Energy investing: exploring risk and return in the capital markets

The complexion of financial markets changed dramatically in 2020. Unprecedented economic conditions have led to deteriorating fundamentals in the energy sector. An updated look at the US portfolios over the first 4 month of 2020 shows that the renewable power companies have held up better than fossil fuel companies during 2020 of severe stress and volatility. The analysis demonstrates a superior risk/return profile for renewable power in both ordinary market conditions and a recent tail risk event. Given the apparent financial attractiveness of renewable power, why hasn’t financing via public markets taken off? The report shows risk and return are the cornerstones of investment beliefs. However, to mobilize listed equity investors toward the objective of decarbonisation, strong performance may not be sufficient. Additional measures will be required to prepare the industry for full-fledged support from global capital markets.