Green energy stocks continue to struggle after a difficult 2021, a sharp reminder of the bumpy transition to a greener future. The renewable energy sector has been particularly hard hit by supply chain disruptions and rising raw materials costs. Key industrial metals have continued to rally sharply this year, on fears of market undersupply.
The froth has been taken out of clean energy stocks. But there remain big questions marks around the profitability of companies critical to the green energy transition, particularly during a time of rise commodity prices.
Hedge funds are shorting green energy companies: this will be a big test for investors, who may have to accept lower rates of return on some investments to meet stricter ESG mandates.
Oil majors have rallied sharply. On a total return basis, the energy sector has now outperformed the S&P 500 composite by 4.6% over the past two years, reversing its underperformance.
CO2 emissions continue to rise, and the climate continues to warm. Climate disasters are increasing in frequency and cost, pushing up the price of insurance.
Last year’s adverse weather events have directly contributed to the bull market in agricultural commodities. China is prioritising food security, and hoarding corn, wheat, and rice. This is no doubt in anticipation of the disruption climate change will continue to exert on food production over the coming decades.
