Sustainable
What a Trump presidency means for sustainable investors
By WHEB Investment Team
Cleaner energy stocks sold off after the 2024 US election, but economics rather than policy are the main driver of new capacity.
We’ve heard a lot about the ‘Trump Trade’ since the US election in 2024. This describes the huge stock market gains experienced by various sectors in the hours and days following the result.
It paints a bleak picture: Bitcoin, defence and private prison firms all soared, while cleaner energy stocks sold off.
Is this really what we should expect for his term?
While it may seem as though the world has just become a more hostile place, we believe the future is still bright for sustainability investors.
Energy is less political than people think
The fourth item on Trump’s campaign manifesto, ‘Agenda 47’, promises to make America the dominant energy producer (by far)¹.
The first thing that springs to mind when you read this statement may be ‘Drill Baby, Drill’. Trump is certainly no ally to the climate agenda. He pulled America out of the Paris Agreement during his first term as President and has promised to do it again.
However, data show that the debate of ‘fossil fuels vs cleaner energy’ over the past three US Presidencies hasn’t been a political one at all.
Both Republican and Democrat administrations have overseen a surge in oil production and massive increases in solar energy capacity – as the charts below demonstrate. In fact, if anything, Trump’s term from 2016-2020 resulted in a massive acceleration in the deployment of solar and wind.
US crude oil production²
US Electricity Grid utility-scale capacity additions³
Market forces ‘Trump’ policy
It is true that a Harris administration would have provided a more stable and supportive policy environment for the cleaner energy sector.
However, this doesn’t mean that a Trump presidency signals doom for the climate transition. It just means that the policy environment won’t be as supportive as it might otherwise have been.
In reality, decisions about how and where to add energy capacity are made on the basis of economic factors and return on investment calculations.
And the economic reality is that onshore wind and utility scale solar are still the cheapest forms of energy you can build, as shown in the following graph.
Levelised Cost of Energy Comparison⁴
Bloomberg New Energy Finance (BNEF) recently conducted a scenario analysis which looked at the future adoption rates of clean technologies.
Their ‘Economic Transition’ scenario forecasted future penetration rates for each technology based on economic factors alone.
Their ‘Net Zero’ scenario incorporated the potential for policy support to drive penetration rates even higher.
They found that, while a supportive policy environment would accelerate the transition, it is not necessary to drive growth. Market forces alone could drive huge growth in cleaner energy technology.
Bloomberg New Energy Finance (BNEF) adoption scenarios⁵
What this means for the WHEB portfolio
Only around 4% of the WHEB portfolio is currently held directly in cleaner energy stocks. This is because they tend to be very volatile, and we don’t see the need to allocate a larger portion of our portfolio risk budget to these names.
However, we continue to hold another 25% of our portfolio in the ‘Resource Efficiency’ theme. This contains a basket of Industrial businesses that are seeking to improve the way we use energy and other resources. These companies tend to be highly correlated to the energy transition.
We are mindful that a Trump presidency may lead to a surge in American isolationism. For that reason, we are thinking carefully about our companies’ supply chains and geographic exposures, to minimize risks from potential tariffs.
However, we don’t anticipate making any major changes to our thematic allocations. We don’t see the need to retreat.
We believe the Trump Trade was driven by ‘meme stock’ euphoria. As the world grows accustomed to its new political context, we are confident that this euphoria will give way to economic reality.
¹ https://www.donaldjtrump.com/platform
² Source: https://theconversation.com/under-both-trump-and-biden-harris-us-oil-and-gas-production-surged-to-record-highs-despite-very-different-energy-goals-236859
³ Energy Information Administration (https://www.eia.gov/outlooks/steo/data/browser/#/v=23&f=A&s=&start=2012&end=2025&linechart=NGEPCGW_US&ctype=linechart&maptype=0&id=
⁴ https://www.lazard.com/research-insights/2023-levelized-cost-of-energyplus/
⁵ Bloomberg New Energy Finance (BNEF) New Energy Outlook 2024.
Risk: The WHEB Environmental Impact Fund, the WHEB Sustainable Impact Fund and the FP WHEB Sustainability Impact Fund are Equity funds. Investors should be willing and able to assume the risks of equity investing. The value of an investment and the income from it can fall as well as rise as a result of market and currency movement; you may not get back the amount originally invested. The Funds are actively managed with the MSCI World used as a comparator benchmark only.
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Disclaimer: This insight may provide information about Fund portfolios, including recent activity and performance and may contain facts relating to equity markets and our own interpretation. Any investment decision should take account of the subjectivity of the comments contained in this insight. This insight is provided for information only and all the information contained in it is believed to be reliable but may be inaccurate or incomplete; any opinions stated are honestly held at the time of writing but are not guaranteed. The contents of this insight should not therefore be relied upon. It should not be taken as a recommendation to make an investment in the Funds or to buy or sell individual securities, nor does it constitute an offer for sale.
