Given the deluge of climate focused companies flooding public markets, it's getting hard to keep track of who's doing what, where they're traded and how they're performing. That's why the folks at Energy Impact Partners have set up an index tracking tech companies that are focused on sustainability, energy efficiency and reducing greenhouse gas emissions.
For the past few months the firm, whose investors include some of the largest energy consumers and utilities in the world, has been working on setting up the index of representative climate tech offerings that are available on public markets and discovered one thing -- these companies are crushing returns compared to the overall market.
Since the beginning of 2020, EIP Climate Index has outperformed NASDAQ by approximately 2.8 times -- it's up 127% compared to 45% for the NASDAQ. Of the companies on the list, about 20 out of the 27 companies are new offerings that have been public less than a year and have outperformed NASDAQ during that period. About16 of them are up over 100% during that time. That's true even with the overall index down about 20 percent from its January peaks.
The index isn't actually available for public investment, it's an educational tool more than anything else, but it does show the breadth of companies working on climate-related solutions and reveals the overwhelming appetite of public market investors to back these companies.
"There’s been a really incredibly positive run in the climate tech run in the public markets and not just from SPACs," said Shayle Kann, a partner at Energy Impact Partners. "Part of our motivation for creating this climate tech index let’s see if we can put together as diverse a group of companies as possible."
Included in the EIP index are companies like Beyond Meat, which is a sustainability darling, and businesses that are a bit longer in the tooth like hydrogen fuel cell companies Ballard Power and Bloom Energy. The companies run the gamut from electric storage to renewable energy production, to vehicle charging and infrastructure to alternative protein providers.
"The idea was, how was the sector, if you include all this stuff, performing as a whole. We created this index and tried to be inclusive. It has been dramatically outperforming the market."
While the EIP list is intended to be informative, there's no reason someone couldn't take this index and turn it into an exchange traded fund for the industry. Most of the ETFs that are currently on the market are focused narrowly on energy production, or infrastructure, this index is potentially the first to track the broadly diversified world of companies focused on mitigating the impacts of climate change and reducing greenhouse gas emissions.
There are even additive manufacturers in the mix like Desktop Metal, which Kann said had a huge climate component to its technology.
"Additive manufacturing has a fairly strong climate case in reduced waste, reduced transportation, electrification of the manufacturing process," Kann said.
It's also a signal that early stage private investors can take note of too, said Kann.
"It provides a broader pathway to public markets. The companies that see their share prices run up here. What it suggests for us and for everybody else in this venture capital world is the exit pathways are improved when this index does well," he said.
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