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Renewable Stocks Deliver 422% Return in 10 Years, Outperform Fossils Seven-Fold

Investors’ overall returns on their renewable energy stocks have outperformed fossil fuels three-fold over the last five years and seven-fold over the last 10, coming in at 422.7% for the decade compared to just 59% for fossil shares, according to an analysis released last month by the Centre for Climate Finance and Investment (CCFI) at Imperial College Business School and the International Energy Agency.

The report found that “listed renewable power portfolios have outperformed listed fossil fuel portfolios in all markets and that the cost of capital remains lower for renewable energy companies than fossil fuel companies,” cleantech correspondent Felicia Jackson writes for Forbes. “Renewable power has a superior risk/return profile over fossil fuels both in periods of volatility and under normal conditions,” adding up to “a strong signal regarding the decline of fossil fuel investment.”

Bloomberg Green quotes the difference in financial results based on average annual rate of returns that came in at 18% for renewables and 4.7% for fossil stocks, more than a three-fold difference.

The report landed just as the International Renewable Energy Agency was calling for US$4.4 trillion per year in low-carbon energy investments to hit the decarbonization targets in the 2015 Paris Agreement, Jackson notes.

“Our research demonstrates that all over the world, renewable power has outperformed fossil fuels,” said CCFI Executive Director Dr .Charles Donovan. It’s been the same story for more than a decade, yet total investment is still lagging. National regulators, particularly in the United States, must get to work on the reforms needed to level the playing field for clean energy investors.”

“This report points to clear financial benefits from investing in clean energy transitions, an important step towards mobilizing higher levels of investment from the capital markets,” added Tim Gould, head of the IEA’s Energy Supply Outlooks and Investment Division. “But much more still needs to be done to link sources of sustainable finance with the areas of greatest need, especially in emerging markets and developing economies.”

Forbes and Bloomberg both say renewables investment is falling short of what’s needed, with many financiers still splitting their energy portfolios between renewable and fossil stocks.

“While investors have increasingly sought out environment, social and governance-friendly investments like renewables, it’s not going fast enough to limit dangerous global warming,” Bloomberg writes. “At the current pace of investment, that would see $11 trillion going to green power by 2050, and the world would still warm 3.3°C by 2100, according to BloombergNEF.”