One critical piece of sustainable development is renewable energy. The chart on the left shows the net additions and retirements in energy generating capacity by type. The growth in wind and solar has been particularly robust. In part, this is because, as shown on the top right chart, costs for wind and solar have come down and are more competitive with natural gas and coal.
These trends are beginning to play out in the equity markets. The bottom right chart shows the performance of the S&P 500 energy sector versus the MSCI Global Alternative Energy index. With lower demand for oil due to the pandemic, high global supply, and range-bound oil prices, many energy companies have been challenged in terms of earnings and performance. However, given the policy momentum behind clean energy and climate change mitigation, alternative energy stocks have surged.