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Investment strategy
September 24, 2020
2 mins

A greener Europe offers compelling investment opportunities

September 24, 2020
2 mins
Jeffrey Sacks
Head of EMEA Investment Strategy
A wind turbine in a field
SUMMARY

Greater government focus, declining costs and increased investor awareness should drive the green economy over coming years.


Europe continues to drive the global push towards climate change reform. In February we highlighted the compelling investment opportunity surrounding the EU’s push to achieve zero net carbon emissions by 2050, through their Green Deal initiative. The European Commission have recently given further impetus to the initiative, increasing the carbon emission reduction target to 55% by 2030 (from 40%).

The €750bn EU Recovery Fund will have a green emphasis, in terms of both the focus of expenditure as well as on fundraising. Regarding the latter, the EU leaders are promising 30% of all debt raised will be through green bonds. Of the $255bn of global green issuance last year, the EU led the way with issuance of $107bn.

The green theme will grow in prominence. Even while companies within the renewable energy space may face some idiosyncratic headwinds, this should be more than offset by greater governmental focus and funding availability, declining fixed costs, increased investor awareness and rising passive fund inflows.

This shift towards a greener Europe continues to offer a compelling equity investment opportunity. Our European focused clean energy basket has delivered an annualized return of 16% since the beginning of 2017, outperforming broader Europe (0.5% annualized). Despite Covid volatility, the basket has also outperformed broader European equities by 29% year-to-date and by 17% since our initial note on February 6th figure 1.

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