GREEN ASSETS are on a tear. The prices of battery metals such as lithium and cobalt have surged by about two-thirds and a third, respectively, so far this year. Copper has reached a record, partly owing to its importance for the energy transition; the price of carbon in Europe has also hit a peak.
Since the start of 2020 our portfolio, when companies are equally weighted, has more than doubled; when firms are weighted by market capitalisation, our portfolio has jumped by more than half. The reason for that difference is that many green firms are small—their median market capitalisation is about $6bn—and the tiddlers have gone up the most. The smallest 25% of the firms have risen by an average of 150% since January 2020.
The enthusiasm reflects two trends. For a start, many clean-energy firms are now more viable. The prices of some technologies have fallen dramatically, making them competitive with fossil-fuel firms. The cost of solar power has shrunk by around 80% in the past decade. That of lithium-ion batteries, which power EVs, is falling by about 20% a year. Moreover, with America, China and the EU setting “net-zero” emissions targets, investors sense that green regulation is here to stay.
The difference in valuations is explained by variations in the maturity of both the underlying technology and the market. Wind and solar firms began to expand in the 2000s, aided by generous government subsidies. Over time the technologies improved and the subsidies shrank. The sectors also consolidated; those that survived now generate stable revenues.
Investors’ enthusiasm could also wane if some of the more speculative technologies or businesses fail. The froth has already attracted short-sellers. Nathan Anderson of Hindenburg Research, an investment firm, says fraud has become “pervasive” as money has flowed into green firms. Bosses might promise more than they can deliver or exaggerate the prowess of their technology. Hindenburg claims a string of ESG superstars have misled investors.
Or, are just saying they are to protect profits!!!!
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the US dollar though...quietly dying a painful death behind all the politics headlines
thanks
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