Once known as “black gold” for its ability to create overnight billionaires, the future of oil now hangs in the balance. The need for this commodity has always come at a high cost, not just financially, but socially and environmentally as well. As the public becomes more aware of the impact of the extraction and burning of fossil fuels on the planet, alternative sources of energy, such as renewables, have taken centre stage.

Currently, the Russia-Ukraine war is pushing oil prices to levels not seen since pre-2014. The European Union has adopted sanctions blocking Russian oil, squeezing around 3 million barrels per day from market supply. China has joined in to some extent, with Sinopec freezing plans for a petrochemical investment deal with Russia’s Sibur. To help prop up supply, the US and its allies have agreed to release an initial 60 million barrels of oil from strategic petroleum reserves.

Oil prices dipped in the second week of March, following United Arab Emirates’ pledge to increase oil production, but recovered shortly after.

The conflict between Russia and Ukraine is showing no signs of ending soon, after Russia backtracked on its promise to cut back on its operations in Chernihiv and Kyiv.

Source: Trading Economics

The European Union depends on Russia for about 40% of its natural gas. Russia also supplies about 27% of the 27-country bloc's oil imports, and 46% of its coal imports. That trade brings in tens of billions of dollars per year to Russia. That is about to end, cutting off a major source of income for Russia. On 8 March the European Commission proposed its outline to make Europe completely independent from Russian fossil fuels before 2030. This plan also outlines a series of measures to respond to rising energy prices in Europe and to replenish gas stocks. Europe has been facing increased energy prices for several months, but now uncertainty on supply is exacerbating the problem.

A number of western energy companies, including ExxonMobil, Shell, BP, and Equinor have announced they are stopping operations in Russia and ending partnerships with Russian firms.

What’s next for oil prices?

Where oil prices are headed over the next 12 months is anyone’s guess. The US Energy Information Administration (EIA) has cautioned that the price forecast is “highly uncertain” as the outcome will depend on the outcome of sanctions, any potential additional sanctions, and the independent decisions of big O&G players.

What we do know is that global consumption of petroleum and liquid fuels will average around 100.6 million barrels per day1 for all of 2022, up 3.1 million from 2021, but these were estimates before the Russia-Ukraine conflict broke.

Moving on from oil

Oil has always been a volatile commodity, but because we’ve grown to depend on it for everything from fuel to chemicals and plastics, we keep extracting it and buying it. Right now, fossil fuels supply around 80% of our energy needs, and the target is to halve that by 20502.

Natural gas, coal, and oil are non-renewable sources of energy, and the planet’s reserves are running low. We’re expected to run out of fossil fuels by the end of this century, so it’s a race against time to improve our capacity for renewable energy sources to meet the ever-growing demand.

It’s oil’s volatility and exposure to geopolitical risk that make it so much less appealing than renewables, which are much cheaper to produce (the sun and wind are accessible for most of the year) and are less exposed to these risks. While global superpowers have been known to start wars over oil, you can’t convincingly fight over who gets more sun.

European Commission President Ursula von der Leyen, in a press conference addressing the Russian oil disruption, highlighted the need to accelerate clean energy transition. "The quicker we switch to renewables and hydrogen, combined with more energy efficiency, the quicker we will be truly independent and master our energy system."

That’s the golden ticket. We need to ensure that the ability to harness renewable energy is accessible to all countries, and we have to do it quickly. Sustainability is the way forward, and investing in it is one way to ensure these companies achieve economies of scale so we can all benefit from renewable energy. 

What’s next for global energy?

For the world to move towards renewables as a primary source of energy, the companies behind innovations and production need the financial backing to develop and expand supply.

This situation presents investment opportunities in uncharted territory, paved by innovations in green technology and the urgency to preserve our planet’s health. This is the chance to get in on the action in a growing sector and be part of the transition towards renewables.

These are some of the opportunities available for investors to get in on the action and invest in a sustainable future.

RHB Climate Change Solutions Fund is designed with diversified exposure to climate change solutions. As a feeder fund to JP Morgan Asset Management’s (JPMAM) Climate Change Solutions Fund, the fund aims to provide long-term capital growth by investing in the US dollar denominated shares of the JPMAM underlying fund, which focuses on ESG (environmental, social, and governance) through themes such as sustainable transport, construction, food and water, recycling and re-use, and of course, renewable energy.

The target fund combines artificial intelligence with human research talent to pick the cream of the crop and uses natural language processing-based ThemeBot to identify companies exposed to the theme. JPMAM’s dedicated Sustainable Investing Team provides climate change insights and stewardship.

Sustainability goes beyond investing in companies that make renewable energy technology – there’s the human aspect as well in investing for the betterment of others. Your investment will help others improve their lives, while generating returns.

RHB Sustainable Global Thematic Fund aims to provide long term capital growth by investing in one collective investment scheme. It acts as a feeder fund for AllianceBernstein SICAV I – Sustainable Global Thematic Portfolio (the target fund), putting at least 95% of its NAV in the USD denominated share class of the target fund.

The target fund pursues opportunities in a global universe of companies with long term positive exposure to environmentally or socially-oriented sustainable investment themes. Examples of some themes are empowerment, health, and climate. At least 80% of NAV is placed in equity or equity-related securities around the world.

