Analysis – As rates fall, stock pickers look to boost bad renewable energy

by Danilo Massoni

MILAN (Reuters) – Clean energy shares may be getting a much-needed recharging this year as bets on an interest rate cut have brightened their outlook after record outflows from this former ESG hot spot.

Cost overruns, supply constraints, and financing problems have plagued debt-intensive wind and solar projects, but cheap valuations are starting to attract investors looking for bargains.

One of the world’s top renewable equity funds, the iShares Global Clean Energy ETF, has lost a third of its value over the past year, while global stocks are up 16%.

“Renewables have regained valuations that are certainly more attractive, even in the medium term,” said Gilles Guibaut, head of European equity strategy at AXA Investment Partners.

Guibaut said, “We are seeing that there is growth, and now that rates have peaked, this is a segment that could be interesting. The returns will not be huge but will appear from businesses that are well managed. Are.”

Guibaut said he could supplement his existing renewables exposure “here and there” without revolutionizing the portfolio.

The big US contract award in December, which should allow Vestas Wind to disclose record quarterly intake when it releases results next week, has boosted some optimism after the project was canceled last year.

Other investors were also bullish based on the industry’s secular growth prospects and expectations of a decline in interest rates.

Speaking from Davos, Switzerland, earlier this month, the CEO of Norway’s $1.5 trillion sovereign fund told Reuters he wouldn’t be surprised to see some renewable energy valuations roll back.

Hertta Alava, strategist at Nordea in Helsinki, sees a better year for renewable shares, but said political support and faster permissions are needed to meet COP28 commitments.

“We look at investment…

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