Energy efficiency stocks soar on stimulus – HSBC
London, 18 June: Energy efficiency and energy management (EEEM) companies within the HSBC Climate Change Index have strongly outperformed this year, thanks to support from government stimulus packages, according to an HSBC report released last Thursday.

HSBC’s EEEM sector, comprising 111 of the 377 stocks in the index, has returned 16% year-to-date, compared to 4.2% for the HSBC index as a whole, and 6.7% for the MSCI World global equities benchmark index. Those EEEM companies considered pure plays, i.e. that derive more than half of their revenue from climate change-related activities, posted returns of 49% year-on-year.

Joaquim de Lima, the London-based global head of quant research for equities at HSBC and co-author of the report, said that government stimulus packages, specifically from the US and China, underpinned the sector’s performance. “At a minimum, the global stimulus packages have acted as a support for the sector and at best the packages have already begun to have a material and positive impact on stock price performance,” HSBC said.

Of $350 billion set aside by governments for climate-related investments, $184 billion, 53% of the allocation, was directed towards the EEEM sector. Water, waste and pollution control received 25% and the low-carbon energy production sector received 22%. 

The EEEM sector’s success underscores the cumulative gains for climate change stocks.  HSBC said that climate-related investments had substantially outperformed global equities since January 2004, registering a 41% return against a 5% decline across global equities.

Meanwhile, pure-play climate stocks across the board outperformed both the HSBC Climate Index and global equities by 45% and 43%, respectively. “Companies that are strongly committed to tackling climate change are already seeing the most growth and are best placed to gain from stimulus packages,” de Lima said. “Climate change investing remains not only valid, but essential for growth.”

While pure-play stocks have led the way, non-pure plays have had success as well.  The HSBC said that both pure plays and non-pure plays had consistently outperformed global equities every year since 2004 with the exception of 2008. HSBC’s Climate Change Index was launched in September 2007. HSBC considers a company to be engaged in climate change activities when more than 10% of its revenue is derived from climate-related activities.