A promising long-term investment theme, green energy benefits from long-term incentive-based political and regulatory frameworks and a favourable current economic climate.
A long-term investment
Investing in the clean energy theme involves placing your capital, over the long term, in companies that will benefit from the energy transition and the shift to a low-carbon economy. This is particularly the case for companies active in renewable energies (solar, wind, etc.) and in energy efficiency related to transport and construction (new fuels, eco-responsible building materials, etc.).
Furthermore, the budgetary and regulatory push from governments will continue to support this issue, both in Europe and in the United States. Indeed, initiatives such as Fit for 55, the Green Deal or NextGenerationEU on the old continent and the Inflation Reduction Act across the Atlantic set ambitious sustainability targets and plan to mobilise several hundred million dollars/euros to help achieve them.
Take advantage of falling rates
These companies operate in sectors that benefit from the current context of falling interest rates, which is tending to become more widespread. In fact, these companies have a high capital intensity, given the size of the investments required for their development. The reduction in their (re)financing costs should therefore be beneficial to their activity and therefore to their economic and financial performance.
In addition, this theme appears resilient in a context where economic activity is slowing down, being little dependent on economic cycles; which further reinforces its long-term appeal in a largely uncertain period on the international level.
An economically profitable sector at the heart of ESG issues
In the coming years, the fundamentals of clean energy companies are expected to improve. They are likely to benefit from a drastic drop in their production costs, particularly for renewables, as well as from reduced deployment times and accelerated storage capacities.
Furthermore, this theme becomes central when we want to invest our money in a sustainable and responsible manner, a trend that is attracting more and more institutional and private investors who want to give more meaning to their investments. In addition, there are regulatory incentives in this direction, particularly in Switzerland, where banks have been required, since January 1, 2024, to measure their clients’ appetite for ESG.
In the short term, however, this theme is not without risk, as some companies in the sector have lowered their earnings forecasts in recent months. However, the current valuation of these companies makes clean energy attractive, as their valuation multiples remain low from a historical perspective.
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