As the sustainable investing movement gains traction investors have increasingly shied away from traditional energy stocks. But ValueAct Capital's Jeffrey Ubben believes that oil and gas companies that are working to clean up their operations can belong in portfolios focused on sustainable companies.
The activist investor, who is the co-portfolio manager of the ValueAct Spring Fund, said that he's been buying shares of BP since the company is working to instate more environmentally-friendly policies.
"They can be part of the solution. They can move to carbon capture, and hydrogen and other things with their capital spend to become a company of the future," he told CNBC's David Faber on Wednesday.
From a more traditional investing perspective, he noted that the company has done a "great job" in the last three years financially and has a "fine" balance sheet.
As the energy sector faces mounting pressure from investors, BP in February announced that it plans to be carbon neutral by 2050.
Even as BP works to make its operations more environmentally friendly, Ubben noted that given how out of favor the sector is with investors, it could be hard to find a buyer on the other side. The sector has shed 28% over the last year, compared with the S&P 500's 12% gain.
But Ubben also said that as an investor it's possible to push for meaningful change, which is why companies like BP can be included in ESG portfolios. The popular acronym denotes when a company's environmental, social and governance factors are taken into consideration when someone is choosing whether or not to buy a stock.
"My new activist hat says let's go find the right investors," he said, meaning that rather than pushing the company to buyback shares, for example, stock owners should instead encourage things like capital re-allocation.
"We need to make it more investable, that's all, and we can. ... Stock price creates the impetus for change. When your stock price gets that low your strategy probably isn't working," he said.
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