Wind and solar developers, along with other companies focused on transitioning to renewable energy, are facing undervaluation in stock markets, which is hindering their ability to raise funds. According to Sumant Sinha, CEO of ReNew Energy Global, a major player in India’s wind and solar sector, companies are not being adequately recognized for their growth and the scale they have achieved in recent years.
Sinha emphasized that public capital markets are currently unwelcoming, which he views as the primary obstacle holding back the sector globally. Data from BloombergNEF highlighted a significant drop in new equity raised by climate technology firms last year, falling from $68 billion in 2022 to $33 billion. Despite this decline, private equity firms are increasingly investing in the industry, with major moves such as Brookfield’s discussions with French Neoen for a potential acquisition and KKR’s acquisition of German Encavis.
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Sinha pointed out that ReNew Energy, a profitable company, is undervalued in the market. He noted contrasting valuations in India, where investors recognize growth potential more favorably. In contrast, ReNew Energy has experienced a more than 30% drop in its New York-listed shares since its listing three years ago, mirroring broader declines in climate tech stocks. According to the S&P Global Clean Energy Index, these stocks collectively decreased by 28% over the past year.
One of the main reasons behind these trends is the impact of high interest rates, driven by central banks’ efforts to control inflation. This has redirected investor interest towards bonds and made it increasingly challenging for wind and solar developers to secure necessary funding for expanding their operations.