Investors are making investments in green funds, banking on a Joe Biden presidency in the United States for a further boost to the renewable and alternative energy industry at the expense of traditional oil and gas businesses, Reuters reported.
Shares in solar and wind energy businesses, electric vehicle companies and environmental technology pioneers have been on the rise for months, widening their lead over fossil fuel rivals since the U.S. presidential election on Nov. 3.
Even without U.S. President-elect Biden’s win, investors have been positioning for governments worldwide to enact more climate-friendly legislation. The UK, for instance, announced this week that it would ban the sale of new petrol and diesel cars and vans from 2030 to cut carbon emissions.
Data from research firm Morningstar shows that investors ploughed 1.9 billion euros ($2.3 billion) into European renewable energy investment funds in the July-September period, 11 times the amount for the same months last year.
In contrast, European conventional energy funds tracked by Morningstar achieved third-quarter inflows of less than 115 million euros.
Morningstar does not track U.S. alternative energy funds, but in Europe the August-September inflows to such vehicles touched their highest in at least three years, taking AUM to a record 9.8 billion euros.
AUM at European funds investing in oil and gas, meanwhile, dwindled to 4.85 billion euros.
Investors were loading up on green energy holdings in the run-up to Biden’s victory.
Biden has pledged to tie the U.S. economic recovery to tackling climate change in a significant policy shift from Trump’s easing of regulations on fossil fuel. He has also vowed to rejoin the Paris climate accord that Trump exited.
October energy fund flow data is not yet available, but provisional numbers suggest a big swing towards funds that claim to meet environmental, social and governance (ESG) goals, though that includes investing in conventional energy companies.
Net flows into all energy funds deemed ESG-compliant topped a record $1.79 billion in October, against $871 million for traditional energy funds, according to fund tracker EPFR.
Biden’s climate plan is targeting net zero carbon emissions for the U.S. economy no later than 2050.
Guillaume Mascotto, head of ESG at American Century Investments, said the appeal of investing in renewable energy assets would continue irrespective of regulatory developments as understanding of the technology improves.
The RENIXX Renewable Energy Index, which tracks the 30 largest renewable energy companies worldwide, has more than doubled in 2020, including a 9 percent gain in November.
The S&P500 energy sector index meanwhile is down 41 percent, hurt by a slump in oil prices.
NextEra Energy, an American renewable energy company, this month briefly overtook U.S oil majors Exxon Mobil and Chevron in market capitalisation after a 28 percent rise in its shares since January.
Other strong performers include Invesco’s Solar Exchange Traded Fund, up 143 percent in 2020, and First Solar, which has registered a 46 percent gain.
Among Europe’s top-performing greener energy companies are Vestas Wind Systems and EDP. Vestas shares have risen by 72 percent this year while Spanish renewables business EDP has gained 62 percent, lifting its market value to 15 billion euros.