Adverse demand supply equation and Energy crunch: Is this an ESG Problem?

Synopsis: When poverty knocks at the door, love flies out of the window. Many parts of the globe are now facing an energy crisis. Much similar to the way the semi-conductor crisis is playing out, the energy crisis also has its origins in the same factors that gave rise to semi-conductor crisis: (a) faster than expected economic rebound post Coronavirus pandemic, resulting in a significant increase in demand, (b) adverse weather conditions and, (c) geo-political tensions. Another factor that has also contributed to the energy shortfall is too much idealistic, purist pursuit of renewables without any concrete plan in place to aid the transition. Governments after governments, companies after companies kept announcing emissions cuts, net-zero goals, renewable adoption in frightening succession. Even on other related matters, the covid pandemic had suddenly made everybody an ambassador of sustainability. But the energy crisis has clearly highlighted the lacunas of such claims. The way countries and companies kept announcing the billion dollars investments in renewables and sustainability, it felt as if there was a proper plan in place. But just as Mike Tyson said, “Everybody’s got a plan till they get punched in the face”. The unexpected set of events that have transpired over the past few months have put a wrench in all those plans. Of course, this is going to be transitory and like everything else, this too shall pass. But it needs to be looked into and there are lessons to learn. On the surface, the geopolitical tensions, unpredictable weather, Brexit, and even ESG are some of the reasons being put forward for this energy crunch facing the planet today. But the bigger question is how to approach the transition so that we can minimize the disruption?