Germany wants to move away from gas, oil and coal. Trillions will be needed for the green transition. But investing money in the energy transition is still not profitable at the moment.
Many German savers, who had always been skeptical of stocks in particular, said to themselves: If I invest in company shares or funds, then I invest in those promoting the energy transition. But it is precisely these clean energy funds and stocks that are weakening.
But that’s not all: Anyone who invests in lubricants, gas or mining companies is happy with the massive price increases. It is indisputable that there is no way to decarbonise the economy in the long term.
Capital market: “Fossils” much more profitable than “renewables”
So what’s going wrong in the capital market right now? Oliver Roth, head of private bank Oddo BHF’s trading at the Frankfurt Stock Exchange, explains the development as follows:
Now more than ever. After the OPEC+ oil cartel cut production, prices rose and profits rose even further. But something else resonates in Roth’s words. Companies offering “clean energy” cannot even come close to the profitability of fossil fuels.
The expectations of the “green industry” were too high
“The hope factor was huge,” analyzes Reinhard Pfingsten, chief investment strategist at Apo-Bank, which favors a sustainable investment style. This unlimited growth of renewable energy sources, combined with the “end of fossils”, has raised expectations.
What followed was a fireworks display driven by billions of dollars’ worth of climate protection programs from the EU, the US and other countries. “Renewables were doing well before,” says Pfingsten.
But setbacks came last year.
That was the crux of the matter. Demand is high, production options are limited.
Many projects turned into loss-making businesses
“Rising interest rates have particularly hurt clean energy companies,” Roth says. Because if you want to grow, you have to invest. However, recently financing costs have increased so much that many offshore operators have had to cancel some of their projects.
First, energy company Vattenfall halted its mega wind project in Great Britain. Now the world’s largest offshore operator, Orsted, had to write off $730 billion. The reason is that the projects no longer pay off. Rising interest rates, as well as delivery delays and inflation, make offshore wind turbines a losing proposition for many companies.
Capital markets: Short-term profits are more important than long-term prospects
This is fatal to the energy transition. Ultimately, offshore wind energy is expected to become the world’s most important energy source within the next few years. However, expansion targets will now slow down and capital markets have reacted exactly to this.
Economists, fund managers and even small savers may say there is no alternative to decarbonisation in the long term, but professional investors chasing high profits year after year see it completely differently.
“Many investors prefer better return prospects in the short term,” confirms Roth. True to the motto: We can always invest in “clean energy” later.
Clean energy will grow slower than expected
Pentecost, which fundamentally believes in sustainable investments, also looks at the future realistically:
A setback for “clean energy” companies. Pentecost recommends that the industry be honest. What he means by this: “Companies need to correct the assumptions they make.” He also explains:
The changing of the guard continues. This means two things for capital investments. First: Anyone who invests their money in solar companies, hydrogen experts or wind turbine operators needs to be tenacious.
Secondly, we should not immediately write off traditional companies that currently earn millions from fossil fuels. They have tremendous financial power and the ability to reinvent themselves. But they don’t see the need for it yet.
I am Ben Stock, a highly experienced professional with over 7 years of experience in the news industry. I specialize in market section writing and have published numerous high-quality articles on various topics under my name. My passion for journalism has helped me to develop an in-depth understanding of the industry, enabling me to stay up-to-date on all the latest trends and developments.