The federal government's decision to introduce a carbon tax in 2012, passed this week in the House of Representatives, and start a large investment fund for environmental technologies has done little to help clean-tech stocks.
The ACT Australian Cleantech Index, which tracks 76 Australian Securities Exchange (ASX)-listed clean-tech stocks, slumped 17.4 per cent in September as the broader share market tumbled.
Few sectors were hit as hard.
Emerging clean-tech companies surely hoped for more investor support. The planned carbon tax should benefit companies that provide clean energy, such as wind-farm developer Infigen Energy, solar installer Solco, fuel-cell developer Ceramic Fuel Cells, and wind and solar developer CBD Energy, among others.
Carbon offset providers, such as Carbon Conscious and CO2 Group, which help companies offset carbon omissions, are other potential beneficiaries, Eco Investor magazine says.
Government funding initiatives, including the $10-billion Clean Energy Finance Corporation, $3.2-billion Australian Renewable Energy Agency and $200-million Clean Technology Innovation Program, should partly solve a big problem for the sector: access to capital. More government finance, when it arrives in the next few years, could boost clean-tech sentiment.
But investors are not interested. The clean-tech sector, as defined by ACT Australian Cleantech, has badly underperformed the share market and smaller companies.
A 35 per cent fall in the ACT Cleantech Index in the 12 months to September 2011 compares to a 14 per cent fall in the S&P ASX/200 Index and 16 per cent fall in the S&P/ASX Small Ordinaries Index.
The ACT Cleantech Index is weighted for market capitalisation, meaning a poor performance from a large stock, such as Sims Metal Management, can crush performance.
The index has fallen from a high near 150 points in 2007 to 36.4 points in September.
It is now more than 10 points lower than it was at the peak of the global financial crisis. The worst-performing sub-sector in the ACT Cleantech Index in 2010/11 was solar, even though solar technologies have attracted considerable investment and market support in countries such as the United States.
Many companies in the index are yet to earn significant revenue and most are considered speculative.
Even the 20 largest ASX-listed clean-tech stocks have struggled, with the ACT CleanTech 20 Index down a whopping 47 per cent over 12 months. It includes stocks such as Sims, Transpacific Industries, Silex Systems, Energy Developments, Tox Free Solutions and Infigen Energy.
Chinese clean-tech stocks have fared much better than those in Australia. The China CleanTech Index, published by Australian CleanTech, was down 14 per cent in the 12 months to September 2011.
The CleanTech Index (CTIUS), which measures 72 global clean-tech companies, is up 14 per cent over 12 months. Australian listed clean-tech stocks are collectively underperforming, even though the long-term prospects for parts of the sector have improved after the government's initiatives to help the sector.
Contrarians might see an opportunity to buy more established, profitable clean-tech companies when the sector is making new lows.
They will need high appetite for risk: clean-tech stocks have had many false starts and mostly disappointed investors. And regulatory and investment reforms for the sector could be short-lived if political uncertainty leads to an eventual change of government.
