New research supports a second wind for clean energy

The transition to clean energy is one of the world’s most important global megatrends. According to Statista, clean energy is set to become the world’s main source of power by 2050. We believe clean energy continues to present a longer-term growth opportunity, yet the sector’s significance has not been reflected by the clean energy market’s performance to date.

S&P Dow Jones Indices explores this phenomenon in its latest research paper, Navigating the Clean Energy Transition: Market Dynamics and Performance Insights. The report goes through the history of the S&P Global Clean Energy Indices before doing a deep dive on the drivers behind the index’s performance from inception in January 2007 through to July 2024.

Ultimately, the paper concludes that the case for clean energy investment continues to be compelling. It notes that many of the structural, regulatory and economic challenges that previously impacted the sector are no longer relevant, including a rapid decline in oil prices, the emergence of cheap gas, and reduced investment in clean energy technologies post-GFC and in the more recent tightening cycle.

Conversely, mounting pressure on countries to achieve net-zero greenhouse gas emissions serves as a tailwind for the clean energy sector, with the paper noting that significantly higher levels of government expenditure in clean energy initiatives is expected over the next 25 years.

According to the International Energy Agency (IEA), governments are increasingly directing long-term investments toward clean energy, with over US$2 trillion allocated since 2020. In the EU, energy investments are projected to reach EU$396 billion per year from 2021 to 2030 and EU$520-575 billion per year in the subsequent decades until 2050. China has also declared its intention to peak carbon dioxide emissions by 2030 and attain carbon neutrality by 2060.

Looking forward, the paper notes that there has been a significant increase in government pledges to achieve net-zero greenhouse gas emissions, however more action is required to achieve the net-zero goal by 2050.

Notwithstanding Donald Trump’s pro-fossil fuel stance, the paper also notes that the drivers of the clean energy sector’s performance are multifaceted, with market performance, clean energy advancement, inflation, oil prices and government policy globally all having some impact on the sector’s performance. This is highlighted by the S&P Global Clean Energy Index’s performance during Trump’s first administration between 20 January 2017 and 20 January 2021, where it was up by 314%. As always, past performance is not indicative of future results.  

With targeted exposure to the largest global companies in the clean energy sector, the VanEck Global Clean Energy ETF (ASX: CLNE) provides investors with access to this megatrend and what we believe to be a long-term growth opportunity as the world transitions away from the limited capacity of fossil fuels. CLNE’s holdings comprise a diversified mix of companies focused on clean energy production, and clean energy equipment and technology businesses.

CLNE tracks the S&P Global Clean Energy Select Index, which measures the performance of 30 of the largest and most liquid companies with businesses related to clean energy production and associated technology and equipment globally, from both developed and emerging markets.

Download the Navigating the Clean Energy Transition: Market Dynamics and Performance Insights research paper here.

Key risks

An investment in our clean energy ETF carries risks associated with: ASX trading time differences, financial markets generally, individual company management, industry sectors, foreign currency, emerging markets, country or sector concentration, political, regulatory and tax risks, fund operations, liquidity and tracking an index. See the VanEck Global Clean Energy ETF PDS and TMD for more details.