The value of share offerings in fossil fuel companies has dropped by almost 20% since 2012, while low-carbon companies gained ground in a shift towards clean energy, a report by think-tank Carbon Tracker showed on Wednesday (31 March).
Between 2012 and 2020, investors have bought almost $640 billion of equities issued by oil, gas and coal producers, fossil fuel-dependent utilities, pipelines and service companies.
However, their investments have lost roughly $123 billion or nearly 20% in value, despite bullish equity markets during much of that period.
That contrasts with activity in clean energy. Investors bought $56 billion in equity from clean-energy companies, which has gained $77 billion in value, the report found.
“Investors have woken up to the fact that fossil fuel companies are no longer the growth stories they once were,” said Henrik Jeppesen, the report’s author and US head of investor outreach.
“Climate risk is now very much a material one that cannot be ignored, and clean energy stocks are rapidly replacing the old order as the choice investment for a transitioning world,” he added.
In 2020, clean energy initial public offerings (IPOs) overtook carbon-heavy flotations worldwide for the first time, suggesting investors are shifting finance away from coal, oil and gas, which have struggled since the beginning of the pandemic.
The biggest winner was Denmark’s Ørsted, a fossil fuel company that switched to offshore wind. Its shares rose by almost 520%, according to the report.
It analysed the stock market fortunes of fossil fuel companies and compared them with electric utilities, renewables and clean-technology companies, as well as the general equity market (the MSCI All Country World Index).
It said an investor who bought into all fossil fuel and related equity issuances from 2012-2020 would have seen their investment underperform the ACWI by 52%.
In the same period, renewables and clean technology outperformed the ACWI by almost 54% and gained $77 billion in value. Electric utilities outperformed the index by less than 1% but increased by $111 billion in value.
“Confidence is really beginning to evaporate as incumbents struggle to access historically strong flows of finance,” said Mark Campanale, founder and executive director of Carbon Tracker.
Even though equity raised by clean-energy companies has grown rapidly, it is still far off what needs to be generated to finance a global energy transition.
According to the scientists, clean-energy investments need to be $3 trillion to $5 trillion a year to keep global temperature rises to 1.5°C.
“It’s astonishing that exchanges are still listing new fossil fuel companies intent on expanding production or developing new reserves in direct contravention of the Paris temperature goals. But what this shows is that confidence is really beginning to evaporate as incumbents struggle to access historically strong flows of finance,” said Campanale.