Last year saw a raft of investment into sustainable funds and climate technology, but market conditions are leading to sell-offs within the clean energy space. Investors, however, are showing confidence in green energy that they didn’t have during the last green bubble 10 years ago, reports the Wall Street Journal.
The Financial Crisis Observatory, a branch of the Swiss Federal Institute of Technology that identifies and tracks bubbles in markets, has declared the current green energy market a bubble one, predicting Tesla’s decline in November. It’s a concern for some because the last green energy bubble, dubbed Climate 1.0, was close to 2010 when a huge influx of investments into solar, wind, and rechargeable battery companies never panned out.
The major solar company at the time, A123, went public with its stock skyrocketing 50% on the first day of trading; a series of defects and lack of definable results from the company saw it bankrupting three years later. Other popular companies of the time ended up never going public, and it’s left a bad taste in investors' mouths for the last 10 years.
This time, investors have more faith in the fundamentals of Climate 2.0 and think there has been enough change in how climate change is prioritized to give the industry lasting power.
“We have seen a tectonic shift of capital,” Larry Fink, CEO of BlackRock said in an annual letter to CEOs. “Actions and ambitions toward decarbonization have also increased. This is just the beginning.”
Rising interest rate concerns are creating pressure on smaller startups, and the failure of the Build Back Better plan in Congress to be passed has removed some of the tailwinds the green energy sector was buoyed by. Despite it all, though, investments continue into sustainable and green energy funds, and with major sectors committing to green transitions, such as the automotive industry’s pivot to electric vehicles, there is foundational support for the green energy market.
“The odds of us getting 10 Teslas 10 or 15 years from now is very high,” said Gene Berdichevsky, former Tesla employee and CEO of Sila Nanotechnologies. Berdichevsky continued, saying he is “seeing $5 billion climate funds pop up like weeds.”
Investing in Clean Energy With SPDR
For investors looking to invest in inherently ESG companies, one such option is a pure play based on the clean energy sector, which has continued growth opportunities as companies seek to find more environmentally efficient ways to reduce carbon emissions and run their businesses.
The SPDR S&P Kensho Clean Power ETF (CNRG) invests in clean energy and tracks the performance of the S&P Kensho Clean Power Index.
This benchmark combines artificial intelligence with a quantitative weighting methodology to invest in global stocks that drive innovation in the clean energy sector concerning both products and services. This includes firms manufacturing technology used for renewable energy and companies that have services and products related to the generation and transmission of renewable energy and supply chain companies.
CNRG allocates 17.33% of its portfolio to electrical utilities, 15.09% to electrical components and equipment companies, 12.05% to semiconductor companies, and 9.68% to renewable electricity firms.
CNRG has an expense ratio of 0.45% and an AUM of $303.5 million.
For more news, information, and strategy, visit the ESG Channel.
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