It's a good time to be in the energy efficiency business, according to a new report from banking giant HSBC.

Companies in the Energy Efficiency and Energy Management category (EEEM) are performing much better than other stocks on the market, EEEM firms are also doing significantly better than other companies on HSBC's Climate Change Index.

Economic stimulus plans the world over are largely responsible for the healthy state of the energy efficiency market: Over 50 percent of all stimulus funds directed toward climate investments to date have gone to EEEM firms, which in HSBC's analysis equals about US$184 billion.
Of the four categories of companies in HSBC's Climate Change Index -- EEEM, Low Carbon Energy Production (LCEP), Water, Waste & Pollution Control (WWPC), and Finance (FIN) -- EEEM firms are leading the pack by far. In WWPC companies have landed around 25 percent of global climate-stimulus funds, or about US$86.2 billion, and businesses working in the LCEP space have taken home about 22 percent of funds, or $US75.2 billion. The financial sector has not received any stimulus funding to date.

All the funding flooding in to these firms is having an impact on their stock performance, as well. In general, EEEM companies are earning 16 percent returns year to date, while the Climate Change Index earned 4.2 percent YTD, and the global equities market as a whole earned 6.7 percent returns.

Pure-play energy efficiency companies -- those that earn more than 50 percent of revenue from climate-related activities -- were far and away the performance leaders in the report: those companies have grown 49 percent year to date.

"[P]rior to the passing of the first stimulus package in October 2008, the Energy Efficiency and Energy Management sector, global equities and most other climate-related themes and investments were all in decline," the report's authors write. "More significantly, the pure-play Energy Efficiency and Energy Management stocks were experiencing a more rapid decline than the non-pure plays."

But soon after the announcement of China's stimulus package in November 2008, these companies' stocks steadily increased in value, and continued to do so with the announcement of the U.S. stimulus package in January 2009.

In March 2009, the U.S. government released the first $8 billion in stimulus funds for weatherization and energy efficiency, and earlier this month another $256 million in funds targeted at energy efficiency, and there is likely much more to come.

The full HSBC Climate Change Index quarterly review is available for download from GreenBiz.com.

Buildings photos CC-licensed by Flickr user Joshua Davis and Wolfgang Staudt.