Responding to regulatory, shareholder and societal pressure, oil & gas majors like Shell are increasingly diversifying into renewable energy.

To incorporate more renewables into their portfolios, big oil and gas companies are acquiring smaller green energy and clean-tech companies, and leveraging their vast resources to ramp up development – which could help accelerate mainstream adoption of renewable energy. “I believe oil and gas companies have a role to play here because they can bring customer access and they can bring knowledge of how to develop very complex projects,” said Damien Sauer, a partner at Greentech Capital.

Royal Dutch Shell, one of the world’s six oil and gas “supermajors,” recently closed a deal to buy UK-based First Utility, a virtual energy company, which purchases and integrates energy from multiple sources, as opposed to generating it. “They give us a platform to grow from,” said Maarten Wetselaar, Integrated Gas & New Energies Director at Shell.

Like other big oil companies, Shell has long maintained that it helps to mitigate climate change by investing billions in cleaner-burning natural gas. In 2016 Shell acquired British energy company BG Group, a leading player in liquefied natural gas (LNG). However, this did not quell public concerns. “People did not trust us,” said Shell’s CEO Ben van Beurden. They thought that “we were secretly advocating for the prolongation” of oil and gas.

Van Beurden is leading Shell’s efforts to diversify into renewable energy, according to the New York Times. Since becoming CEO in 2014, he has had the task of balancing the company’s primary oil and gas business with demands from regulators, shareholders and the public to do more to protect the environment and mitigate climate change. Last year, Van Beurden and his executive team developed a plan to start reducing the carbon footprint of Shell’s operations, and of its fossil fuel products, setting the goal of a 50% reduction in carbon emissions by 2050.

Given that Shell will continue selling oil and gas, it will need to lessen its overall emissions by integrating clean energy products. It has started allocating up to $2 billion per year to alternative energy businesses and technologies. In addition to buying First Utility, it has acquired or invested in a variety of smaller operations, including a solar business in California, an offshore wind farm in the Netherlands, and a supplier of charging stations for electric vehicles.

Some environmentalists and investors remain sceptical, noting that the $2 billion annual investment is relatively small, considering Shell’s capital budget of up to $30 billion. “At the moment, the scale between their oil and gas business and their alternative energy business is still pretty disproportionate,” said Charlie Kronick, a senior adviser for Greenpeace in Britain. Mark van Baal of shareholder activist group Follow This said Shell’s taking responsibility for emissions is “an industry-leading move,” but that it is not doing enough.

A growing number of European oil majors are, like Shell, developing strategies that align with a global transition to clean energy. BP said it will pay $200 million for a stake in Lightsource, a solar power company. France’s Total recently acquired a majority stake in electricity retailer Direct Energie as well as Saft, a battery-maker. Such strategies also make sense from a business standpoint, as clean energy is likely to grow more quickly than legacy fossil fuel businesses.

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