Over the near- and short-term periods examined, legacy energy investments outperformed green energy investments when measured against key S&P benchmarks.

Near- and Short-Term Financial Returns of Green and Legacy Energy Investments vs Key S&P Benchmarks — figure 2
Fig. 2 of 3 · Chart 2022-19 · Source: EPRINC
Near- and Short-Term Financial Returns of Green and Legacy Energy Investments vs Key S&P Benchmarks — figure 3
Fig. 3 of 3 · Chart 2022-19 · Source: EPRINC
  • As COVID-19 has abated during the last two and a half years, energy demand has rebounded. However, energy supplies, like other commodities, have struggled to keep pace. This mismatch has led to high prices for consumers regardless of the energy source.
  • During this period of recovery from COVID, oil & natural gas resource producers have shifted their investment regimen from one that emphasizes growth to one that emphasizes returns and profitability.
  • Green energy firms are emphasizing growth over prioritizing returns, even during the current period of rising interest rates, which limit and impair returns to capital.
  • The general caveat that is often repeated by financial advisers should be abided here also: past performance is not an indicator of future returns.

Key stock market benchmarks used in the charts:

  • The S&P 500 Energy Index tracks the equity market returns of 21 U.S. oil & natural gas energy producers engaged in exploration & production, refining, services, and pipeline & logistics operations; each of these entities has a minimum market capitalization greater than $14.6 billion. The Index represents approximately 2.7% of the total market capitalization of the S&P 500 Index.
  • The S&P Global Clean Energy Select Index is calibrated to measure the performance of 30 of the largest companies in global clean energy-related businesses.
  • The S&P 500 is one of the most widely known and used stock market index that tracks the performance of the largest 500 publicly-traded U.S. companies.

Large cap equities that exemplify legacy and green energy spaces:

  • Chevron is an integrated hydrocarbon energy producer operating in both Exploration & Production as well as Refining & Petrochemicals. It has a stock market capitalization of $341 billion. It is part of the S&P 500 and S&P 500 Energy Indices.
  • The BlackRock iShares Global Clean Energy ETF (ICLN) tracks the investment results of an index composed of global equities in the clean energy sector. It has a stock market capitalization of $5 billion. Its key benchmark is the S&P Global Clean Energy Select Index.

From the EPRINC Chart of the Week archive.