Green Investors Were Crushed. Now It’s Time to Make Money. - Kanebridge News
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Green Investors Were Crushed. Now It’s Time to Make Money.

The lessons have been hard, and are a reminder of the basic facts of investing

By JAMES MACKINTOSH
Wed, Dec 6, 2023 9:34amGrey Clock 3 min

Invest according to your political views, and you’re unlikely to make money. Companies that appeal to left-wingers or to right-wingers might be good or bad investments, but the fact of being, on current politics, clean and union-friendly for the left or oily and gun-friendly for the right is neither here nor there. What matters is their ability to make money and how highly they are valued.

This has been rammed home for environmentally-minded investors in the past year, as a coordinated selloff in anything with green credentials crushed the idea of making money while doing good.

It turns out that the real world is tougher than advocates of ESG—environmental, social and governance—investing claimed. The lessons have been hard, but should remind investors in the sector of some of the basic facts of investing. The fall in prices has improved the outlook for the stocks.

This year has been almost universally bad for clean investments. The two worst performers still in the S&P 500 are solar companies Enphase Energy and SolarEdge Technologies, down 60% and 70%, respectively. Hydrogen stocks have fallen sharply, led by Plug Power, which warned it might not survive. Wind-farm developers have been doing so badly they have pulled out of some contracts, with Denmark’s Ørsted off 48% in dollar terms and Florida-based NextEra Energy off 29%.

Electric cars have disappointed too, hitting startups and suppliers and pushing the price of lithium ores, used to produce the battery metal, down by three-quarters or more, although market-leader Tesla’s stock has been an exception.

Just as there was a coordinated green selloff, there has been a coordinated partial rebound in the past month or so.

This provides the first lesson: debt. The clean-energy sector is dependent on vast amounts of borrowing, so high interest rates really hurt. Roman Boner, who runs a clean-energy fund at Dutch fund manager Robeco, points out that major projects are typically financed with 80% debt, so rises in financing costs have a big impact on competitiveness.

Investors who bought into green stocks probably didn’t think they were making a leveraged bet on Treasurys, but that is what they ended up with. It isn’t only about corporate financing costs, either. High borrowing costs hit consumer demand for rooftop solar and for electric cars, both of which are often leased, since leasing costs depend on the cost of debt.

At a very high level, this is about long-term thinking. Low rates encourage investors to think long term, because they make future profits almost as valuable as current profits, and encourage borrowing to try to secure those future profits.

High rates encourage short-term thinking, by making profits today far more valuable than future profits—why bet on the future when you can earn 5% from Treasury bills? Short-term we get fossil-fuel profits, while long-term we get either clean energy or global warming; recently investors have been encouraged by rising rates to think short term.

The second lesson: government. Ronald Reagan overstated it when he said: “The nine most terrifying words in the English language are: ‘I’m from the government, and I’m here to help.’” But investors who rely on state subsidies to ensure profits leave themselves at the mercy of both fickle politicians and the bureaucrats Reagan was concerned about. This year’s selloff has been worsened by the bureaucrats and their failure to provide the details of many of the subsidies promised in last year’s badly named Inflation Reduction Act.

“We’re still hoping to get them by year end,” says Ed Lees, co-head of the environmental strategies group at BNP Paribas Asset Management. The next problem might be the politicians, at least if Donald Trump wins the presidency and torches the IRA. Lees thinks this will be hard, because so many IRA-subsidised projects are heading for Republican states. But Trump certainly has no sympathy for environmental causes.

The third lesson is the one most relevant to buying today: valuation. Buying stocks when they are trendy and wildly overpriced is a recipe for disaster. Perhaps the most extreme example of late is the L&G Hydrogen Economy ETF, launched in London at the height of clean-energy excitement in February 2021. It plummeted from day one, never regained its launch price, and is down 55% since then.

“We’ve seen a very harsh reality check,” said Sonja Laud, chief investment officer of L&G Investment Management.

The question is whether the hype has left. Laud worries that one year of high rates won’t have crushed all the excesses built up in 12 years of near-zero rates. But clearly valuations are much lower than they were, and she is hopeful there are opportunities to be found now.

“The huge green premium you had previously is no longer there,” says Velislava Dimitrova, who runs sustainable funds at Fidelity International. Clean-energy stocks are “much more interesting than they used to be—I don’t believe that renewables are dead.”

In the bond market, investors are no longer paying much if any “greenium,” or extra price for green bonds. In stocks, it is harder to judge: The S&P Global Clean Energy index trades at a discount to the global market on some measures, but not others, making it difficult to conclude that the sector as a whole is a wonderful bargain.

Still, it is good news for buyers that the hype has evaporated. Investors who care about profits more than purpose can finally consider clean-energy stocks again.



