Investing in renewable power stocks beat a fossil fuel-focused strategy by more than threefold in the last decade.
Superior returns from green power could help push investors to provide the capital necessary to scale up low-carbon power sources in the coming years, according to the analysis by the International Energy Agency and Imperial College Business School of hundreds of publicly-listed companies globally.
“Renewables are outperforming fossil fuels and they’re outperforming the broader market,” said Milica Fomicov, a researcher at Imperial College London who was previously a portfolio manager at BlackRock Inc. and JPMorgan Chase & Co.
Researchers found renewable power investments beat fossil fuels in all regions — globally, in developed economies and in emerging markets. They also found investing in green power to be less volatile in advanced markets than polluting-energy sources.
“We’re not seeing enough global investment in low-carbon power,” said Charles Donovan, executive director of the Centre for Climate Finance and Investment at Imperial College Business School. “Is it that it doesn’t make sense from a financial point of view? The answer is no. It clearly outperforms.”
A global portfolio of renewable power companies posted an annual average return of 18% in the decade to December 2020, compared with 4.7% for fossil-fuel stocks. The total return for renewables for the period was 426%, more than seven times the figure for fossil fuels.