Is clean energy investing dead, at least for now?

by William Mathis

Less than a year after launching a hedge fund dedicated to the green energy transition, its founder says there’s currently no financial gain to be had from investing in renewable power.

“The whole sector — solar, wind, hydrogen, fuel cells — anything clean is dead for now,” said Nishant Gupta, founder and chief investment officer at London-based Kanou Capital LLP. 

Against a barrage of political headwinds in the US, a war-fueled energy crisis and stubbornly high interest rates, large parts of the clean-energy industry are stalling. In the past year, the S&P Global Clean Energy Index has lost 20%, a period during which the S&P 500 Index gained 16%. And with the Trump administration shredding climate policies in the world’s largest economy, many green investors are taking a timeout.

“The fundamentals are very poor,” said Gupta, who worked at Clean Energy Transition LLP, a hedge fund with about $2.7 billion under management, before branching out on his own last year. “I’m not talking about long term. I’m talking about where I see weakness right now.”

That weakness has been several years in the making. The post-pandemic era brought with it the first major blow to green asset values, making the strategy harder to sell. Republicans then seized on the moment, introducing bans and litigation threats against environmental and social-investing strategies.

Despite such headwinds, Gupta says the long-term need for a clean-energy transition remains. So his hedge fund, which manages about $100 million of assets, is focused on finding corners of the market where supply-demand dynamics will inevitably drive up prices.

“Energy transition–related investments are expected to increase from around $1.8 trillion per year to $5–to-$6 trillion by the end of the decade,” he said. “With roughly a third of that spending directed toward the supply chain, we’re highly focused on identifying supply-chain bottlenecks as core investment opportunities.”

Opportunities singled out by Gupta include Ingersoll Rand Inc., a North Carolina-based company that makes equipment designed to control the flow of energy such as air and gas compressors, as well as vacuum systems and pumps. 

Shares of the company, whose biggest investors include Capital Group, Vanguard Group Inc. and BlackRock Inc., gained about 80% over the past three years. The stock is down 7% this year. 

“Because electricity costs over a compressor’s lifetime can easily exceed its initial purchase price, investing in efficient equipment and continuous performance improvements can yield substantial long-term savings,” Gupta said.

Another company that the hedge fund manager likes is Legrand SA, a French maker of everything from switches to fuses and circuit breakers. Its shares are up about 12% this year. 

“When a heat pump and an EV charger are both added to a home, electricity usage can nearly triple” and “this surge in demand significantly benefits Legrand,” Gupta said. The company’s biggest investors are Sun Life Financial Inc., Massachusetts Financial Services Co. and BlackRock, according to data compiled by Bloomberg.

While Kanou has made the energy transition its overarching strategy, Gupta says he’ll only pick companies with widening margins and strong growth. In recent years, however, such performance metrics have eluded key corners of the transition economy, with traditional green stocks like Orsted A/S suffering huge setbacks.

And businesses pegging their hopes to clean-burning hydrogen have seen growth prospects disappear amid persistently high costs. 

But there also have been success stories. Siemens Energy AG saw its share price grow more than fourfold last year, buoyed in large part by the global need for grid expansion. And GE Vernova Inc., which was spun off from General Electric Co.’s energy operations last year, has since seen its share price surge more than 150%.

“Overall, the grid investment is going to increase,” Gupta said. “And the supply chain will benefit from that.”