Renewable Energies: Strong Gains in the Global Share Index RENIXX - All-Time High in Sight
Muenster, Germany - The global stock index for renewable energies RENIXX, which tracks the 30 largest renewable energy companies across the globe, has already more than doubled this year. Now, even the previous all-time high from 2007 is coming within reach. There are several reasons for this.
RENIXX World: Green shares benefit from political change in the EU and the USA
In 2019, the RENIXX World was already able to shine with a gain of 58 percent. This trend continued in early 2020, interrupted only by the COVID-19 lockdown in the spring. With the EU announcement of the Green Deal, the trend solidified and the price gains accelerated in the RENIXX. With the Green Deal, Europe aims to transform its energy system to become climate neutral by 2050. In addition to the expansion of wind and solar energy, the implementation of the EU hydrogen strategy with a phased plan is planned for decarbonization.
This announcement provided a sustained boost to the share prices of companies in the renewable sector and the hydrogen economy. The entire sector and the RENIXX received a further boost following the election of John Biden as the new US President. After that, the USA could also become climate neutral by 2050 and wants to return to the Paris climate agreement. "If Europe, the USA and also China jointly align their economies in the direction of decarbonization, then this is a very strong signal to the world, to climate protection and to investors," said IWR Director Dr. Norbert Allnoch in Muenster.
Low oil prices and restructuring - Shell has to depriciate billions
While the share prices of companies from the renewable energy sector have multiplied in some cases, investors from the conventional energy sector have had to accept sometimes heavy losses. For example, while the Royal Dutch Shell share was still quoted at 25 euros at the beginning of 2020, the price temporarily plummeted to 10 euros (most recently on 28.10.2020) and thus by more than half. Currently, the loss compared to the beginning of 2020 is still around 42 percent.
Above all, the low oil prices and restructuring measures are leading to burdens worth billions at Shell. In the fourth quarter alone, this impacts with 3.5 to 4.5 billion U.S. dollars, Shell announced. In 2021, Shell plans to cut costs further in its oil and gas production operations.
Decoupling: Low oil prices do not burden price development of "green" shares
For a long time, the rule held that renewable energies are only competitive when oil and gas prices are high. Accordingly, shares of renewable energy companies rose when oil prices were high and fell when oil prices were low. "The current visible decoupling between oil prices and green stock price performance is striking," Allnoch said. He added that this also shows that the cost degression in renewable energies such as wind and solar energy is having an increasingly strong effect and, secondly, that low oil prices are currently weighing heavily on the business model and profit prospects of the conventional energy industry.
"If investors want to reduce investment risk in the energy sector, they currently have no choice but to diversify and thus invest in green stocks," summarizes Allnoch. This change in direction can also be seen in concrete terms in the numerous capital increases in 2020 among the companies listed in the RENIXX. Mainly institutional investors and thus large addresses are investing in global companies in the renewable energy industry."A lot of money is currently flowing into this sector of the future, and there is currently no end in sight," says Allnoch.
Source: IWR Online, 23 Dec 2020