Mar 14, 2024 · 41m · catalyst
Climate tech’s tough year in the public markets
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In this episode of Catalyst, host Shayle Kann and Lazard portfolio manager Shanu Matthew analyze the sharp correction across public climate tech equities. They break down the macroeconomic, regulatory, and sector-specific headwinds impacting EVs, solar, and battery minerals, while highlighting an institutional flight to quality and climate-adjacent industrials.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Shayle holds 29.1% of the talking time here. How this is scored →
Shayle as informed peer 4.6 Guest teaching 5.6 Guest disagreement 1.3 Shayle pushing back 1.7
speaking balance: gold is Shayle, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 16:57 Shanu rejects host's lack-of-sophistication theory
Shanu explicitly states 'I think I would disagree' when Shayle suggests public market investors conflate executive action with congressional repeal risk.
Hardest push from Shayle ▶ 15:33 Shayle questions public investor nuance on policy mechanismsShayle presses Shanu on whether public equity markets lack the sophistication to differentiate between unilateral White House administrative actions and legislative IRA rollbacks.
Biggest teaching moment ▶ 26:40 Shanu delivers detailed lithium supply-side dataWhen Shayle argues long-term demand fundamentals are unchanged, Shanu educates with exact supply growth figures (30-40%) drastically outpacing demand (20%), explaining current surplus economics.
Shayle holds their own ▶ 5:19 Shayle explains EIP proprietary index methodologyShayle demonstrates his domain experience by outlining how his venture fund designed its own climate index to handle edge cases like NextEra and GE.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Shayle as informed peer | Guest teaching | Guest disagreement | Shayle pushing back | Why |
|---|---|---|---|---|---|---|
| Defining and Categorizing Climate Tech Equities | 6 | 5 | 1 | 2 | Shayle details how his venture firm EIP constructed its own climate tech public index and explains the difficulties of categorizing pure-play tech versus utilities like NextEra or conglomerates like GE. Shanu provides context on broader ESG and sustainability fund definitions and AUM stats. | |
| Macro Performance and Market Correction in Climate Tech | 4 | 7 | 1 | 1 | Shanu gives a comprehensive breakdown of the macro underperformance of climate indices versus the S&P 500 over a multi-year period, citing specific performance metrics and market dynamics. | |
| Analyzing the Outsized Impact of Rising Interest Rates | 5 | 6 | 1 | 2 | Shayle asks why clean energy equities are uniquely vulnerable to rising interest rates compared to the broader market. Shanu explains the mechanics of consumer debt financing and corporate capital intensity. | |
| Assessing Election Risks and Policy Uncertainty | 6 | 7 | 4 | 4 | Shayle challenges the sophistication of public market investors regarding presidential executive powers versus congressional authority under the IRA. Shanu respectfully disagrees, citing recent sell-side expert network calls and developer feedback. | |
| Sponsor Messages: Bloom Energy and Engie | 0 | 0 | 0 | 0 | Mid-roll sponsorship messages for Bloom Energy and Engie. | |
| Lithium Commodity Cycles and Battery Mineral Stocks | 6 | 6 | 2 | 3 | Shayle posits that long-term secular lithium demand remains intact. Shanu nuances this view by pointing out immediate supply overcapacity and CapEx project dynamics. | |
| Diverging Fortunes: Utility-Scale vs. Residential Solar | 5 | 7 | 1 | 1 | Shanu provides detailed market intelligence on the divergence between utility-scale solar and residential solar destocking, highlighting specific quarterly revenue declines at SolarEdge and Enphase. | |
| Capital Allocation: Flight to Quality and Climate-Adjacent Equities | 5 | 6 | 1 | 1 | Shayle asks where thematic capital is flowing given the downturn, and Shanu outlines the flight to safety in high-executing names and industrial climate-adjacent plays like HVAC and electrical equipment. | |
| Future Outlook: Navigating Near-Term Pain and Long-Term Value | 4 | 6 | 1 | 1 | Shanu outlines sell-side estimate revisions and how Wall Street is positioning for near-term challenges versus multi-year inflection points. |
Statements from this episode (14)
Matthew: Europe holds 80% of $2T global ESG fund AUM
“If you look at like a big level, you know, like Morningstar was site, like two trillion dollars AUM in ESG type funds. And then, you know, the, like a bulk of that is largely in European capital markets, like 80% of that. And then in terms of like subsectors o…”
Matthew: Only 50 to 100 US public stocks are pure-play climate tech
“If you break down that universe of what you're calling, you know, the pure climate technology or climate service companies, you might end up with a universe of, let's call it, 50 to a hundred names just using rough approximate numbers, and so that's often chal…”
Matthew: Clean energy indices lagged S&P 500 by 40-50% over two years
“So when you look at like a multi-year basis, let's call it the last two years you know, the S and P 500, which is a not climate tech
indices, but a broadly used indices to assess market performance is up 23%.
When you look at something like the MAC Global Sol…”
Matthew: Climate tech valuations suffer disproportionately from rising discount rates and debt costs
“In terms of the broader companies and their business models, oftentimes with some of these climate tech companies, you do have what we call capital intensity, meaning that you need to spend a lot of dollars at CapEx or R&D or et cetera to develop your product …”
Matthew: EV tax credits will likely face political risk if presidency switches
“You don't need to look too much beyond public commentary to see that, like, EV tax credits will likely come under concern, and so that probably impacts anyone investing in the EV value chain.”
Matthew: Global EV sales growth is slowing toward 20% in 2024
“2020 to 21, you saw like a hundred percent growth. 21, 2021 to 22, you saw a 64% growth. And this is the global growth rate for electric vehicles defined as battery electric vehicles and plug in hybrid vehicles. And then you saw 33% growth in this last year, a…”
Matthew: EV 50% penetration forecasts have slipped from 2027–2028 to 2030+
“Where, you know, maybe 12 to 18 months ago, some folks had, you know, forecast that they were, had high conviction on that you could get 50% penetration by 27, 28, are now being pushed to, you know, maybe twenty-thirty or beyond, and that's largely as a result…”
Matthew: Lithium spot prices crashed from $80,000 to around $14,000
“In the period between twenty-twenty and twenty-twenty-two, you had prices skyrocket on the back of this accelerating EV adoption curve, where lithium prices went all the way up to 80,000 dollars per metric ton. Since then, they've crashed all the way back down…”
Matthew: Top-tier lithium producers guided to negative free cash flow
“And if you look at a lot of what was said in this recent earnings season, a lot of the companies, so like a lot of the ones I just mentioned are what we'd call tier one producers. So they have the lowest cost assets in the world. So, you know, if anyone's maki…”
Matthew: 2024 lithium supply growth of 30-40% is outpacing demand
“If we look at this year, I mentioned the growth outlooks for most reasonable market forecasters is 20%. Supply for lithium again for this year is supposed to be 30 to 40%. So we have supply that's outpacing the demand increases.”
Matthew: Utility-scale solar grew 50% to 60% in 2023
“In 2023, you had a significant growth year. It was on the order of 50 to 60%. And that's from a down year in 2022.”
Matthew: SolarEdge and Enphase customers hold 6-12 months of inventory
“If you look at something like the recent earnings calls from like a solar edge or an end phase, you know, in the recent quarters, they talked about six to 12 months of inventory that are sitting around at their customers warehouses.”