Get ready for clean energy stocks if Biden wins

One of the pillars of a Biden administration is climate policy. This has been neglected by the Trump administration, which pulled the US out of the 2016 Paris Agreement and rolled 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, which will look to spend $1.7trn in federal money over the next 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 also likely 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 vehicle 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, so far, has correctly assessed the positive sentiment in green stocks. The basket of stocks mentioned in that research note is up 44% in 2020 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 of climate change. Political capital will be mobilised 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. In the table below, you can see 28 stocks, sorted by market capitalisation, from the S&P Global Clean Energy Index, comprising of a mix of clean energy producers and clean energy technology and equipment providers.