Hedge Funds Are Shorting Stocks That Biden’s IRA Was Meant to Help

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A number of hedge funds have started shorting renewable energy stocks, as they bet climate stimulus will tip debt-reliant green companies over the edge by fanning inflation and triggering even higher interest rates.

Renaud Saleur, chief executive officer at Geneva-based Anaconda Invest, expects the vast sums of cash being pumped into the US economy by the Inflation Reduction Act to actually make life harder in the near term for many of the companies it was supposed to help.

But investors are getting cold feet around a number of green stocks. Shares of California-based SunPower Corp. have lost about 30% since late July, partly because of anxiety about rising US interest rates. And SunPower panel supplier Maxeon Solar Technologies Ltd., which recently announced plans to build a $1.2 billion US polysilicon solar panel factory, is down by roughly half over the same period.

And according to Anaconda, it’s now clear that climate stimulus has contributed to the correction gripping the solar sector. “Solar companies have been completely inflated by the IRA, and because there weren’t a lot of liquid, good companies, people poured money into them and the valuations became far too high,” Saleur said.

Global offshore wind cumulative capacity is on track for eightfold growth by 2035, according to BloombergNEF analyst Chelsea Jean-Michel. But countries installing the technology face several obstacles, including rising costs and supply-chain bottlenecks, she said.In the meantime, clean energy firms are seeing their free cash flows turn negative, a recent analysis by BNEF shows.

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