RDSB share price: what I’d do given the company’s green strategy

Jay Yao writes what he’d do given the RDSB share price and the Royal Dutch Shell’s recent release of its net-zero emission transformation strategy

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

The Royal Dutch Shell (LSE: RDSB) share price has increased substantially since October. However, it is still down nearly 30% over the last 12 months. Royal Dutch Shell depends on oil, natural gas, and oil products for a substantial part of its cash flow. With the meaningful rally in oil prices since October of last year, many in the market expect Royal Dutch Shell to be more profitable, and that’s helped the RDSB share price.

While oil prices are important to Royal Dutch Shell now, I reckon how management does in green energies will be important for the company in the future. Fortunately, Royal Dutch Shell recently gave more details on their green transition strategy. Here’s more on the strategy and what I think it could mean for the RDSB share price.

Green strategy

In terms of its goals, Royal Dutch Shell’s management has certain targets in mind when it comes to reducing net carbon intensity.

Specifically, using the company’s 2016 levels as a baseline, Royal Dutch Shell hopes to cut net carbon intensity by 6%–8% by 2023, a more ambitious 20% by 2030, and 100% by 2050.

In terms of how they plan on getting there, management plans to taper down its oil business over time. In terms of petroleum production, management sees a decline of around 1% to 2% annually.

RDSB hopes to target green markets such as carbon capture and storage, and electric car charging. In terms of carbon capture, one area of particular interest could be nature-based solutions such as reforestation.

With this said, Royal Dutch Shell isn’t investing everything in green energy. Management plans to invest $2bn to $3bn annually in renewable energy assets versus an annual capital expenditure budget of $22bn.

What I think the strategy means for the RDSB share price

Many green stocks have done well over the past year regardless of fundamentals. The optimistic valuations aren’t limited just to small and medium-sized companies in the sector either. Electric vehicle and solar panel maker Tesla, for example, has a huge market cap around the same size as Facebook. If the market remains optimistic on green stocks and Royal Dutch Shell management successfully sells the market that they too are a ‘green stock’, I think there’s a possibility that the RDSB share price could benefit.

With that said, I think it’s going to be difficult for Royal Dutch Shell to change market perception that it’s an oil and gas company right away. Royal Dutch Shell is simply too big in terms of its hydrocarbon business to me. However, giving more details on the green strategy is a step in the right direction, in my view.

In the long run, I don’t know how long the market’s optimism on green stocks will last. Although the valuations might be generous now, they could always change if green stocks fall out of favour.

To me, what matters more to the RDSB share price in the long term is how well management does in terms of delivering sustainable earnings in the renewables sector. With management’s recent description of their strategy, I feel more confident that the company has an achievable plan. I reckon management will execute and as a result, I’d buy and hold RDSB shares.


Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jay Yao has no position in any of the shares mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK owns shares of and has recommended Facebook and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

ISA Individual Savings Account
Investing Articles

How to build a Stocks and Shares ISA with a 6% dividend yield

It’s easy to build an investment portfolio with a high dividend yield today. But investors need to manage risk carefully,…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How risky is switching from cash savings to a Stocks and Shares ISA?

The UK government is making moves to encourage cash savers to consider investing via Stocks and Shares ISAs. But what…

Read more »

Friends and sisters exploring the outdoors together in Cornwall. They are standing with their arms around each other at the coast.
Investing Articles

4,985 shares of this FTSE dividend star pay an income equal to the State Pension!

Zaven Boyrazian calculates how many shares investors would have to buy to generate enough income to match the UK State…

Read more »

Finger clicking a button marked 'Buy' on a keyboard
Investing Articles

£500 buys me 407 shares in this 8.2%-yielding income stock!

Got a small lump sum? Zaven Boyrazian explores one underappreciated income stock offering an enormous yield that could be set…

Read more »

Thoughtful man using his phone while riding on a train and looking through the window
Investing Articles

Up 23% this year, is it too late to buy shares in this FTSE 100 compounder?

Having missed Diploma shares at £36 back in April, is a strong trading update with higher guidance a good enough…

Read more »

Businessman hand flipping wooden block cube from 2024 to 2025 on coins
Investing Articles

Does this ex-penny stock have the potential to almost double?

This under-the-radar mining stock has doubled in the last 12 months, lifting it out of penny stock territory. But could…

Read more »

A mature adult sitting by a fireplace in a living room at home. She is wearing a yellow cardigan and spectacles.
Investing Articles

£5k in savings? Here’s how that can unlock a £255 monthly second income

Ever wondered how to turn a lump sum of savings into a chunky second income? Zaven Boyrazian explains a simple…

Read more »

British pound data
Investing Articles

Get ready for a US stock market crash?

Experts are waving the red flag on the US stock market and economy, warning of an impending crash. Should investors…

Read more »