Impacts of Trump, Harris, and Project 2025 on Investors Involved in Energy Transition
In the lead-up to the 2024 US presidential election, the clean energy market finds itself in a state of flux. The potential return of Donald Trump, who won the Republican nomination with his running mate JD Vance, has raised concerns among energy transition investors.
Trump and key Republican politicians have expressed intentions to protect the fossil fuel industry, withdraw from the Paris Agreement, and roll back clean energy policy. However, it's expected that Trump may tweak the Inflation Reduction Act (IRA) but a complete reversal is not expected, according to Robeco, a Dutch asset manager.
The bipartisan nature of the IRA and the benefits it brings to swing states and Republican states are reasons why the chance of Trump fully repealing the IRA is low, Robeco states. The IRA, a component of the green industrial plan, has led to a significant increase in business and consumer investment in clean technologies over a two-year period, according to a Rhodium Group report.
The IRA's tax credits allow investors to receive extra funding early on in the business development process, making it popular among investors. Ashley Keet argues that many clean energy projects are competitive without subsidies, with the unsubsidized levelized cost of energy for utility scale solar often cheaper than natural gas or coal in the US.
Despite the uncertainty, some companies are forging ahead with their clean energy commitments. Microsoft, for instance, has signed the largest clean energy deal in history for Brookfield to provide renewable energy to Microsoft's upcoming data centres.
Energy transition investors are in a "wait and see" mode, waiting for the outcome of the November election before committing to new investments, according to Chris Berkouwer, portfolio manager of Robeco's Sustainable Global Stars Equities fund. Berkouwer is confident that common sense will prevail over anti-ESG ideology.
Meanwhile, Democrat presidential candidate Kamala Harris currently enjoys a narrow lead in the polls, but the race is still too close to predict a winner. The uncertainty surrounding Trump's potential actions has been "priced in" to the clean energy market, which has already faced two years of severe macroeconomic challenges.
AXA IM, another asset manager, focuses on identifying companies with strong competitive positions and durable earnings growth prospects that are not overly dependent on subsidies or environmental regulation. This approach allows them to navigate the uncertain political landscape and capitalise on opportunities in the clean energy sector.
In conclusion, while the clean energy market faces uncertainty due to the upcoming US presidential election, there are signs of resilience and opportunities for growth. Investors and companies are adapting to the situation, waiting for the election outcome and preparing for various scenarios.
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