Green energy stocks have fallen back to levels last seen five years ago ahead of an environmental, social and governance frenzy that pushed them to record highs, as uncertainty over political support for the clean energy transition away from fossil fuels depresses the market.
The S&P Global Clean Energy Transition Index, an important barometer that tracks the performance of big clean energy companies, has dropped 16 per cent over the past 12 months.
The decline outweighs a 5 per cent fall over the same period in the more oil and gas-weighted S&P Global BMI Energy (Sector) index, with several oil and gas stocks benefiting from Trump’s mantra of “drill, baby, drill”.
It also contrasts with a 14 per cent increase in the S&P Aerospace and Defense Select Industry Index, as weapons-makers rise on the prospect of higher defence spending in the EU.
Some investors believed shares would start to recover late last year as interest rates levelled off or fell and electricity prices climbed.
But US President Donald Trump’s decision to freeze Inflation Reduction Act funding for green projects and withdraw the country from the Paris climate agreement have contributed to negative sentiment. Support for measures to cut fossil fuels is also under pressure in some European markets.