Exxon’s $5B Acquisition Puts Green ETFs in the Spotlight

Exxon’s $5B Acquisition Puts Green ETFs in the Spotlight

The largest U.S. energy company acquired Denbury Inc. on Thursday.

sumit
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Senior ETF Analyst
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Reviewed by: Lisa Barr
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Edited by: Lisa Barr

The largest U.S. energy company accelerated its low-carbon initiatives this week, boosting the prospects for green exchange-traded funds.  

ExxonMobil, the $420 billion behemoth best known for its oil and gas operations, acquired Denbury Inc. on Thursday for $4.9 billion. It was the largest acquisition for the energy giant since 2017.  

According to Exxon CEO Darren Woods, the addition of Denbury’s assets will enable his firm to “play an even greater role in a thoughtful energy transition.” 
 
Denbury owns the largest CO2 pipeline network in the U.S., at 1,300 miles, which it uses to reduce CO2 emissions through a process known as carbon capture and storage.  

In that process, carbon dioxide emissions are captured before they go into the atmosphere, transported through a pipeline and then stored deep underground.  

Exxon says it intends to use Denbury’s infrastructure to reduce the carbon emissions of its own energy operations, as well as those of companies in other industries, such as steel and industrial gases.  

Though a modest sum compared to its own market cap, Exxon’s willingness to spend $4.9 billion on Denbury reflects how seriously the firm is taking the transition to a lower-carbon world.  

Energy ETFs 

Denbury isn’t a popular holding among ETFs. The Horizon Kinetics Energy and Remediation ETF (NVIR) holds the largest stake in the stock, at 3.8%. 

Only four other funds hold more than a 1% position in the name: the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the Alpha Architect U.S. Quantitative Value ETF (QVAL), the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH) and the Invesco DWA Energy Momentum ETF (PXI)

But from an ETF perspective, Denbury itself isn’t as important as what its acquisition says about the investment opportunity in the transition to a lower-carbon world.  

In that regard, for investors who share Exxon’s view that decarbonizing the economy is a priority and an opportunity, there are a few dozen ETFs to consider.  

etf.com’s clean energy channel includes 20 ETFs that invest in renewable energy—energy sources that are constantly replenished, such as solar and wind. Renewable energy is an important component of the transition toward a low-carbon economy.  

There are also infrastructure ETFs, such as the JPMorgan Sustainable Infrastructure ETF (BLLD), which invests in infrastructure stocks with an eye toward “sustainability,” a concept that includes reducing carbon emissions.  

 

Contact Sumit Roy @ [email protected] 

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.