Energy demand continues to increase but the transition of energy generation from fossil fuels to renewable does not seem to get market support. In fact there is a segment that is betting against it! How some Hedge fund managers are playing dice with our present & future?
On 7 Oct I wrote about why Electrification of everything and Electricity generation from renewable sources is the pillar of transition to Net Zero. All other industries’ transition fall in line after the top spot of ‘Energy transition’ manifests.
China is the leading beacon of light in the equation of energy transition. You can read about their progress and scale here Peaking in emissions and reducing emissions, puzzle starts with Energy Transition
Amid Europe's recent tariff barrage on China's EV sector, a tit-for-tat trade war is brewing. But does any of this bring us closer to meeting our climate goals? Not even close. I've been following the shifting pledges, commitments, and transition plans involving financial institutions, all aimed at signalling that the energy transition—anchored in renewables—is here to stay, with the backing of both old and new capital. One recurring argument from certain investors is that few technologies rival the reliability of fossil fuels, but if one exists, markets are eager to support it. Yet, there's an alarming trend: while China surges ahead in scaling solar, wind, and nuclear power, a significant chunk of global business seems intent on resisting its progress.
Here is a finding about the preferences of an investor class known for trying to conduct its business outside the glare of public scrutiny. The Hedge funds!
Despite the promises, clean energy and green technology - the hedge fund managers in the 5 trillion dollar industry is going short on these stocks. Deep-pocketed institutions are concluding that many climate investments won’t pay off as quickly, or as lucratively, as they’d hoped. Greed is overtaking all the balance of decision making.
While the tragedy of horizon lives and hence the climate and nature continues to suffer.
Despite vast green stimulus packages in the western world (read US and Europe), more hedge funds are on average net short batteries, solar, electric vehicles and hydrogen than are long those sectors; and more funds are net long fossil fuels than are shorting oil, gas and coal. Such pushback will stall our nature and climate positive progress. Why no one talks about this? and only blames politics.
Many fund managers are eager to pivot toward green tech, moving away from the "brown and black," yet they’re still waiting for that elusive inflection point. But I ask: if extreme weather events aren’t enough to break this "tragedy of the horizon," when will we wake up to the long-term vision? Or are we doomed to march down this path of madness and self-inflicted ruin simply because some can’t see beyond short-term ROI? The current rules of capitalism no longer serve us. And as the saying goes, "You can’t see the forest for the trees"—the global reluctance to embrace China's leadership in scaling renewable energy will only undermine economies and derail the NDC commitments of many nations.
The political landscape has grown increasingly hostile, painting ESG strategies as guilty by association, branding pro-climate initiatives as some "woke" or leftist agenda, and casting China’s victories in clean energy as an affront to the Global North—essentially framing them as anti-West. This short-sighted narrative is setting the stage for a catastrophic cost to be borne by both current and future generations.
Consider this: if clean energy becomes synonymous with China—a pariah that no one wants to touch—it locks us into a future where carbon capture technology is hailed as the sole solution. Meanwhile, the oil industry will continue drilling, and we, along with our governments, will be left scrambling to capture CO2 at a trickle, molecule by molecule. In this scenario, the game is already lost.
But can investors shift their mindset? Policy and politics must tackle this reluctance head-on. As the saying goes, “The road to hell is paved with good intentions”—and inaction disguised as prudence will lead us straight there.
This isn't a "GameStop" story, where speculators seek to predict market bottoms for profit. It's far more dire. In the market, people obsess over finding the lowest point to buy, but when it comes to the climate crisis, we seem blind to the absolute rock-bottom reality we’re already perched on. It’s time we see the cliff edge for what it is—before we fall off.
Read full report of analysis of data provided by Hazeltree & analysed by Bloomberg: https://www.bloomberg.com/graphics/2024-hedge-funds-climate-change-green-energy-stocks/