Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Get ready for clean energy stocks if Biden wins
Peter Garnry
Chief Investment Strategist
Summary: Since our big research note on green stocks calling it a mega trend in equities the theme has been bid up by investors. Despite elevated valuations we remain positive on the long-term prospects for green stocks and believe every long-term investor should have exposure to this theme. Political capital will only increase over time and stimulate the economy in the direction of a green transition away for high carbon intensity. Biden's big clean energy plan announced this week underscores this trend and in this research note we present 28 stocks with exposure to clean energy.
According to PredictIt Joe Biden has a 15%-points lead over Donald Trump for winning the US 2020 Election in November a margin that came about as the public opinion of the current administration soured over the handling of COVID-19. But more importantly for a potential Biden administration is the fact that PredictIt also has a 58% probability that the Democratic Party will take the Senate and thus make a clean sweep during the election. In that event the US is likely headed into four years of drastic policy reforms.
One of the pillars in a Biden administration is climate policy which has been neglected by the Trump administration pulling the US out of the 2016 Paris Agreement and rolling back many of the environmental laws (Recovery Act) from the Obama years. As part of the 2020 Democratic National Convention Biden has introduced a climate policy called Clean Energy Revolution looking to spend $1.7trn in federal spending over 10 years on top of commitments from local states and the private sector. Part of the plan is to ensure the US achieves a 100% clean energy economy and net-zero emissions no later than 2050. For utilities, the goal will be 2035.
In the case of a clean sweep by the Democrats it will mean big changes to some US sectors. The oil and gas industry will lose out and financials will most likely see it difficult to ease regulation. The corporate tax cut by Trump in 2017 would most likely also be rolled back. The clear winners would be any company or industry that offers solutions to progress the US towards a 100% clean energy economy. That would mean a boost to electric vehicles manufacturers, solar, wind, waste management and recycling, water efficiency solutions, etc.
Back in early January we wrote the research note Green stocks are the next mega trend in equities which has proven so far to correctly assess the positive sentiment in green stocks. The basket of stocks mentioned in the research note is up 44% year-to-date and up 230% since January 2015 easily outperforming the global equity market.
We remain long-term positive on the ‘green transition´ as the coming years will show that the COVID-19 crisis is insignificant relative to the long-term impact from climate change. Political capital will be mobilized and the carbon economy will be fought against like the tobacco industry. Oil and gas are still important and will play a crucial role to bridge society to a cleaner energy future and our view is that oil prices will likely rise significantly from current levels as excess inventories are brought down. Investors with a long-term investment horizon should consider having exposure to clean energy stocks and the table below shows 28 stocks sorted on market capitalization from the S&P Global Clean Energy Index comprising of a mix of clean energy producers and clean energy technology and equipment providers.
| Name | Industry | Market cap (USD, mn.) | Revenue (USD, mn.) | % YTD | % 5yr |
| Vestas Wind Systems A/S | Wind Energy Equipment | 29,506 | 15,560 | 38.7 | 159.6 |
| Siemens Gamesa Renewable Energy SA | Wind Energy Equipment | 18,942 | 10,570 | 45.6 | 95.2 |
| Verbund AG | Power Generation | 18,344 | 4,173 | 0.2 | 264.2 |
| SolarEdge Technologies Inc | Solar Energy Equipment | 10,977 | 1,592 | 132.1 | 779.7 |
| Enphase Energy Inc | Solar Energy Equipment | 9,471 | 721 | 188.9 | 1418.9 |
| Xinyi Solar Holdings Ltd | Solar Energy Equipment | 9,324 | 1,247 | 64.0 | 301.5 |
| Meridian Energy Ltd | Renewable Energy Generation | 7,991 | 2,360 | -1.2 | 208.2 |
| First Solar Inc | Solar Energy Equipment | 7,885 | 3,121 | 35.5 | 51.9 |
| Xinjiang Goldwind Science & Technology Co Ltd | Wind Energy Equipment | 6,422 | 5,484 | -18.1 | -19.2 |
| Sunrun Inc | Development & Construction | 5,704 | 852 | 248.6 | 348.6 |
| Plug Power Inc | Fuel Cells & Industrial Batteries | 5,071 | 257 | 332.0 | 523.3 |
| Neoen SA | Renewable Energy Generation | 4,333 | 283 | 36.2 | N/A |
| Ormat Technologies Inc | Renewable Energy Generation | 3,145 | 730 | -16.9 | 76.9 |
| Atlantica Sustainable Infrastructure PLC | Operations & Maintenance | 3,075 | 972 | 18.4 | 90.5 |
| Cia Energetica de Minas Gerais | Electricity Networks | 3,043 | 5,551 | -37.9 | 7.9 |
| Cia Paranaense de Energia | Electricity Networks | 2,971 | 3,969 | -34.7 | 53.5 |
| Contact Energy Ltd | Power Generation | 2,966 | 1,317 | -8.9 | 64.6 |
| Innergex Renewable Energy Inc | Renewable Energy Generation | 2,962 | 424 | 35.8 | 163.7 |
| Scatec Solar ASA | Development & Construction | 2,552 | 260 | 35.9 | 306.9 |
| Boralex Inc | Renewable Energy Generation | 2,413 | 447 | 36.7 | 185.9 |
| Encavis AG | Renewable Energy Generation | 2,290 | 311 | 52.0 | 102.7 |
| Solaria Energia y Medio Ambiente SA | Renewable Energy Generation | 2,239 | 41 | 122.6 | 1772.5 |
| SunPower Corp | Solar Energy Equipment | 2,026 | 1,882 | 52.7 | -51.2 |
| Falck Renewables SpA | Renewable Energy Generation | 1,869 | 425 | 15.7 | 435.4 |
| Canadian Solar Inc | Solar Energy Equipment | 1,570 | 3,201 | 20.3 | 31.6 |
| Renewable Energy Group Inc | Biofuels | 1,480 | 2,623 | 39.8 | 312.1 |
| JinkoSolar Holding Co Ltd | Solar Energy Equipment | 1,003 | 4,654 | 0.4 | 5.4 |
| GCL-Poly Energy Holdings Ltd | Solar Energy Equipment | 927 | 2,787 | 15.3 | -77.5 |
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