Sustainable Future: Under the radar, above the noise

Hot Topics

Here is an update of the Hot Topics presented in our 2025 outlook.

Trump’s Clean Sweep

Trump wasted no time. On day one, he pulled the U.S. out of the Paris Agreement, declared an “energy emergency,” shut down the White House climate office, froze offshore wind leasing, and halted federal EV charging programs. As expected, it was a full reversal of the Biden administration’s climate posture. But crucially, the core of the Inflation Reduction Act (IRA), particularly the tax credits for clean electricity and domestic manufacturing, remained untouched. Executive orders cannot override legislation.

This distinction was central to our 2025 outlook, which argued that Trump’s priorities, namely energy security, jobs, and cheap power, could still align positively for certain segments of clean energy. That thesis has largely held. Technologies that are cost-competitive, locally manufactured, and essential to grid stability still fit the narrative.

The pivot began in May with the House’s budget reconciliation bill. The initial draft was surprisingly moderate. But the final House-passed version added sharp deadlines and stricter content rules, prompting fears of a cliff in clean energy deployment.

The Senate Finance Committee has now released its own draft, and the tone is markedly softer. It restores a more gradual credit phase-out, extends eligibility via the “start of construction” rule, and relaxes foreign content restrictions. Developers now have until year-end to safe harbor full tax credits, with phased reductions from 2026 onward. Financing tools like transferability remain largely intact.

The draft is now moving toward a vote in the full Senate ahead of the July 4th recess. While some amendments are still possible, we expect only limited changes. Meanwhile, tech giants like Microsoft and Google continue to push for clean energy incentives, stressing that AI and data center expansion depend on access to reliable, low-cost power.

What about China?

Year-to-date, our Chinese holdings have contributed positively to strategy performance. As noted in our 2025 outlook, China remains the cornerstone of the global energy transition. In 2024, it represented $818bn of clean energy investments, two-thirds of the worldwide increase, and about 40% of the global total.

Still, scale alone doesn't guarantee investability. In solar, structural overcapacity remains severe, with module production capacity far exceeding global demand. This continues to compress margins across the upstream segment (where we have zero exposure), but is beneficial for downstream players, as cheaper module prices make the technology more competitive.

The battery sector is also seeing price pressure, though less acute. Here, we focus on global leaders with strong pricing power, favoring those with higher exposure to the energy storage systems (ESS) segment, which is both faster-growing and higher-margin than EV batteries.

In EVs, we are equally selective. BYD is our sole holding. As a profitable market leader with scale, global reach, and a growing presence in emerging markets and Europe, it stands out in an otherwise hyper-competitive space.

Meanwhile, China’s policy support is adapting to market realities. Incentives now increasingly reward high-performance storage systems that contribute to grid stability. Power market reforms are addressing curtailment (where renewable output is wasted because it cannot be absorbed by the grid) by improving dispatch mechanisms and expanding transmission capacity. Offshore wind is set to benefit, with installations expected to more than double in 2025 (vs. 2024), supporting our exposure.

We expect the recovery in China’s cleantech sector to continue in the second half. Fiscal support for domestic demand is rising, the macro backdrop is stabilizing, and international investors are showing renewed interest. Our exposure remains focused on market leaders with pricing power, strong fundamentals, and minimal reliance on the U.S. market.

Is there still growth?

The deployment of clean technologies continues to accelerate worldwide. According to the IEA, global energy investment will reach $3.3tn in 2025, with $2.2tn going to clean energy (+10% YoY), more than double the amount for fossil fuels.

Solar and wind remain central. Global solar installations reached 548 GW in 2024 (+27% YoY). While 2025 may see a slight decline (–2%) due to a 5% drop in China after record additions, global volumes remain near historic highs. The temporary slowdown reflects a policy shift in China from fixed tariffs to market-based pricing (making returns more sensitive to wholesale prices). Outside China, growth remains strong in the U.S. and Europe (regions we’re most exposed to), supported by rising electricity demand, improving economics, and policy tailwinds.

Wind is rebounding strongly. Global installations are forecast to rise 48% in 2025 to 165 GW, led by China and a wave of delayed projects catching up in other markets.

Battery storage also continues its rapid expansion. BloombergNEF expects 90 GW of new stationary capacity in 2025, up from 69 GW last year (+30%).

Grid infrastructure is finally catching up. Global transmission and distribution capex is projected to exceed $430bn in 2025, but experts agree that figure needs to double by 2030. Our largest holdings, spanning grid hardware, software, and EPC players, are positioned to benefit directly.

Valuations remain attractive. Our strategy trades at a forward 12-month P/S of 1.8x and P/E of 23x, for a consensus 3-year earnings CAGR of 25.5%.

As earnings visibility improves and capex accelerates, we expect investors to increasingly favor companies with pricing power, margin resilience, and exposure to long-duration growth drivers.

Catalysts

• Improved U.S. policy visibility. If passed, the Senate’s more moderate IRA reform bill would preserve core clean energy incentives, remove a major policy overhang, and help restore confidence in the U.S. market.

• Accelerating power demand. The structural rise in electricity demand from AI infrastructure and data centers continues to drive long-term growth in grids, utility-scale renewables, and storage.

• Rate cuts on the horizon. A pivot toward looser monetary policy would reduce financing costs for capital-intensive clean energy projects, reenergizing deployment pipelines across the U.S. and Europe.

Risks

• Transmission bottlenecks. Despite rising clean energy deployment, slow grid buildout and interconnection delays in key regions (e.g., the U.S. wind belt or parts of Europe) remain a structural bottleneck. These delays risk stranding assets and deferring revenue recognition.

• Regulatory volatility in Europe. The European Commission’s evolving stance on trade defense instruments (e.g., tariffs on Chinese EVs or solar equipment) introduces uncertainty for global players operating in Europe, potentially impacting margin expectations and expansion.

• China macro fragility. Despite a pickup in cleantech investment, lingering concerns around China’s property sector, weak consumer confidence, and uneven industrial activity could weigh on sentiment and growth visibility in the region.