Using a combination of “top-down” and “bottom-up” approaches, the investment manager identifies the most attractive securities that fit the theme and assesses the company’s exposure to ESG factors, as well as earnings growth, valuation, and quality of management.

The Target Fund aims to address challenges relating to economic prosperity, environmental sustainability and social inclusion. Investments that align with the UN SDGs (sustainable development goals) can help to end poverty, protect the planet and improve the lives and prospects of everyone, everywhere.

Contact your Relationship Manager to take the first step in ensuring the sustainability of our planet, or drop by your nearest RHB Branch, today.

1US Energy Information Administration, Short-term energy outlook, 8 March 2022.
2ScienceDirect, The role of renewable energy in the global energy transformation, Dolf Gielen et al, April 2019.

This article is strictly private, confidential and personal to its recipients and should not be copied, distributed or reproduced in whole or in part, nor passed to any third party, without obtaining prior permission of RHB Bank Sdn Bhd (“RHB”).

This article has been prepared by RHB and is solely for your information only. It may not be copied, published, circulated, reproduced or distributed in whole or part to any person without the prior written consent of RHB. In preparing this article, RHB has relied upon and assumed the accuracy and completeness of all information available from public sources or which was otherwise reviewed by RHB. Accordingly, whilst we have taken all reasonable care to ensure that the information contained in this presentation is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness and make no representation or warranty (whether expressed or implied) and accept no responsibility or liability for its accuracy or completeness. You should not act on the information contained in this podcast without first independently verifying its contents.

Any opinion, management forecast or estimate contained in this article is based on information available as the date of this podcast and are subject to change without notice. It does not constitute an offer or solicitation to deal in units of any RHB fund and does not have regard to the specific investment objectives, financial situation or the particular needs of any specific person who may receive this. Investors may wish to seek advice from a financial adviser/unit trust consultant before purchasing units of any funds. In the event that the investor chooses not to seek advice from a financial adviser/unit trust consultant, he should consider whether the fund in question is suitable for him. Past performance of the fund or the manager, and any economic and market trends or forecast, are not necessarily indicative of the future or likely performance of the fund or the manager. The value of units in the fund, and the income accruing to the units, if any, from the fund, may fall as well as rise.

A Product Highlights Sheet (“PHS”) highlighting the key features and risks of the RHB Climate Change Solutions Fund dated 13 January 2022 and RHB Sustainable Global Thematic Fund dated 8 March 2021 (“Fund”) is available and investors have the right to request for a PHS. Investors are advised to obtain, read and understand the PHS and the contents of the Information Memorandum and its supplementary (ies) (if) (“the Information Memorandum”) before investing. The Information Memorandum has been registered with the Securities Commission Malaysia (“SC”) who takes no responsibility for its contents. The SC’s approval and authorization of the registration of the Information Memorandum should not be taken to indicate that the SC has recommended or endorsed the Fund. Amongst others, investors should consider the fees and charges involved. Investors should also note that the price of units and distributions payable, if any, may go down as well as up. Where a distribution is declared, investors are advised that following the issue of additional units/distribution, the NAV per unit will be reduced from cum distribution NAV to ex-distribution NAV. Any issue of units to which the Information Memorandum relates will only be made on receipt of a form of application referred to in the Information Memorandum. The printed copy of prospectus and Product Highlight Sheet is available at RHB branches/Premier Centre and investors have the right to request for a Product Highlight Sheet. Investors are advised that investments are subject to investment risk and that there can be no guarantee that any investment objectives will be achieved. Investors should conduct their own assessment before investing and seek professional advice, where necessary and should not make an investment decision based solely on this update.

The Manager wishes to highlight the specific risks of the RHB Sustainable Global Thematic Fund are Management Risk, Liquidity Risk, Currency Risk, Country Risk, Interest Rate Risk, General Risks, Country Risk General, Certain Legal and Regulatory Risks, Cybersecurity Risk, Market Risk, Borrowing Risk, Loans of Portfolio Securities Risk, Taxation Risk, FATCA and Certain Withholding Risk, Investment Strategy Risks, Country Risks – Emerging Market, Focused Portfolio Risk, Allocation Risk, Turnover Risk, Derivatives Risk, OTC Derivatives Counterparty Risk, Equity Securities Risk and REIT’s Risk. The specific risks of the RHB Climate Change Solutions Fund are Management risk, Liquidity risk, Currency risk, Country risk, Interest Rate risk and other general risks are elaborated in the Information Memorandum. The specific risks of RHB Shariah China Focus Fund are Country Risk, Currency Risk, Market Risk, Particular Security Risk, Reclassification of Shariah Status Risk. The specific risks of RHB Global Artificial Intelligence are General market risk, Currency risk, Company specific risk, Volatility risk, Emerging market risk, Liquidity risk, Concentration Risk, Derivatives risk and other general risks are elaborated in the Information Memorandum.

This article has not been reviewed by the Securities Commission Malaysia (SC).

RHB Bank Berhad 196501000373 (6171-M)

Previous Article
Fund Discovery ...
Next Article
Discover potential...