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Investors Dump Renewable Energy Funds Amid U.S. Policy Uncertainty

Uncertainty about the pace of renewable energy growth with the U.S. presidential election approaching has pushed investors to withdraw money from funds invested in renewables stocks—so much that these funds booked the biggest quarterly withdrawal ever in the first quarter of the year.

Exchange traded funds that invest in stocks of renewable energy firms saw a combined outflow of $4.8 billion during the first quarter, according to LSEG Lipper data cited by Reuters.  

On top of policy uncertainty in the U.S. energy sector with the November election, high interest rates are also curbing renewables growth and inflows into renewable energy funds.   

In recent months, a perfect storm of soaring costs, supply chain delays, rising interest rates, and low electricity prices at auctions have been hurting renewables-related companies.

For example, the S&P Global Clean Energy Index (INDEXSP: SPGTCLEN), which tracks the performance of big-name wind and solar power firms, has been down by almost 10% year to date. This compares to a 16% jump in the S&P 500 Energy Index amid a rally in oil and gas stocks so far this year.

While oil stocks are staging a rally that eclipsed the Big Tech stocks and all other 10 S&P sectors last month, major renewables companies are flagging additional pain for alternative energy players.

Earlier this year, Orsted, Siemens Energy, and Vestas – the three biggest wind power developers and turbine makers in the world – warned that last year’s challenges in the industry would continue this year and suspended dividends as they look to return to profitability and reduce costs.

It’s not only renewables funds that have suffered in recent weeks.

Global ESG funds, or funds that use environmental, social, and governance approaches, saw net quarterly outflows for the first time on record in the fourth quarter of 2023, Morningstar data showed in February.

Sustainable funds in Europe attracted inflows in Q4, but investors pulled $5 billion from U.S. sustainable funds in the last quarter of 2023, for a total of $13 billion over 2023, according to the data.

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By Tsvetana Paraskova for Oilprice.com

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