Bloated prices can be found “all over ESG,” according to Soren Aandahl, the founder and chief investment officer of Texas-based Blue Orca Capital LLC. He says he didn’t set out to target ESG but, here and now, the “great shorts just happen to be in the ESG space.”
Regulators are racing to put in place frameworks that limit ESG hype, but the process is drawn out and hampered by legal challenges in the US. Hedge funds, meanwhile, may offer a faster route to exposing greenwashing. Other shorts include Li-Cycle Holdings Corp., a battery recycling special purpose acquisition company whose market value is down about 20% this year as lithium and cobalt prices fall.
But here and now, investors are increasingly trying to figure out which companies — and in some cases whole sectors — will falter once the effect of those subsidies fades. Argonaut Capital Partners is shorting green hydrogen stocks and some wind turbine producers, while Geneva-based Anaconda Invest is short solar stocks in the US.
Even hedge funds whose strategies are dedicated to supporting renewable energy have acknowledged that some green sectors look bleak at the moment. Per Lekander, chief executive of London-based hedge fund Clean Energy Transition, says the wind turbine industry now needs “a complete reset” as investors face a “very long period with very disappointing growth.”