The value of share offerings in fossil fuel producing and related companies dropped by $123 billion in the last decade underperforming a key world equities index by 52 percent, while levels of new shares issued in the sector fell sharply, a Carbon Tracker study published on Wednesday said.

This trend was in marked contrast to activity in clean energy initial public offerings (IPOs) which overtook carbon-heavy flotations worldwide for the first time last year, suggesting investors are shifting finance towards a low-carbon future as the coal, oil and gas industries have struggled.

Fossil fuel issuance fell by 85 per cent from $70 billion to $10 billion in the period analysed from 2012 to 2020, while renewables raised a record $11 billion from public equity offerings in 2020 alone.

Henrik Jeppesen, report author and US head of investor outreach, said: “Investors have woken up to the fact that fossil fuel companies are no longer the growth stories they once were. Climate risk is now very much a material one that cannot be ignored and clean energy stocks are rapidly replacing the old order as the choice investment for a transitioning world.”

A Tale of Two Share Issues: How fossil fuel equity offerings are losing investors billions found that over the decade investors have bought almost $640 billion of equity issued by fossil fuel producers, fossil fuel dependent utilities, pipelines and service companies.

But their investments have lost roughly 20 percent in value despite one of the longest and strongest equity bull markets on record.

The report analyzed the stock market fortunes of fossil fuel companies and compared them with electric utilities and renewables and cleantech companies as well as the general equity market (the MSCI All Country World Index, or ACWI, is used as benchmark).

An investor who bought into all fossil fuel and related equity issuances from 2012-2020 would have seen their investment underperform the ACWI by 52 per cent.

However, despite equity raised by clean energy companies having grown rapidly, it is still trivial in the context of what has to be generated to finance a global energy transition.

According to the IPCC special report on global warming of 1.5 degrees Celsius, investments into clean energy infrastructure need to be in the order of $3 trillion to $3.5 trillion annually.

Moreover, of the total equity raised by companies on world markets, 10 per cent was accounted for by fossil fuel producer and electric utility companies but only one percent in renewables and cleantech in the period analysed.

Nevertheless, investors in renewable energy have received a good return, according to the study, with the MSCI Global Alternative Energy index outperforming the market (ACWI) by 54 percent and with most of that return coming in 2020 — making it one of the best performing sectors of the decade.

Share issuances raised $56 billion over the period and investors have gained $77 billion in value.

Since 2016, there has been a decline in fossil fuel IPOs, where companies raise money through new share issues, and an increase in sales by existing long-term holders, for example, founders, owners and governments, that could indicate declining confidence in future prospects for the sector.

The proportion of equity issuances comprising secondary share sales surged from six percent in 2016 to 58 percent in 2020.

Mark Campanale, founder and executive director, said: “It’s astonishing that exchanges are still listing new fossil fuel companies intent on expanding production or developing new reserves in direct contravention of the Paris temperature goals. But what this shows is that confidence is really beginning to evaporate as incumbents struggle to access historically strong flows of finance.”

The report notes that while oil and gas producers were able to tap equity markets in the market collapse of 2011-14, this does not seem to have been the case in the 2020 price downturn.

From 2018-20 annual equity offerings have been less than half that of 2014-2016.