This month’s question: At this stage in the so-called energy transition, what do you consider the optimal balance between fossil fuels and renewables in a portfolio’s energy sleeve?

Robert Howard, president, Resource Royalty, LLC

While the Russian invasion has grabbed the headlines as it relates to the oil price spike, the West’s dream of an “energy transition” is largely to blame. Preventing domestic reserves from being recovered as we await the new green energy economy has totally backfired on the United States. China and India account for most of the growth in energy demand over the coming 20 years. Neither have the financial capability or the desire to upend their economies to accommodate the move away from fossil fuels. A move away from petroleum is such a long-term proposition that investing in what might happen over 20 to 30 years does not make for sound investments. I do not advocate investing in the transition unless you consider natural gas as part of the solution.

Mehul Mehta, CIO, Greenbacker Capital

An allocation toward renewables rather than fossil fuels isn’t just about return metrics — it reflects personal conviction on the negative impact fossil fuels have on climate and environment. The energy transition is accelerating and will be a multi-decade phenomenon. Energy security and reliability, as we see in Germany’s reliance on Russian gas, highlight the importance of U.S. gas and liquified natural gas exports.  If I were advising someone who was somehow climate agnostic, perhaps an 80/20 renewables to “conventional” (natural gas/LNG) allocation could make sense, but for an environmentally conscious investor, a 100 percent allocation to renewables is not out of the question.

Brad Updike, director, Mick Law P.C.

We’re in the very “first inning” of a long transition process. While environmental priorities command that we start this transition now to slow global warming, fossil fuels aren’t going away anytime soon and will, in fact, be the predominate source of energy in the United States for the next 30 years. That said, I believe it is premature to give up on E&P as an investment. E&P remains viable, but upstream companies need to be more disciplined today than what has been the case over the past five market cycles. Going forward, the financial advisory sector should consider upstream opportunities with companies like BP, Shell, Chevron, Total, Exxon and others that are putting some of their resources into renewable energy projects. I also believe that we need to reward the E&P companies that use debt reasonably and that are making commitments “to get ahead of the curve” on ESG issues (e.g., by capturing and selling their natural gas as opposed to flaring it out into space).

Matt Iak, executive vice president, U.S. Energy Development Corp.

“It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.” This Warren Buffet quote is especially relevant while deciphering between valuations used for fossil fuel and renewable energy investments. Fossil-fuel firms are typically mature, known entities, whose value is based on current cash flow, while renewable energy companies are usually speculative, unknown, and valued based on their potential and future cash flow. Don’t stray from what you know or understand, which is why I favor an 80/20 ratio of fossil fuels to renewables for your energy exposure.

Keith Black, managing director, FDP Institute

With the highest crude oil prices since 2008, investments in fossil fuels are still profitable. Solar and wind energy become more cost competitive as oil prices rise, which also sets up these investments for increased profitability in coming months. However, solar and wind technologies only supply power intermittently as the weather allows, so fossil fuels will continue to be an important part of the energy mix until a time where battery technologies to store solar and wind energy become widely available at reasonable prices.