After the shock of the US election and initial negative sentiment against renewables, I have been thinking ‘Seven’. As the number seven has played a crucial role in determining market returns (Mag 7) and political outcomes (7 US battleground states), I remind myself that for many, ‘seven’ signifies wisdom, insight, and intuition – all positive attributes. Could it be that Trump 2.0 is not as bad as initially thought?
Promote renewable energy
The Inflation Reduction Act (IRA) has been a cornerstone of the Biden administration’s efforts to combat climate change and promote renewable energy. We estimate that over the past two years, a third of the $370 billion investment supported by the IRA has been allocated in subsidies to the electric car, solar and wind energy, Medicare and manufacturing credits. Interestingly, the IRA has made significant strides in supporting projects across all the fifty states, but particularly Republican states, like Texas, Michigan, and Alaska.

The economic advantages of the IRA, including job creation, economic growth, and energy cost savings, resonate with voters and State Governors across the political spectrum, with many Republicans showing strong support. With that in mind, it looks unlikely that Republican states would support a total repeal of the IRA. Also, Trump's new friendship with Elon Musk may prove critical to continuing the support for the energy transition, in particular the electric car, energy storage and solar power – all Musk’s business interests.
On balance, I am more concerned about Trump’s protectionist policies underpinned by trade wars, particularly with China. Imposing hefty tariffs on a range of goods would disrupt the global economy, cause supply chain bottlenecks, and increase input costs. These are all inflationary. On the other hand, I gain reassurance by the fact that companies in the Climate Assets Funds were key beneficiaries of Trump’s corporate tax reductions during his first Presidency. Currently, he has pledged for a corporate tax reduction from 21% to 15%, which goes straight to companies’ bottom line. As a reminder, over 60% of our Funds’ equites are set to benefit from this change.
From a long-term standpoint, the demand for electricity, driven by a push for energy efficiency and advancements in AI is set to bolster the fortunes of businesses in the renewable sector. Companies like EDP Renovaveis, a holding across our Climate Assets Funds, are leading the way in wind and solar power projects. These projects not only contribute to the energy transition but also offer highly profitable energy storage solutions, making them attractive to investors and policymakers alike.
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Climate Assets Funds
The Climate Asset Funds invests in companies that make a positive contribution to the world, with a strong underpinning of ethical values.