After a record year in 2020, the macroeconomic context has taken a more difficult turn for the energy transition. Rising inflation and monetary tightening over the last two years have undermined the green transition.
The rise in interest rates has affected different sectors in different ways, and renewable energy projects have been particularly hard hit. This is due to their high initial costs and long-term contracts that set the selling prices before the projects were developed (which became unprofitable as prices rose). Solar and wind energy companies were among the hardest hit stocks.
This slowdown has resulted in probably the worst annual performance of the Clean Energy index since 2013. This situation has led to a significant devaluation in the P/E (Price-to-Earnings) ratio in just 3 years, from 53.5 to the current level of 15.9. Compared with the historical average of 28.2, this level represents a potentially attractive entry opportunity for investors in renewable energies.
The forthcoming fall in interest rates could stimulate many strategies focused on the transition to a green economy, particularly in the clean energy sectors, given their strong growth bias. The likely prospect of lower borrowing costs further enhances the prospects for investment in this theme.
Recent data showing inflation approaching the ECB's target, combined with hopes of a rate cut in 2024, led to a strong rebound in the performance of green themes towards the end of the year, narrowing the gap with traditional indices.
Energy transition has become a key theme in portfolios. It is one of the main priorities on the agenda of governments (Green Deal in Europe, IRA in the United States and Green Development in China) and investors (commitment to support the green transition).
For investors convinced by the potential of renewable energies, structured products enable them to take full advantage of the coming transitions, in particular by setting:
Do not hesitate to get in touch with your contact person at Renalco or contact us here. Our dedicated specialists will be happy to assess your personal needs and discuss investment solutions that would be suitable for your situation.
Source : Kepler Cheuvreux Solutions - April 2024
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