(Bloomberg) — Survey results from Bloomberg’s new Markets Live Pulse show that the recent selloff in green stocks is expected to continue into 2024, marking a fourth consecutive year of losses.
Negative sentiment is predicted to impact a wider range of green asset classes, with Tesla Inc. at risk of losing its position among the top 10 stocks in the S&P 500. Over 60% of the 620 MLIV Pulse respondents plan to steer clear of the electric-vehicle sector, while 57% anticipate a further decline in the iShares Global Clean Energy exchange-traded fund.
This bleak outlook is influenced by the shock of a post-pandemic world shaped by substantially higher interest rates, as well as ongoing political pushback in several US states and evolving regulatory changes that could expose greenwashing and damage valuations.
Despite the gloomy near-term perspective for green stocks, respondents expect the need to protect portfolios from climate risk in the coming years. Green Alpha Advisors’ Garvin Jabusch sees the current selloff as a temporary shift of capital away from renewables, while others view the market downturn as a buying opportunity.
Public markets’ overreaction to interest rates and supply chain challenges have contributed to the decline in traditional ESG stocks, especially wind and solar. Clean energy companies are particularly vulnerable due to high capital intensity and disruptions in project plans caused by supply chain bottlenecks.
Tesla, whose shares surged this year but have subsequently dropped, is expected to fall out of the top 10 S&P companies. While facing challenges, the increased pace of climate change necessitates more investment in greener technologies.
Barclays Plc analysts emphasize the importance of 2024 for the implementation and renewal of decarbonization targets, with adaptation and decarbonization remaining in focus. Additionally, a majority of MLIV Pulse respondents anticipate climate change to impact portfolio values over the next three years.
Despite challenges, nearly 90% of investors acknowledge the importance of ESG metrics, highlighting the need to prioritize environmental, social, and governance goals in the investment landscape.
The survey conducted by Bloomberg’s Markets Live team, which also runs the MLIV blog, includes portfolio managers, traders, and retail investors. Overall, the prevailing sentiment in the green investing space suggests ongoing challenges but a recognition of the broader, long-term importance of ESG initiatives.