Ramping Renewables: Portfolio Perspectives?

It is often said that Oil Majors should transition to renewables and become Energy Majors. But what is the best balance based on modern portfolio theory? Our 7-page paper answers this question by constructing a mean-variance optimisation model. We find a c0-20% weighting to renewables can maximise risk-adjusted returns. 5-13% is ideal. But beyond a c35% allocation, both returns and risk-adjusted returns decline rapidly to utility-type levels.