Greg Abel, the likely successor to Warren Buffett as Berkshire Hathaway CEO, directed the company’s move into renewable energy as the head of Berkshire’s large utility business.
By most accounts, it’s too soon to predict if that pedigree will translate into a more aggressive green shift for a conglomerate whose exposure across so many sectors means that it wants a bite at clean energy while simultaneously keeping up stakes in fossil-fuel industries.
Vice Chairman Charlie Munger indicated at the Berkshire Hathaway BRK.B, +1.54% BRK.A, +1.82% annual meeting Saturday that it will be the 59-year-old Abel to eventually step in at the top. Buffett, 90, himself confirmed as much in a weekend comment to CNBC. “The directors are in agreement that if something were to happen to me tonight, it would be Greg who’d take over tomorrow morning,” he said.
Edward Jones analyst Jim Shanahan told the Associated Press that Abel brings confidence to stock-watchers. Abel’s workload to date pushed him to the top. If BHE, one division of the $630 billion Berkshire Hathaway, were a stand-alone public company, it probably would be worth well over $50 billion, Barron’s reports.
“I think he has proven to be a really effective leader,” said Shanahan, who added that Abel handled questions about Berkshire’s efforts to respond to climate change well at the annual meeting.
Abel has been with Buffett for more than two decades, most recently leading Berkshire Hathaway Energy. That division includes subsidiaries focused on Midwestern and Western utilities. It includes coal, natural gas pipelines, hydroelectric, wind, solar, geothermal and nuclear energy in the mix. A $10 billion bet on liquefied natural gas emerged as recently as 2020.
Buffett, Abel and crew have backed the largest U.S. solar project.
Yet count Berkshire Hathaway as one of the companies most criticized by the influential Climate Action 100+ investor group. It leaned on metrics tied to emissions, governance and disclosures and considers Berkshire Hathaway in the close company of PetroChina PTR, +1.30%, the listed arm of China’s state-owned energy interests, when it comes to lack of climate-change transparency.
Abel, for his part, has emphasized the spending on a renewables future.
“If you look at our investment through the end of 2020, we’ve invested $30 billion, or in excess of $30 billion, into renewables, and have really completely changed the way our businesses do business, i.e. our utility businesses,” he has said. “They have been decarbonizing and delivering a valued product to our stakeholders, to our customers.”
Buffett, whose vision still captures the imagination of investors, has no doubt embraced clean energy, but on a slower timeline. It’s a pace he has argued the size of the shift demands.
“Our country’s electric utilities need a massive makeover in which the ultimate costs will be staggering,” he said in the recent shareholder letter. “Historically, the coal-based generation of electricity that long prevailed was located close to huge centers of population. The best sites for the new world of wind and solar generation, however, are often in remote areas.”
And Buffett made clear in that letter that he sees the slower transition to renewables as the realistic path.
“Billions of dollars needed to be invested before meaningful revenue would flow,” he said. “Transmission lines had to cross the borders of states and other jurisdictions, each with its own rules and constituencies. BHE would also need to deal with hundreds of landowners and execute complicated contracts with both the suppliers that generated renewable power and the far-away utilities that would distribute the electricity to their customers. Competing interests and defenders of the old order, along with unrealistic visionaries desiring an instantly-new world, had to be brought on board.”
The phrase “unrealistic visionaries” rings out as a shot against the most aggressive calls for the U.S. to catch up with Europe and elsewhere on the net-zero emissions path to slowing global warming by the 1.5 degrees laid out in the Paris climate pact, even from a Democrat like Buffett.
The Biden administration has an ambitious strategy to cut the country’s greenhouse gas emissions roughly in half by 2030.
Of the dozen largest electricity producers in the country that also own local utilities, Berkshire Hathaway Energy is one of only a few that have not announced plans to get to net-zero emissions, or at least close to that benchmark, by mid-century.
Berkshire has this spring again urged shareholders to reject a call for greater climate-related disclosures, saying it did not believe an analysis of its risks was “necessary.” Freedom to make such a call for now comes as the Securities and Exchange Commission is reviewing stepping up tougher climate disclosures.
Buffett’s own one-third ownership of the shares means he can essentially block a proxy.
Still, increased pressure from shareholders on climate change and other sustainability issues isn’t expected to ease once Abel takes over.
BlackRock BLK, +0.77%, the $8 trillion investment giant, has urged the companies it holds stakes in to do more on climate and “sensitive social and political issues.” It owns nearly 5% of Berkshire.
And California’s giant public pension fund, CalPERs, has said the size of Berkshire and the prestige of its leadership won’t stop it from demanding climate-risk disclosure.
“Shareholders said the fact that the resolutions got about a quarter of the votes was significant, as it was twice what similar resolutions got last year,” said David Callaway, writing for Callaway Climate Insights. “But given the backing of CalPERs and BlackRock on the resolutions, I would have hoped for better.”