Renewable energy funds continued their weak performance in 2024, making them the worst performers of the past year, according to the latest data from Global X.

Although inverse ETFs also managed to rank, Betashares Solar ETF (TANN), Global X Hydrogen ETF (HGEN), and VanEck Global Clean Energy ETF (CLNE) made up the bulk of the five worst performers for the year ended June 30. , reporting losses of 39.9%, 29.5% and 27.8% respectively.

However, Mark Jockum, Global X ETF product and investment strategist, emphasized that renewable energy will remain a major theme even as investor appetite changes.

"There are companies and nations that are largely aiming to reach net zero in the next few decades," Jocum told InvestorDaily.

"But what's really weighing on it, no matter how great the structural theme to renewable energy might be, is actually some of the cyclical headwinds that these companies have had to face, mainly on the downside from higher interest rates."

Jocum explained that higher interest rates and inflationary pressures continue to weigh on long-term renewable energy projects. While companies could borrow at very low interest rates just a few years ago, economic instability has led to discounting future earnings at higher interest rates.

"While we still believe renewable energy will be a theme going forward, in the short term higher interest rates and inflationary pressures have really hurt many of these companies," he said.

"Not only that, but we've also seen more broadly that interest in ESG investing has actually hit an all-time low here in Australia," Jockum said, noting that many investors are choosing to become more targeted in their distributions.

Namely, Global X is seeing a shift in investor allocation to specific areas of renewable energy, such as uranium and copper, and less to some of the other sources, such as solar, wind and broader clean energy in general.

That divergence — especially for leaders such as copper, which climbed to $5.20 a pound in May — is likely due to demand fundamentals led by strong energy transition demand, according to JP Morgan Asset Management.

Weighing in on the outlook for copper, Marcella Chow, global market strategist at JP Morgan Asset Management, previously opined in May that EVs and renewables combined with various ancillary applications, including data centers, to support the ongoing development of artificial intelligence (AI) and EV charging stations, "suggests that demand for copper for wider grid infrastructure will accelerate further over the next few years".

"There's a big divide, but I think the reason a lot of these renewable energy funds have underperformed is simply a function of people refocusing on short-term gains over long-term gains, and that's where a lot of these companies are hit harder than most," Jocum said.

"If you actually look at some of the flows ... a lot is coming out of the broader clean energy ETFs and a lot more is going into these targeted approaches because I think investors are kind of betting that some renewable energy gainers are more profitable."

Looking at the political dialogue in Australia, he highlighted that uranium remains a hot topic given Australia's potential role as a global player.

Namely, the Liberal Party has indicated it has an appetite for nuclear power, claiming it can "maximise the highest energy yield per square meter and minimize environmental damage".

Although Australia has never had a nuclear power plant, it holds 33 percent of the world's uranium deposits and is the world's third-largest producer.

For Jocum, the renewable energy investment theme is likely to continue for years to come.

He said: "This year the baton has kind of been passed to artificial intelligence and technology, but we can definitely see a resurgence of a lot of these thematic products like renewable energy because we have to get to net zero and we're not going to be able to do it one way. .

"There's going to be multiple ways to get there, whether it's hydrogen, uranium, copper, wind, and I think investors are just betting accordingly," he said.