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Is it time to back renewable energy?
by James Phillipps on Jan 22, 2014 at 12:08
Several of the key sustainable investment themes have been disaster zones in recent years, but improved technologies and government-led demand could spark a recovery in bombed-out areas like renewable energy.
Sub-sectors such as wind and solar, agribusiness, water and pollution control have been hit by a combination of weak economic growth and high costs. However, Impax Asset Management says away from the headlines, several significant drivers are combining to make the firm more bullish on the outlook for its funds than ever before.
‘It’s been a long time since the outlook for resource efficiency stocks and environmental markets has been quite as good as it is right now,’ said chief executive Ian Simm.
‘The next 12 months look promising across our investment strategies, buoyed by a broad-based cyclical recovery from the deepest downturn in living memory.
‘But there is much more at play than a cyclical pick-up. Away from the headlines, the last few years have seen the ratcheting of building regulations and energy efficiency standards and pollution limits continue to tighten.
‘And as the global economy recovers, companies exposed to these themes are seeing their earnings start to rise strongly as houses get built, cars roll off the production lines, and long-delayed infrastructure projects move forward.’
Moreover, Simm said the above-trend growth he anticipates in sub-sectors such as water treatment, pollution control and energy efficiency, is not dependent on costly government subsidies, but rather advances in technology and rapidly growing demand.
‘Even in renewable energy – the one sub-sector most assumed to rely upon government largesse and an elusive, international climate change agreement – the picture is finally starting to brighten,’ Simm said.
‘The policy uncertainty of recent years that has blighted renewables investment has fallen. Substantial consolidation has also improved equipment makers’ pricing power,’ he added.
‘But most of all, we see unsubsidised demand for renewables driving the sector’s long-term development, as the technologies involved simply get better and cheaper.’
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