Forget Wall Street mania over chatroom stocks. The big money is flooding into ESG plays such as clean energy. Are these a bubble too? Patrick Pouyanné chief executive of French oil producer Total, thinks so. Valuations for renewable energy assets are “crazy”, he told the Financial Times.
Pouyanné may have a point. His rivals are not simply other latecomers, such as BP and Royal Dutch Shell, which are trying to elbow their way into solar and wind-power projects. Many portfolio investors in publicly listed equities are proffering capital to businesses that have been quicker and smarter than most oil majors in following a green agenda.
Wind farm developer Orsted Energy, itself once an oil producer, and biofuels refiner Neste Oil have seen their market worth and earnings multiples climb ever higher, reducing their cost of equity. Their respective forecast price to earnings ratios have doubled over the past two years. Both could easily raise equity capital to fund more investments.