Why the Shine Has Come Off Clean-Energy Stocks
Clean-energy stocks have fallen out of favor, with pressures created by rising interest rates outweighing supportive government policies. The iShares Global Clean Energy ETF reached its lowest level since July 2020 this week. The exchange-traded fund invests in renewable-energy companies and utilities in line with a benchmark compiled by S&P Dow Jones Indices, including First Solar and Plug Power.
It has plunged 33% this year. Some stocks have fallen even harder. U.S.-listed Enphase Energy has shed 64% in 2023, while competitor SolarEdge Technologies has sunk more than 70%.
Excluding stocks that have been ejected from the S&P 500, SolarEdge ranks as the index’s worst performer this year. Supply-chain problems and waning demand have added to the challenges created by higher borrowing costs. The result: a stock-market selloff despite commitments by the U.S.
and other large economies to foster sustainable power generation. “The policy backdrop is very supportive. But there are headwinds.
Clean tech is a very interest-rate-sensitive sector," said Simon Webber, a global equities portfolio manager at Schroders. He said the industry’s long-term prospects were still good. “I think this is a low point in the cycle," Webber added.
The Biden administration’s Inflation Reduction Act of 2022 allocates close to $400 billion to clean-energy development through direct funding and tax credits. This program has attracted more than $120 billion in project proposals, according to ING. Meanwhile, the European Union is also endeavoring to build up its ability to generate homegrown energy and reduce its dependence on natural-gas imports—the EU learned a tough lesson from disrupted Russian supplies following the Ukraine invasion.
Read more on livemint.com
