INVESTORS SHARE CLIMATE BURDEN
Clean-energy companies are still finding their footing
The planet is heating up. World leaders are taking action. And making money from global warning presents its own challenge.
The United Nations climate summit kicked off Sunday afternoon, putting a number of companies developing technology to cool the planet in play Monday. But given the lack of any form of global cooperation on this complex problem or major technological breakthrough, so far the stocks have been a bust.
Shares of the 20 companies at the forefront of developing technology to address climate change, developed by Motif Investing, were down an average of 0.7% Monday despite the efforts by Microsoft co-founder Bill Gates and President Obama to address the problem. The PowerShares WilderHill Clean Energy exchange-traded fund, which is targeted at companies that are working on clean ways to produce energy, is up just 0.5% to $4.28.
The lack of a meaningful pop in shares of companies might come as a surprise to investors who see climate change as an increasingly
significant problem. Gates as well as Obama, French President François Hollande and other leaders are pushing a plan to help funnel investment to drive down the cost of clean energy at talks in Paris.
But for mainstream investors, growth and profitability of many such companies isn’t there yet. A one-day political event doesn’t change how sour investors have gotten on the industry.
The Motif Investing Climate Change portfolio is down 6.7% over the past year and 1.4% the past month. These climatechange-fighting stocks lagged the Standard & Poor’s 500’s 0.7% rise for the year and 0.1% increase the past month. More than half of the stocks in the Climate Change portfolio are down this year.
Focusing on clean energy hasn’t been much better. The PowerShares WilderHill Clean Energy exchange-traded fund, which tracks clean-energy companies, is down 19% this year.
The problem stems from the lack of returns from these companies despite the massive investments required. Take SolarCity, which sells, installs and leases solar panels on homes. Many investors figured this company was at the forefront of the future and sent its value to more than $7 billion in early 2014, says S&P Capital IQ. Despite the great story, including the involvement of Tesla founder Elon Musk, the company has lost money every year since 2012.
Meanwhile, its debt continues to pile up, soaring to more than $2 billion as of the end of the third quarter. That’s roughly double the company’s long-term debt at the end of 2014. Shares of SolarCity have lost nearly half their value the past year sending the company’s value down to less than $3 billion.
Investors are finding some spots that are working. The best performing stock in the Motif Investing Climate Change portfolio is Energy Recovery, which has seen shares rise 40% this year.
Despite its promising technologies, though, Energy Recovery hasn’t turned a net profit since 2009. FirstSolar, a leading solar module maker, has seen its shares rise 27% this year.
The company has been consistently profitable since 2013, generating a profit of $577 million in the 12 months ended in September.
Perhaps the involvement of Gates and other business leaders and politicians can make clean energy a more lucrative investment.