Cannibalisation Effect of Renewable Energy Technology - Impact on Returns of Sustainable Investment Funds

Abstract

This thesis examines cannibalization effects of renewable energy technologies on sustainable investment fund returns through an event study analysis of 75 European funds across 50 policy events in 2022–2024. Using CAPM-based abnormal return calculations and GARCH models for risk assessment, the study investigates how policy announcements favouring specific renewable technologies affect different fund architectures: actively managed funds, ETFs, and Article 9 sustainable funds. The results reveal significant cross-technology cannibalization, with Wind/Hydro policy events generating the largest negative spillovers across all fund categories. ETFs exhibit the highest volatility and most severe negative returns (–19.44 to –38.73 basis points), while Article 9 funds demonstrate superior resilience with positive abnormal returns (6.98 basis points) and consistently higher win rates (53–100%). The analysis identifies systematic patterns where Solar investments suffer the most severe cannibalization intensity (–393% during Wind/Hydro events), while Wind/Hydro assets achieve the highest risk-adjusted cannibalization scores (+1.126). Risk analysis using 95% Value-at-Risk and Expected Shortfall metrics confirms that Wind/Hydro events constitute Max-Risk scenarios, deteriorating VaR by 17–31 basis points across fund types. These findings challenge conventional diversification assumptions within renewable energy portfolios and demonstrate that sustainability mandates (Article 9 classification) provide structural advantages in managing cannibalization effects, contributing novel insights to both sustainable finance theory and renewable energy investment strategy.