Renewable energy has been one of the means of combating global warming and as such could be seen as a long-term growth prospect. The FT's Alan Livsey explains that despite this potential investment winners are hard to find.
Produced by Filip Fortuna. Filmed by Rod Fitzgerald.
Once upon a time, greed was good. Today good counts for more. A more responsible investor has appeared, looking for ethical companies less likely to do society harm. But does good necessarily offer much chance for greed?
Take the case of renewable energy, one means of combating the global buildup of greenhouse gases. Given the intractable nature of global warming, one would expect this is a long-term growth story. Well, not quite. China, the US, and the European Union have all spent pretty heavily to build up their green energy credentials. Even so, relatively few investment winners have come from this boost. Sure, some companies have done well, such as Vestas, the Danish maker of wind turbines. Its shares have more than doubled over the past three years.
Big growth in wind generation in the US and Europe has helped, and it has only begun to crack the world's largest wind market, China. Now, having said this, shares of its Chinese rival, Hong Kong-listed Xinjiang Goldwind, the world's largest turbine maker, have hardly budged over that time. Worse-- Vestas has noted that it expects much lower turbine prices there. Indeed, one of the largest wind generators, China Longyuan Power, has also been a poor investment.
Another area which should have good prospects is solar energy, as costs have fallen. A glut of solar panels, many made in China, has kept prices low for years. It's bad news for solar panel producers such as SunPower, down 78% since 2014.
And anyway, a few winners does not mean there's a lot to choose from in renewable energy. Specialised investment funds such as BlackRock New Energy or Pictet's Clean Energy have had three poor years of performance until this year. That may explain why well over half of their portfolios hold companies, at best, only tangentially involved in renewable energy.
That's understandable, says Jenny Chase at Bloomberg New Energy. She reckons there is a lot more money chasing pure-play renewable energy opportunities than there are good opportunities. Proponents might baulk at the notion of expecting quick profits from renewables. It's the thought that counts. Still, a little more green would do no harm.