In a provocative analysis, Goldman Sachs argues that traditional energy stocks should form the “bedrock” of sustainable investment portfolios, challenging conventional ESG wisdom. The firm’s research suggests oil and gas companies are critical to funding the energy transition, with 60% of sector capex now directed toward low-carbon initiatives.

“These firms generate the cash flows needed to develop renewables at scale,” said Michele DellaVigna, Goldman’s EMEA Commodity Equity head. The report highlights how majors like Shell and BP now allocate 30-50% of investments to wind, solar, and carbon capture—far exceeding most pure-play green tech firms’ R&D budgets.

Goldman’s data shows energy transition spending by fossil fuel companies grew 18% annually since 2020 versus 9% for specialized clean energy firms. The analysis comes as oil giants demonstrate surprising climate progress, with 12 European producers already achieving Scope 1-2 emission cuts exceeding Paris Accord targets.

Critics counter that this legitimizes fossil fuel dependence, but Goldman maintains pragmatic transition investing requires engaging—not shunning—incumbent energy players during the multi-decade shift to net zero.