Investors Can't Ignore Big Oil's Latest Acquisitions

Major oil and gas companies have been snapping up startups aiming to boost their tech game, diversify their energy mix, and respond to mounting pressure for sustainability. This trajectory signals a shift toward innovation and cleaner energy, but it's unclear if it's the start of true transformation or a strategy to future-proof against tougher green regulations. 

Such trend coincides with a noticeable retreat from previously stated net-zero commitments. For instance, BP recently abandoned its target to cut oil and gas output by 2030, as CEO Murray Auchincloss scales back the firm's energy transition strategy to regain investor confidence. Similarly, reports indicate that major oil firms' climate pledges are falling short on almost every metric, raising concerns about the sincerity and effectiveness of their commitments to reducing emissions. This juxtaposition suggests a complex strategy where oil companies are hedging their bets, investing in clean energy startups to capitalise on future opportunities while maintaining, or even expanding, their traditional fossil fuel operations to secure immediate profits.

In their January 2024 Climate Tech Investment Trends report, Sightline Climate, a climate market intelligence platform, highlighted a sharp rise in activity over recent years. They noted a high number of company exits, shattering 2022’s record with 177. These were mostly tuck-in deals with no disclosed valuations. The graph illustrates the top climate acquirers. 

Oil and gas companies are increasingly moving into renewables, with three of the top five most active climate acquirers coming from the sector. As European oil majors broaden their market reach, they are focusing on acquiring projects and expertise through strategic acquisitions, rather than developing these capabilities internally. This is offering new exit opportunities for clean tech start ups. 

TotalEnergies led the pack in 2024, launching a major buying spree that made it the most active acquirer of the year. It acquired VSB Group, a renewables developer, Talos Low Carbon Solutions, a CCS project developer, SN Power, a hydropower developer, and Kyon Energy, a grid-scale storage provider.

Stéphane Michel, President, Gas Renewables & Power at TotalEnergies said:

“All these solutions will enable us to improve our B2B offers; the development of our renewable projects; our market analyses; and the deployment of EV charging points.”

But this isn't a new trend. TotalEnergies, has made bold renewable investments for over a decade, buying a majority stake in SunPower in 2011, acquiring battery maker Saft Groupe in 2016, and more recently taking a 50% stake in Clearway to expand its U.S. presence. 

This wave of acquisitions highlights a broader trend of traditional energy giants integrating new technologies while maintaining their fossil fuel dominance. BP, for example, has increased venture capital investments in electric vehicles, bioenergy, hydrogen, and renewables. But despite its green pledges, BP Ventures has only invested around $1 billion since its inception—just a fraction of the company's overall spending. In 2024, it plans to invest only $200 million, while its CO₂ footprint remains massive at 340 million tonnes annually.

BP made two notable moves in 2024, taking full ownership of bp Bunge Bioenergia, an ethanol producer, and Lightsource bp, a solar developer. 

Gareth Burns, Vice President of BP Ventures, said that more than 90% of this spending will go to startups working on technologies related to what BP refers to as its five “transition growth engines” — bioenergy, electric vehicle charging, convenience, renewables and power, and hydrogen. “In dollar terms, it’s about a 60% increase compared to our previous investment activity,” says Burns.

Research on more than 10,000 energy M&A deals suggests that while international oil companies are investing in renewables, their approach remains largely exploratory. This emphasis on ‘exploration’ is evident in BP Ventures’ strategy. “We hope to have the opportunity to deploy those technologies into our activities over time, as those technologies actually prove themselves,” says Burns. At the same time, BP Ventures will continue investing in startups beyond BP’s immediate business needs, a category Burns refers to as the “explore” space.There appears a greate rinterested in innovation than in fully integrating renewables into their core businesses.

While these acquisitions may not be redefining the future of oil, they are shaping the startup ecosystem. Freya Pratty at Sifted highlighted this in an interview with Joe McDonald, founder of Tem and former CEO of Limejump, a climate tech startup acquired by Shell.

“When we set out building Limejump, I don’t think we thought we were building a renewable energy company to sell to an oil company,” McDonald said. However, he acknowledges that acquisitions like these provided many founders with an exit and the capital to keep building.

This has led to a new wave of climate tech startups. For instance, UK-based Modo Energy was founded by Quentin Scrimshire after selling his first company, Kiwi, to French energy firm Engie in 2019.

Would McDonald sell Tem to an oil and gas company today? No. He believes that current market conditions allow climate tech startups to compete directly with incumbents, citing Octopus Energy, founded in 2015, which is now one of the UK’s largest energy companies. The energy market is changing, and disruptive startups now have a real shot at challenging Big Oil.

The relationship between clean tech start ups and big oil is clearly complex, yet investment must come from somewhere. 

Finance is a major roadblock in transitioning to renewables an private investment, especially from oil and gas giants is important and necessary. But despite record profits, major energy firms aren’t allocating nearly enough to renewables. European oil giants put just 5% of their 2022–2023 mega-profits into green projects. To meet climate goals, global energy investment must jump from $2.2 trillion in 2025 to $3.2 trillion in 2040, with a significant portion coming from oil and gas firms.

For investors, this opens up new opportunities. If oil majors make a genuine shift toward renewables, climate tech startups could see strong long-term growth. As energy giants diversify, energy stocks may become less dependent on oil prices, leading to potential shifts in ETF and index fund portfolios. Companies driving clean energy infrastructure, such as lithium suppliers, hydrogen pipelines, and EV charging networks, stand to gain significantly. Savvy investors may want to consider early entry into these high-potential sectors.

There are challenges though. Geopolitical instability constantly disrupts energy investment, and competition between the U.S., China, and the EU over clean energy policies further complicates things. The U.S. Inflation Reduction Act, Chinese subsidies, and Europe’s regulatory changes all impact how and where capital flows.

The financial sector isn’t helping as much as it should, either. In 2022, global banks poured $673 billion into fossil fuel projects, despite all their sustainability pledges. Many firms talk a big ESG game while still backing traditional energy. 

We stand at a crossroads. Big Oil’s interest in clean energy is promising, but its financial commitment falls far short of what’s needed. Investors must navigate a complex energy landscape where short-term fossil fuel profits still dominate, yet long-term sustainability is unavoidable. Keeping an eye on how this transition unfolds will be crucial for forward-thinking investors.