Despite summer rally, clean energy funds still lagging fossil fuels

Investing

Published: August 18, 2022 3:21 am

Last Updated: August 18, 2022 11:58 am

By Mark Hulbert

(Mark Hulbert, an author and longtime investment columnist, is the founder of the Hulbert Financial Digest; his Hulbert Ratings audits investment newsletter returns.)

CHAPEL HILL, N.C. (Callaway Climate Insights) — If 2022 were a normal year, renewable energy and climate-friendly funds might be winning the performance sweepstakes. But, I need not remind you, this is not a normal year.

Consider the performance of these funds for the year to date through Aug. 15, according to an analysis Morningstar conducted for Callaway Climate Insights. These funds (both open-end and exchange-traded) outperformed the S&P 500 by an average of 4.3 percentage points. (These calculations take dividends into account.) This margin of outperformance — known as alpha — might normally convince skeptics that climate-friendly investing is not only the right thing to do but also a market-beating strategy.

Except for one thing: Fossil fuel stocks have performed far better. So far this year, stocks of traditional energy companies have produced an average alpha of more than 43 percentage points. If you were otherwise tempted to attribute clean energy funds’ alpha to avoiding the risks associated with fossil fuels, then to what do you attribute the even-larger alpha of the fossil fuel funds?…