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Investors are piling into clean energy funds at the fastest pace in five years as the Iran war accelerates a global push for energy security and alternatives to oil and gas, boosting a slew of stocks linked to the energy transition.
More than $3bn poured into global ETFs linked to renewable energy in April, bringing their total net assets to $43bn, according to Morningstar data, the biggest monthly net inflows since January 2021.
While investors five years ago were betting on a global push into renewables in response to climate change, said Charles de Boissezon, global head of equity strategy at Société Générale, priorities are now being shaped by the conflict in the Middle East that has pushed oil prices to a four-year high.
“What may look like a renewables bounce is really an energy security trade — investors are pricing the cost of relying on imported fuels in a world that keeps springing geopolitical surprises,” de Boissezon said.
He said there was an “additional irony” in the fact that policy U-turns and uncertainty in the US that might have deterred investment in clean energy had “actually been a tailwind”.
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Oil and gas prices have soared since the US and Israel attacked Iran on February 28, with the international oil benchmark Brent crude hitting $126 a barrel last week, up from about $70 previously.
The S&P Global Clean Energy Transition index, which tracks global renewable energy-related businesses, has outperformed its sister S&P Global Oil index over the same period, after powering ahead of the oil index this month as a stalemate in negotiations ground on.
Deepa Venkateswaran, a clean energy analyst at Bernstein, said that while soaring energy prices offered a “short-term boost” to fossil fuel company revenues, “in the long run, it’s going to create demand destruction”.
For the clean energy sector, on the other hand, “it is making the case for renewables and electrification even stronger than before,” she said.
Bank of America upgraded European offshore energy giant Ørsted to overweight at the end of March, arguing that “the war in the Middle East will create impetus for fossil fuel independence in Europe, with offshore wind a key beneficiary”. The company’s share price is up 37 per cent this year so far, after it was hit last year by the Trump administration halting its US wind project.
Frankfurt-listed onshore wind turbine manufacturer Nordex has risen 67 per cent this year. Nordex’s largest shareholder, Spain’s renewable energy producer Acciona, is up 33 per cent.
Germany’s Siemens Energy — which includes wind turbine maker Siemens Gamesa and supplies gas-power equipment and grid technology — is up 50 per cent.
Successive crises since Russia’s 2022 full-scale invasion of Ukraine had sounded a “massive wake-up call” about energy autonomy, said Kasper Elmgreen, chief investment officer for equities and fixed income at Nordea Asset Management, driving flows into clean energy stocks on the back of a “multiyear capex cycle in Europe”.
“The agenda around clean tech in the past was driven by an [environmental, social and governance] agenda and a political will to tackle climate change,” Elmgreen said. “Now, in Europe, it is about sovereignty and autonomy.”
Despite the Trump administration’s opposition to renewable energy and to environmental research and regulation, clean energy funds have also benefited across the Atlantic, pushing some stocks higher.
GE Vernova — a major supplier of wind and gas turbines and of grid equipment — has led clean energy bets, with its shares up 65 per cent this year. Florida-based NextEra Energy, which builds power plants and grid infrastructure and generates most of its energy from renewables, is up 22 per cent.
In the US, analysts say, such companies are being supported less by a drive for energy autonomy or renewables than by the imperative to source energy of any kind to support the build-out of infrastructure for AI.
“In the US it is about: how do we build enough power for the AI data centres?” Elmgreen said. “It’s all hands on deck . . . they need more generation and they need to invest in the grid.”
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