Renewable energy sector funds witnessed steady inflows in
the past few years, bolstered by consumers willingness to pay more for
environmentally sustainable products and services and supportive policies in
the United States and Europe.
Now, however, the dampening impact of high interest rates on
investment and uncertainty over future energy policies are challenging the
renewable energy sector.
BY THE NUMBERS
LSEG Lipper data shows funds that invest in renewable energy
stocks had an outflow of $4.8 billion in the first quarter of the year, marking
the largest quarterly withdrawal to date.
The Handelsbanken Hallbar Energi saw the biggest
first-quarter outflows of $458 million, followed by iShares Global Clean Energy
ETF and Ninety One Global Environment Fund R Acc GBP with $335 million and $226
million, respectively.
The S&P Global Clean Energy index, comprised of major
solar and wind power companies and other renewables-related businesses, is down
nearly 10% this year, while the oil and gas-heavy S&P 500 Energy Index is up 16.3%.
WHY IT'S IMPORTANT
Global renewable energy capacity is expanding at a pace well
short of what is needed to meet targets agreed at last year's COP28 climate
summit in Dubai and dwindling investor interest could hinder progress towards
achieving climate objectives.
The world's top wind power groups, Siemens Energy, Orsted
and Vestas, are forecasting a dire year for an industry buffeted by regulatory
delays, equipment problems and rising costs.
In the United States, many solar, wind and energy storage
projects have benefited from President Joe Biden's Inflation Reduction Act
passed in 2022. Now there is concern Donald Trump could undo some of the tax
breaks and pivot back to supporting fossil fuel production if he wins
November's election.
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