Climate tech stocks are surviving, if not quite thriving

The climate tech stock decoupling

The economy — it’s rough. Perhaps you’ve heard? If you, like me, have been looking at your 401(k) and wondering why things have stopped going up and to the right, then allow me to show you something that may make you feel a little better.

At least some climate tech stocks are doing better than the overall Nasdaq market. There are caveats, because of course there always are. But hey, in this economy? We’re taking any bright spots where we can find them.

Climate tech stocks have had a wild but elevated ride. That’s according to the EIP Climate Tech Index, which aggregates relatively big, publicly traded players in climate tech. The index was created by Energy Impact Partners, a venture capital firm with an on-the-nose name.

• Climate tech stocks are much more volatile than the market as a whole. Many of the companies in the EIP index are smaller, which can mean more ups and downs.
• But though its components have had some steep drops, the index has still outperformed Nasdaq over the past four years. That includes during this year’s economic downturn, with a relatively notable climb in March and early April following the Russian invasion of Ukraine.

The climate tech boom is largely being driven by one big player. To paraphrase Arnold Schwarzenegger, Tesla would like to pump you up. While there are a fair number of multibillion-dollar companies in the index such as Orsted, Vestas, Chargepoint and Bloom Energy, none comes close to Elon Musk’s juggernaut.

• The great EIP Climate Tech Index decoupling happened at the start of the pandemic, right when Tesla took off like a rocket.
• It’s also followed the ebbs and flows of Tesla’s stock over the past few months as Elon has done various Elon things.
• That shows the limits of the EIP Climate Tech Index, which in many ways is just Mr. Musk’s Wild Ride Index. (I’m trademarking it, back off.)

The lack of climate tech insights is a problem. There are a growing number of companies trying to save a little corner of the world, both public and private.

• Yes, governments could be a lot more muscular in their approach to decarbonization, but right now, that’s not happening. That makes gauging how financially healthy the clean tech industry is all the more important since it’s currently the world’s main vehicle to fix the climate.
• The 2008 recession was not kind to climate tech. The industry saw an influx of cash — including after the recession hit as the U.S. leaned into a greenish recovery — and let’s just say it didn’t end super well.
• The EIP Climate Tech Index’s biggest weakness is that it only tells you what’s happening with publicly traded companies. Elsewhere, there are signs that companies working on tech that saves the planet are better positioned now than in the last bust.
• Last year saw $53.7 billion in private equity and venture capital go into clean tech, according to BloombergNEF. There have been a lot of dubious investments with so much cash sloshing around the VC ecosystem in general.
• But, Bloomberg notes, this round of funding includes “big asset managers and corporations backing solutions for the climate crisis to hit their ESG goals or out of some moral compunction.” That could give it staying power compared with the 2000s and 2010s.

Public climate tech stocks may be on a roller coaster, and there are signs the climate tech VC pipeline is softening a bit (though an analysis by Climate Tech VC found there’s “ample climate capital in the market to stay warm through a cold snap”). That feels familiar. What’s new are the other sources of capital that could keep the climate tech industry, if not living the high life, at least better off than it was during the last wave of economic uncertainty.

— Brian Kahn (email | twitter)

Big Tech's SEC comments

We hope you remembered to log your comment about the Securities and Exchange Commission’s climate rule that it proposed in March, because the time to do so has come and gone. The landmark rule would create a framework to govern how publicly traded companies report their emissions and climate pledges.

In the comment period’s waning days, a number of major tech companies sounded off with their thoughts. To spare you, dear reader, from combing through the thousands of letters, we’re pulling out the highlights of several tech giants.

Apple is “deeply supportive” of climate disclosures but said the SEC’s approach “does not go far enough.” In a letter from Apple’s global energy and environmental policy lead, Arvin Ganesan, the company stumped for a “common framework and standards” for emissions disclosures from all companies.

• The company is pushing for the SEC to “issue rules to require that companies disclose third-party-reviewed carbon emissions information to the public, covering all scopes of emissions.”
• Apple devotes an entire section of its letter to — you guessed it — Scope 3 emissions (those tied to manufacturers creating and customers using their products). While the proposed rule would only require companies to report the Scope 3 emissions considered “material” to investors, Apple “strongly believes” all Scope 3 emissions should be accounted for, despite the occasional trickiness of measuring them.

Meanwhile, Microsoft is less enthusiastic, though the company still “generally” supports the proposed regime. In its own letter penned by Vice President and Deputy General Counsel Keith Dolliver, the company pushed for certain changes to make the requirements less onerous.

• Microsoft is angling for the SEC to demand less-granular data and allow companies greater flexibility in reporting annual emissions; the company said it will be hard to get the needed data together on the timeline that the SEC proposes.
• The tech giant also asked for a yearlong delay beyond what is currently proposed for disclosing emissions, among other types of data, saying the SEC has “underestimated the amount of time” it takes to come up with the requested information.

Amazon, Meta and Alphabet did not submit new comments. But the three were among the seven major tech companies that submitted a letter a year ago in response to the SEC’s initial request for information on climate change disclosure. That letter was basically supportive and was resubmitted during the comment period.

The docket also includes meeting memos, though they are sadly short on details. We know from them that Amazon met with the SEC twice in recent weeks. SEC Chair Gary Gensler also met with GM CEO Mary Barra in late May. (The company has been particularly ambitious in its EV targets.)

Now, we wait. The SEC is now digging into the comments and could make changes to the rule. There’s no set time line for when a final rule could be published, but the Biden administration generally has made it clear that it wants to take action on climate as briskly as the regulatory process allows.

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One big number: A $6 billion solar panel promise

The solar panel market is a mess. An ill-timed Commerce Department probe has wrought uncertainty beyond the already-fraught supply chain. But a collection of developers are trying to cut through the noise and reach manufacturers with the kind of clear message that only cold, hard cash can provide: Build solar panels in the U.S., and we promise to spend at least $6 billion buying them.

The developers — AES Corp., Clearway Energy Group, Cypress Creek Renewables and D.E. Shaw Renewable Investment — even created a pact to formalize the commitment, known as the U.S. Solar Buyer Consortium, according to a scoop from The Wall Street Journal. The plan is to purchase up to 7 gigawatts of domestically made panels per year, for four years.

In theory, this attempt to lure manufacturers stateside could ease some of the reliance on solar imports from China and Southeast Asia, which are currently the subject of tariffs and the aforementioned probe. However, even with guaranteed buyers, the financial calculus is a tad tough. Experts told the Journal that given that the building blocks of solar panels (polysilicon, ingots, wafers and cells) are mostly produced in China, U.S. manufacturers will likely have to import those raw materials. That could drive up prices compared with the cheaper Chinese counterparts.

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— Brian Kahn

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