formed strategic plans and roadmaps, with economic rationales.

Companies have committed to greater sustainability in their operations and products.

Leading companies are beginning to make progress, setting CO₂ targets while improving the transparency of their supply chains and appointing new faces to boards to speak more forcefully for sustainability.

While a lot of work lies ahead, the contours are beginning to emerge of a next wave that will require more cooperation.

Second wave: Collaboration

With momentum established and ESG targets growing, the challenge shifts from recognising the need to change, to funding that change sufficiently enough to make a difference.

Energy and resource companies will need to draw on the strength of their traditional businesses to secure funding for capital expenditure in new assets and infrastructure that supports the energy transition, everything from bio feedstock production to renewable power generation, hydrogen electrolysers, electric vehicle charging infrastructure, waste recycling, and much more.

ESG investors could go further by helping public companies go fully or partially private for a spell, to speed up transitions that could be much more difficult under public ownership. Other companies will transform themselves or spin off some of their more sustainable businesses to try to revalue their market positions and ensure better access to capital.

Energy and resource companies will need to draw on the strength of their traditional businesses to secure funding for capital expenditure.

Third wave: Reinforcement

Where might we be in five years?

If energy and natural resources companies and their investors are where they say they’d like to be in 2026, what will have changed to make that progress possible?

First, the relationship between these companies and their investors will improved. Looking back from 2026, we saw a sea change in the dialogue between them, which became more constructive and cooperative.

The best energy and resource companies were no longer just trying to convince shareholders and customers that they were doing the right things; they began demonstrating that they were changing their operations, adapting their products, and getting positive results in revenues and capex profiles.

As their operations changed, they became more transparent, and the two-way dialogue became more innovative, reinforcing, and forward-looking. Their relationship with customers also changed, with ENR companies seen as key partners for business and responsible supplier for consumers.

The best energy and resource companies were no longer just trying to convince shareholders and customers that they were doing the right things.

At the same time, these companies moved beyond pilot programs and began revamping their operations and supply chains at an industrial scale. They learned quickly and applied that learning rapidly in the next generation of activity.

As these new businesses and methodologies matured, executives realized that they really can redefine the economics of their industries. They were no longer investing below the desired rate of return and hoping for a subsidy; they were investing at the rate and seeing attractive returns.

Executives got better at measuring the things that traditional metrics like net present value overlook, things like company reputation, competitive advantage, customer advocacy, and the expansive options created by a growing, sustainable business.

In conclusion, as the energy and natural resources sectors got better at reducing and mitigating emissions, other aspects of the ESG agenda also moved closer to centre stage: Water scarcity, diversity and equity issues, corporate governance, stronger relationships with local communities.

Some executives looked back nostalgically at a time when their performance was measured simply by profitability and share price. Those, of course, remain essential, but by 2026, the other elements of the ESG scorecard were also important indicators of a company’s resilience and success.

Peter Parry, partner, chairman of Global ENR practice, Bain & Company Milan; and Eric Beranger, partner, Bain & Company Middle East.