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A return of fund inflows into renewable energy stocks is helping to breath new life into these companies’ shares, powering their strongest quarterly rise since the sustainability boom early this decade.<\/p>\n
After two years of bearish sentiment and relentless redemptions that made the sector a short-sellers’ hotspot, a fundamental shift in the U.S. power demand outlook and greater policy certainty are luring investors back.<\/p>\n
U.S. President Donald Trump’s “One Big Beautiful Bill” and
\nthe subsequent move to direct the U.S. Treasury to restrict tax
\ncredit rules have hit the renewables industry. But money
\nmanagers say the outcome was not as bad as many feared, and
\noffers enough certainty for investors to engage and companies to
\nresume projects.<\/p>\n
“Valuations were so disconnected from the fundamentals that
\neven confirmation of negative news became a positive catalyst,
\nsaid BlackRock portfolio manager Alastair Bishop. “It allowed
\ninvestors to start focusing on the fundamentals.”<\/p>\n
With the outlook improving, Bishop said outflows from
\nBlackRock’s active clean-energy strategies had slowed.<\/p>\n
Robeco portfolio manager Roman Boner said flows into the
\ncompany’s Smart Energy strategy had recently turned positive
\nafter sustained outflows.<\/p>\n
Lipper data shows alternative energy funds had their first
\nnet monthly inflow in June, after 25 straight months of outflows
\ntotalling around $24 billion. Investors pulled out money again
\nin July before inflows returned in August and neared $800
\nmillion in September, the largest since April 2022.<\/p>\n
Quarterly data from Morningstar shows outflows from Clean
\nEnergy\/Tech have shrunk to their lowest since the last recorded
\ninflow in Q2 2023.<\/p>\n
These green shoots coincide with double-digit gains in clean
\nenergy indices, ETFs, and a surge in individual stocks across
\nthe sector \u2014 from producers to infrastructure plays.<\/p>\n
Bloom Energy is a prime example, teaming up with Oracle
\nto deploy fuel cells at data centres. Its shares have
\nrallied 300% in four months to become the biggest weight in the
\niShares Clean Energy ETF, a jump some investors view as
\nover-exuberant.<\/p>\n
The Federal Reserve’s dovish tone has also helped.
\nCapital-intensive renewable projects benefit from lower
\nborrowing costs, though rates remain well above the ultra-low
\nlevels seen during ESG’s heyday.<\/p>\n
Private equity is also moving in, ignoring political noise
\nto focus on long-term value. Global Infrastructure Partners is
\nreportedly in talks to buy AES, potentially one of the
\nlargest deals involving a Wall Street power company.<\/p>\n
The MSCI Global Alternative Energy Index has
\nhalved since its January 2021 peak, but rose 17% in the three
\nmonths to September \u2014 its strongest quarter since end-2020 and
\nmore than double the broader market’s gain.<\/p>\n
The rally, from a record-low base, has extended into October
\nand is not purely U.S.-centric<\/p>\n
First Solar, a U.S. solar bellwether, climbed about
\n33% over this period. Portuguese renewable energy company EDP
\nRenovaveis rose 18%.<\/p>\n
Driving the rally is rising electricity demand from Big
\nTech’s rapid AI data centre build-outs, electrification of
\ntransport and industry, and the upgrading of grid infrastructure
\nto handle new loads.<\/p>\n
U.S. power consumption, stagnant for over a decade, is
\nforecast to grow sharply. With gas turbines in short supply and
\nnuclear years away, solar-plus-storage is emerging as the only
\nscalable short-term solution.<\/p>\n
“Data centres need electricity in two to three years. People
\nwill just add as much renewables as they can. It’s not only the
\ncheapest source, but also the fastest to build,” said Boner.<\/p>\n
These trends show renewable energy is morphing from a sector
\ndriven by policy and subsidies, to one shaped primarily by
\nmarket forces, where strong demand requires all forms of energy.<\/p>\n
“Every electron counts,” Boner added.<\/p>\n
Cumulative new U.S. power generation demand is seen at 450
\ngigawatts by 2030, based on data presented by renewables
\ndeveloper NextEra. Of that, only 75 GW is projected from
\ngas-fired plants, around 40 GW from deferred coal retirements,
\nand limited nuclear contributions.<\/p>\n
Jonathan Waghorn, who manages both sustainable and fossil
\nfuel funds at Guinness Asset Management, sees renewable earnings
\npicking up, noting electricity demand forecasts have surged
\neightfold in just a few years.<\/p>\n
“That’s starting to get earnings momentum into the
\ncompanies, especially those with AI, data centre, and
\ngrid-building exposure. The industry has just started to get
\ngoing again, and the market is reacting.”<\/p>\n
Waghorn’s fund holds stocks involved in electrifying the
\nenergy mix like Eaton and Legrand. He also
\nlikes European names like cable maker Prysmian and grid
\nservices company Spie.<\/p>\n
Bishop expects earnings upgrades, typically supportive of
\nprice performance, and sees room for valuations to rise.<\/p>\n
At 14.6 times forward earnings, MSCI’s Alternative Energy
\nIndex trades at a 40% discount to world stocks,
\nvs a 10-year average premium of 7.4%, based on LSEG data,
\nillustrating how the sector is currently valued well below the
\nbroader market despite historically commanding a premium.<\/p>\n
There are still risks – including higher-for-longer interest
\nrates, policy reversals, and speculative retail excitement in
\nunprofitable areas like new-generation nuclear – but some
\nmanagers say unwinding bearish bets could help sustain the
\nrally.<\/p>\n
“There are still shorts to be squeezed out of the renewable
\nspace,” said Luca Moro, CIO at SpesX, an energy transition fund.<\/p>\n","protected":false},"excerpt":{"rendered":"A return of fund inflows into renewable energy stocks is helping to breath new life into these companies’…\n","protected":false},"author":2,"featured_media":117816,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[175],"tags":[79,18,19,17,188],"class_list":{"0":"post-117815","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-business","9":"tag-eire","10":"tag-ie","11":"tag-ireland","12":"tag-markets"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/117815","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=117815"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/117815\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/117816"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=117815"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=117815"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=117815"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}