Investors may be surprised to learn midstream has an important role in supporting ESG initiatives and a cleaner energy future.
MSCI recently upgraded Enterprise Products Partners LP’s (EPD) ESG rating from a BBB to an A, the midstream company said during its third-quarter earnings call last month. Enterprise is a leading North American provider of midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products, and petrochemicals.
MSCI ESG Ratings aim to measure a company’s management of financially relevant ESG risks and opportunities. MSCI uses a rules-based methodology to identify industry leaders and laggards according to their exposure to ESG risks. How well they manage those risks relative to peers is also considered. The MSCI ESG Ratings range from a CCC (laggard) to AAA (leader).
As energy security, reliability, and affordability continue to be essential when considering global energy needs, liquefied petroleum gas (LPG) is a solution for improving quality of life in developing nations. Demand is calling for an additional 3 million barrels per day of LPGs by the end of the decade, influencing Enterprise’s ESG rating upgrade.
According to Enterprise’s 2023 sustainability report, energy addition – rather than energy transition – is needed to meet the growing global demand for energy. Increases in energy consumption enable quality of life improvements; both renewables and hydrocarbons will be necessary to satisfy future demand.
How Hydrocarbons Enhance Quality of Life
30% of the global population lives in energy poverty, according to the United Nations. Furthermore, there are four million deaths per year attributed to indoor air pollution from unclean cooking fuels, according to Enterprise.
Increasing availability of reliable, affordable energy may reduce high mortality rates associated with cooking with wood, charcoal, and animal waste.
The projected increases in both population and energy consumption can’t be supported by renewables alone. Traditional hydrocarbons are advantageous given their energy density, availability, and ease of transport. Therefore, hydrocarbons will continue to play a vital role in meeting the growing demand for energy, according to Enterprise.
Enterprise is a top holding in both the Alerian MLP ETF (AMLP) and the Alerian Energy Infrastructure ETF (ENFR).
AMLP’s underlying index is a capped, float-adjusted, cap-weighted composite of energy infrastructure MLPs. Included companies earn most of their cash flow from midstream activities.
ENFR’s underlying index is a composite of North American midstream energy infrastructure companies. The index includes MLPs (25%) and corporations (75%) engaged in the pipeline transportation, storage, and processing of energy commodities.
For more news, information, and analysis, visit the Energy Infrastructure Channel.
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