By Sheryl Tian Tong Lee Look at the surface of the Earth from a satellite in space, and the legions of solar panels you see will leave you thinking the energy transition is very much underway. But look at the stock market, and you might walk away with a very different impression. Despite massive green stimulus packages in the last few years, an S&P basket of clean energy stocks has lost almost 60% of its value since a 2021 peak. That’s as the S&P 500, and another basket of oil and gas companies, gained more than 50%. During the pandemic, a combination of emergency interest-rate cuts and plunging demand for energy fanned a sudden alertness to the concept of sustainability. Money managers were keen to persuade investment clients they had products that catered to the new trend, and ESG (environmental, social and governance) investing was on a roll. But as the global economy came roaring back after the pandemic, bringing with it higher interest rates and demand for uninterrupted energy supplies, ESG started to lose its appeal. The question is: have we finally hit a bottom? In answering, my colleague Ishika Mookerjee and I were keen to look past the green marketing and instead zero in on how the most puritanical of capitalists — hedge fund managers — were handling this moment. Which green stocks are they building long positions around? And which corners of the green economy are they betting against? The challenge is accessing the right data. The $5 trillion hedge fund industry is notoriously cagey about its bets, and also subject to less stringent disclosure rules than other asset managers. We ended up crunching data on more than 500 hedge funds, which they voluntarily — albeit anonymously — shared with Hazeltree, a data compiler in the alternative investment industry. Using Hazeltree’s data, we looked into about 400 stocks across the energy transition space to understand how this money-minded group was betting on specific stocks and sectors. COP29 Reports: Click here for comprehensive coverage of this year’s climate summit. Subscribe now. As we found out, hedge fund managers think there could be more downside to come. On average, more hedge funds were net short batteries, solar, electric vehicles and hydrogen than long those sectors. And more funds were long fossil fuels than were shorting oil, gas and coal. In the short term, the upcoming US presidential election is feeding uncertainty over how much support the clean energy sector is set to get over the next few years. Beyond November’s result, investors are worried geopolitical tensions with China could result in a tariff war directly hitting green products. It’s not all doom and gloom though. Hedge fund managers pointed to a few bright spots, in wind and grid infrastructure stocks. Read our story to see which sectors and stocks they’re long and short. As Ran Zhou, chief investment officer at New York-based hedge fund Electron Capital Partners LLC, puts it: “It’s not like we just invest in ideology. We actually want to make money.” The full story with graphics detailing hedge funds’ long and short positions can be found on Bloomberg.com. |