The overhaul of industrial policies in the United States and the European Union is establishing a solid foundation for the expansion of renewable energy value chains. Leveraging these developments and numerous other catalysts, Robeco underscores the appeal of investing in renewable energy stocks.

To begin with, the asset manager delves into the nitty gritty of carbon pricing. As per the World Bank’s data, nearly a quarter of worldwide emissions are currently subject to carbon taxes or emissions trading schemes (ETS), a substantial increase from a mere 7% a decade ago.

“Carbon prices in many regions are still too low to function as an effective deterrent. That is set to change as we approach 2030 and countries are forced to make good on their Paris-agreed pledges,” writes Diego Salvador Barrero, Equity Analyst at Robeco. 

Subsequently, Barrero points out that renewable energy has become not only cleaner but also cheaper than fossil fuels in many markets globally. According to him, technological advancements, falling component costs, and government support have made solar and wind energy cost-competitive with traditional fossil fuels. 

Additionally, the asset manager contends that despite lower production costs, renewable energy stocks have faced challenges in 2023, including higher interest rates and capital expenditure. However, Robeco believes that the US’s commitment to decarbonising the energy sector through various initiatives will provide substantial financing support, potentially exceeding $400 bn over the next decade.

“Moreover, access to more financing from REPowerEU directive and the covid-era Recovery and Resilience Facility (RFF) and the EU Innovation Fund could easily push available clean tech stimulus to well over EUR 550 bn,” informed Barrero. 

All in all, the asset manager believes that the re-shoring and friend-shoring trends are expected to bolster renewable energy markets in the EU and US, enhancing supply chain security.

“Moving forward, lower valuations create attractive entry points ahead of a renewable market reboot triggered by higher carbon costs, a tripling of renewable installations through 2030, and supportive industrial policies,” concludes Robeco. 

Read the full insight here.