Energy Math Doesn’t Lie: ESG Backlash, Oil Reality, and the New Winners

Corporate Overview

Forget the Fed for a moment. This week, the real constraint on markets isn’t monetary policy — it’s energy math. Oil is pressing higher despite soft growth data. Utilities are tripping over transition mandates. ESG funds are bleeding assets while fossil fuel cash flows gush. And industrials caught in the middle are figuring out how to profit from both sides of the divide.

At Daly Asset Management, our ethos is simple: systematic investing, data over narratives, no hidden fees. We’re not here to cheerlead “green revolutions” or demonize oil. We’re here to follow flows, understand where policy collides with physics, and back the companies that survive that collision.

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Stock of the Week: Schneider Electric (SBGSY)

Ticker: SBGSY (ADR) | Sector: Industrials / Energy Automation | Market Cap: ~$140B | Dividend Yield: ~2%

Schneider isn’t a headline-grabbing “clean tech” darling. It’s a French industrial quietly building the backbone of the energy transition: grid automation, building efficiency, industrial electrification. While politicians scream about banning gas stoves or subsidizing EVs, Schneider is in the trenches selling the picks-and-shovels of electrification to utilities, governments, and corporates.

• Secular Tailwinds: Global capex in grid upgrades and energy efficiency is accelerating. Governments don’t want blackouts, and corporates want lower energy intensity. Schneider is the one wiring the circuits.

• Diversified Position: Unlike pure-play renewables, Schneider makes money on automation, software, and services tied to both fossil and green infrastructure. That’s resilience.

• Valuation Edge: It trades at a premium to boring industrials, but a discount to frothy U.S. clean-tech. Balanced upside.

Risks:

• A deeper global slowdown could delay utility and industrial capex.

• Political fragmentation: EU/U.S. policy shifts could alter subsidy flows.

• Competitive encroachment from Siemens, ABB, or new software entrants.

Verdict: We’re long Schneider Electric because it’s not hostage to either side of the ESG fight. It’s essential infrastructure for the energy transition — and unlike the politicians, it actually delivers.

📉 Market Snapshot (Week of Sept 15-19, 2025)

*Approximate weekly closes.

Equity markets bounced on Fed cut expectations, but the real action was in energy. Oil rose despite soft economic signals — a reminder that supply, not demand, is driving price. Bond yields drifted lower, signaling the market is still pricing in slower growth and policy easing. Crypto chopped sideways, showing it’s no macro hedge right now.

📊 Market Commentary

1. The Energy Transition Is Inflationary (Near-Term)

Transition rhetoric sells votes. Transition costs hit balance sheets. The shift to renewables means double capacity — you build new infrastructure while maintaining the old. That duplication is inflationary. Power bills in Europe, copper demand in Chile, and grid costs in the U.S. all reflect this. Investors who buy “green equals cheap” are ignoring the math.

2. ESG Funds Are Bleeding

Fund flows show it: ESG ETFs and mutuals saw outflows in Q3 as investors balked at underperformance and political heat. BlackRock and State Street are already scrubbing “ESG” from marketing. The irony? Companies still face transition mandates, but the branding game is over. For allocators, it means less crowded trades — opportunity in unloved industrials with real cash flow.

3. Commodities Pinch: Copper, Lithium, Rare Earths

Energy transition = metals bottleneck. Copper demand for EVs and grid lines is surging, lithium is volatile, and rare earth sourcing is still dominated by China. Supply expansion is slow, capex in mining is decades behind. That scarcity is bullish for producers, bearish for margin-thin manufacturers.

4. The Dual-Track Winners

The best performers aren’t the ESG purists. They’re the diversified majors and industrials hedged on both sides:

• Oil majors like Exxon and Chevron: cash machines as long as supply remains constrained.

• Industrials like Schneider and ABB: essential grid modernization.

• Mining and metals firms with friendly-jurisdiction assets.
  In short, “do less wrong” beats virtue signaling.

5. Institutional Flows: Quiet Hedging

Pensions and sovereign funds are quietly increasing exposure to commodities and infrastructure debt. They won’t call it “fossil fuel exposure” — but they’re buying pipelines, storage, and grid projects. Meanwhile, U.S. retail allocators are still overweight the Magnificent 7. That mismatch = opportunity.

6. Equities Rotation

• Growth/tech: still leading, but stretched.

• Energy: regaining leadership, quietly outperforming.

• Industrials: selectively strong, especially those tied to grid or automation.

• Utilities: under pressure from capex requirements, but long-term buys if balance sheets hold.

🧭 Tactical Map: Where to Lean In

• Long energy infrastructure (pipeline MLPs, grid modernization names).

• Select integrated majors with fat cash flows (oil at $85+ supports dividends and buybacks).

• Add industrial automation & efficiency plays (Schneider, ABB, Siemens).

• Watch copper & metals producers for medium-term scarcity upside.

• Avoid crowded ESG-only names without cash flow support.

🔍 Theme to Watch: Dual-Track Energy Strategy

The “dual-track” is simple: companies positioned across fossil and renewables are the real winners. They capture subsidies, ride oil cash flows, and hedge policy volatility. Pure plays — whether oil or solar — are too exposed. The winners are the firms threading the needle.

Think of it like portfolio construction: you don’t bet everything on one regime. These firms are diversified by design, and they’re showing the market how to profit from volatility instead of being consumed by it.

📅 Forward View: Sept 22–26, 2025

• FOMC Meeting (Sept 16–17) → Market expects 25 bp cut; the dot plot will decide whether this rally has legs.

• Durable Goods Orders (Sept 25) → Signal on industrial and energy capex.

• PMIs (Sept 24–25) → Services vs. manufacturing divergence continues.

• OPEC+ Meeting Watch → Any shift in supply targets will matter more than CPI for oil prices.

• U.S. Consumer Confidence (Sept 24) → Labor softening shows up here first.

Key Levels:

• S&P 500: Support ~6,500, Resistance ~6,750.

• WTI Crude: $85 is key support; break above $90 re-prices energy equities.

• 10Y Yield: 3.8% floor, 4.2% ceiling.

💬 Final Words

The Fed may dominate headlines, but energy math is the real constraint on global markets. ESG is out, cash flow is in. And the winners aren’t the loudest cheerleaders — they’re the firms threading the line between fossil and renewable.

At Daly AM, we don’t sell hope. We sell clarity. Systematic, data-driven, and contrarian. That’s how you navigate markets where politics and physics collide.

Disclosures: This newsletter is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Always conduct your own due diligence or consult with a financial advisor before making investment decisions.