ESG-Driven Green Hydrogen Risk At The Center Of Air Products Dispute

A growing controversy over the ESG-driven capital allocation strategies of industrial gas provider Air Products illustrates the sorts of challenges so many American companies face related to the energy transition. Management at Air Products has come under fire from major investors in recent weeks due largely to the heavy, high-risk investments it has made in green hydrogen, which is classified as hydrogen manufactured in an electrolysis process using zero-carbon power generation sources only.

Major investors including D.E. Shaw & Co. and MantleMantle Ridge, LP - led by activist investor Paul Hilal - are raising concerns about a lack of succession planning for eventually replacing CEO Seifi Ghasemi, as well as the company’s decisions to invest billions of dollars in green hydrogen projects for which it lacks adequate offtake agreements with potential customers. Ghasemi has led the company since 2014 and has said he wants to remain in the job. But at age 80, he ranks among the oldest chief executives at S&P 500 companies, leading to investor concerns about the lack of a detailed succession plan.

At the center of the dispute is the NOEM Project, a major green hydrogen project based in Saudi Arabia. The development is part of a 2020 partnership formed by Air Products with Saudi Arabia’s ACWA Power Co. and the Kingdom’s planned Red Sea City. In a letter sent to the Air Products Board of Directors October 10, D.E. Shaw noted that the original projected cost of the NOEM project of $5 billion has now risen to an estimated $8.5 billion as its timeline has been extended from end-of-year 2025 to the end of 2026.