Renewables investors continue to outpace fossil fuel investors across the globe, “signalling a broader structural trend of decline for fossil fuels”, according to new analysis.
The second in a series of reports by Centre for Climate Finance & Investment at Imperial College with the International Energy Agency (IEA) has investigated the investment case for clean energy.
It examines the performance of publicly traded renewable energy and fossil fuel companies in four categories: global markets, advanced economies, emerging markets and developing economies, and China, found outperformance in all portfolios.
Across all portfolios, renewable power generated “significantly higher” total returns, of 367%, over the last 10 years compared with fossil fuels.
Annualised volatility was lower than fossil fuel portfolios in the global and advanced economies and higher than the fossil fuel portfolios in China and emerging markets and developing economies.
The report also includes a new correlation analysis, which found that the global renewable portfolio is less correlated to the broader market than the global fossil fuel portfolio and that correlation fell during the recent downturn indicating the potential for diversification benefits.
It also found renewables showed greater resilience during the pandemic.
Advanced markets renewable energy returns have outweighed fossil fuel returns by 2300% over the last decade, the report highlighted.
It also found that shares of renewable power in global energy investment has risen to nearly one fifth and renewables posted 22% higher returns in emerging markets and developing economies.
Charles Donovan, executive director of the Centre for Climate Finance & Investment at Imperial College Business School, said: “Our research demonstrates that all over the world renewable power has outperformed fossil fuels.
“It’s been the same story for more than a decade, yet total investment is still lagging. National regulators, particularly in the United States, must get to work on the reforms needed to level the playing field for clean energy investors.”