Green energy stocks have been belted. What comes next?

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Dismissing the sector’s long-term potential based solely on short-term underperformance would be a mistake, writes James Wright.

Despite strong narratives and the obvious long-term potential, these green stocks have significantly underperformed the broader market, leavingSince its peak at the start of 2021, the S&P Global Clean Energy Index, which tracks the performance of companies engaged in global clean energy businesses, has fallen more than 55 per cent.

However, there are other reasons which have also contributed to the weaknesses across global markets. The competitive landscape, further intensified by auction systems for wind projects across Europe, has squeezed margins, making it difficult for companies to pass on increased input costs. The extension of the Investment Tax Credit incentivised homeowners and project developers, enhancing long-term market visibility and making solar systems more attractive.

The world added 50 per cent more renewable capacity in 2023 compared to the previous year and the COP28 climate talks called for a tripling of renewable energy capacity and a doubling of energy efficiency improvements by 2030.

 

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