We use our proprietary HSBC Climate Solutions Database (HCSD) and apply the quantitative framework of the HSBC Climate Radar to identify the most attractive solutions within the climate change space. We screen ten stocks each (page 17, Figure 27) from the top two best-placed themes on our HSBC Climate Radar.

Climate stocks have underperformed YTD: Driven by the weakness in clean-tech themes in the renewable and energy efficiency sector, global climate stocks have underperformed the global equity benchmark index (FTSE All World) by 1.7% in 2022 (ytd). Growth orientated Transport Efficiency, Wind and Solar are the bottom-placed climate themes with the lowest price returns in 2022, whereas more defensive themes of Food & Agriculture, as well as Bio-Energy have outperformed.

The long-term valuation measures for Energy Storage trade at considerable discount relative to historical levels, and there are also signs of improving consensus outlook towards the theme. The relative EPS revisions ratio for the theme is positive, and at 21%, the 12M forward consensus EPS growth forecast for Energy Storage relative to global climate stocks is among the highest across all climate themes in our framework.

Bio-Energy has emerged as one of the two most attractive climate themes for the third consecutive quarter in Q2 2022, and with a price return of 6% (YTD), it is in fact the 2nd best price performing climate theme so far this year. Though the recent outperformance has led to some re-rating of the Bio-energy theme, we think that there is still scope for more re-rating, as the long-term measures of investor sentiment are still close to historical average levels.