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Savvy travellers who plan their trips around dining at their destination’s most in-demand restaurants know that securing a reservation at a top Paris eatery isn’t an easy proposition on any given day.

Come the Olympics in July, when the city is flooded with tourists, one would expect the jockey sport to snag a table to be that much more intense. But that’s not necessarily shaping up to be the case. As of mid-May, Parisian insiders such as hotel managers, restaurant owners, and local luxury concierges reported that inquiries at sought-after spots were no higher than usual, foretelling a potential opportunity for visitors looking for a fine-dining experience during the games.

The time to book falls over the next few weeks given that many top spots don’t take reservations until one month before the dining date.

The Michelin-starred Jean Imbert Au Plaza Athenee and Le Relais Plaza, both at Hotel Plaza Athenee and helmed by the renowned French chef Jean Imbert, are two examples.

Francois Delahaye, the COO of the Dorchester Collection, a hospitality company that includes the Plaza Athenee and a second Paris property, Le Meurice, says that his regular guests who are visiting for the games and Parisians who frequent the restaurants know not to call too far in advance of when they want to dine.

Further, he doesn’t foresee reservations being a challenge at either venue or at Le Meurice’s two-Michelin-starred Restaurant Le Meurice Alain Ducasse.

“Booking for the restaurants won’t be an issue because people are planning meals at the last minute,” Delahaye says. “Also, the people who are in Paris specifically for the Olympics are here for the games, not to eat at restaurants. They’re not the big-spending clientele that we usually get.”

Delahaye doesn’t expect the kinds of peak crowds that descend on fine dining during Fashion Week each spring and autumn, for example, when trying to land a seat at the three eateries is nearly impossible. “People are fighting to get in,” he says. “You need to book through your hotel’s concierge, have an inside source, or be a hotel or restaurant regular.”

Several Paris luxury concierge companies echoed Delahaye’s perspective

Manuel de Croutte, the founder of Exclusive & Private, says that Paris regulars probably aren’t planning a trip when the Olympics transpire—from July 26 to Aug. 11—because they want to avoid the tourist rush. “We’ve gotten some reservation requests from people who’ve heard about us but not nearly as many as we usually get when the very wealthy travellers are here,” he says.

During peak periods like the French Open or Fashion Week, de Croutte says that his job entails making bookings for travellers who don’t have any other way to get into buzzy or Michelin-starred establishments.

“You’re unlikely to get a table at a see-and-be-seen place without knowing someone,” de Croutte says. “No one picks up the phone or answers email.” He says his team has established relationships with managers and owners of many of the hot spots in Paris and often visits them in person to land tables.

Exclusive & Private’s Black Book of Paris restaurant recommendations for Olympic visitors span a broad range, from casual bistros to fine-dining.

Michelin eateries include the three-star Le Gabriel at La Reserve, the two-star Le Clarence near the Champs-Elysee, and the two-star Le Taillevent.

Spots without a Michelin star but equally notable are also on de Croutte’s list: L’ Ami Jean offers traditional and flavourful southwestern French cuisine, Allard is a brasserie from Alain Ducasse, and Laurent serves French food to a fashionable set.

“My favourite neighbourhood for restaurants is Saint Germain de Pres,” de Croutte says. “You’ll find unassuming but chic names with excellent food and a great vibe. You can book with these places directly if you’re here for the Olympics, but don’t wait until the last minute because they will get filled.”

He also cautions that some Paris eateries are asking for nonrefundable prepayments for reservations during the Olympics.

“Be sure you want to go before committing and ask about the refund policy if you are charged,” he says.

Stephanie Boutet-Fajol, the founder of Sacrebleu Paris, says her bespoke travel company charges a lump sum of about US$750 to make all the restaurant bookings for the Olympic period, though the price varies depending on the dates and the number of restaurants that a client requests. “Reservations around the closing ceremony are harder to come by because that’s when more elite travelers are coming to Paris and want the chic restaurants that are always difficult to get a table at,” she says.

Meanwhile, chefs at some Michelin-starred restaurants share that they have tables available during the Olympics and welcome travellers to their establishments.

Thibaut Spiwack, for one, behind the Michelin-starred Anona, serving modern French cuisine, and the culinary consultant for the popular Netflix series Emily in Paris , says that he is open for reservations.

“My team and I look forward to sharing a culinary experience with new clientele that I hope will remain in their memory,” he says.

Spiwack suggests that travellers check out other worthwhile restaurants where he himself dines. For terrific wine, there’s Lava, and for Italian, he likes Epoca where the pastas are “divine.” Janine is the best bistro in town, and Prima wins for a pizza fix, he says.

“You have a lot of restaurants in Paris to pick from,” Spiwack says. “You just need to determine where you want to go, and book as soon as you can.”