Clean energy funds rout and ESG capitulation

Plus, East Coast wind deals start to turn direction

In today’s edition:

— Investors threw in the towel on ESG funds last quarter. Is capitulation finally here?

— East Coast wind power developers restructure their goals

— The truckers behind the coming electrification of American highway

— Flood insurance becomes a federal issue as rain soaks the U.S.

— Vast hydrogen deposits in the Midwest attract big investors

— Atmospheric rivers are back in California

Never too early: Today is National Plan A Vacation Day. The National Park Service has a trip-planning tool here. Make your summer reservations early, no matter where the path takes you. Photo: Katmai National Park.

---

Each morning one of the first emails I get is from the Federal Emergency Management Agency (FEMA), which details all the weather and climate emergencies in the country that day and their significance. For at least the past 50 days, the emails have begun with: No significant incidents.

That’s good news for a nation battered by climate emergencies in 2023, from extreme heat to a drying Mississippi River to smoky orange skies over Manhattan. But in terms of attracting attention to climate change, much less climate investments, it’s no wonder that anti-climate opposition is on the rise. And ESG stocks are on the decline.

This played out in the brutal rout of ESG funds in the fourth quarter, where a combination of tax-loss selling, weariness of political backlash, and general unease about the future of high-profile government strategies contributed to the worst first quarter of net outflows from environmental, social and governance funds ever.

The first few weeks of January have not been much better, as once popular funds such as the Invesco Solar Index (TAN), the Kraneshares Global Carbon ETF (KRBN) and the IShares Global Energy ETF (ICLN) continue to sink, even as the S&P 500 hits a new record.

Yet despite the fading of the ESG theme, global clean energy spending leaped 17% to $1.8 trillion last year, according to BNEF. China led the way but spending in the U.S., UK and Europe rose more than 20%, the researcher said. While that is not enough, according to climate scientists, it shows the direction the spending is going, even as investors bail because of high interest, supply chain issues, and concern about what a Trump administration will do to climate strategy.

If this all feels a lot like capitulation, we agree. The ESG theme may have passed its prime, but the climate fight continues. Investors take note.

Don’t forget to contact me directly if you have suggestions or ideas at dcallaway@callawayclimateinsights.com.

Follow us . . . .

Twitter | LinkedIn | Facebook | Instagram

---

Tuesday’s subscriber-only insights

East Coast's offshore wind arena shows signs of getting its act together