Some observers believe Trump’s return to power spells disaster for sustainably themed investments, citing his long-held deep dislike of wind turbines and his promise to wind back the Inflation Reduction Act. 

Such concerns may appear valid after a flurry of activity in his first months back in office and a sweeping array of executive orders directed towards promoting fossil fuel energy and cutting government support for sustainable technologies.

But, in Nanuk’s view, it is a misnomer that Trump’s policies will halt the long-term growth of [sustainability] transition-aligned industries. 

While his actions, and no doubt others still to come, may slow some industries in the US and create ongoing uncertainty there and around the world, the factors inevitably driving the global economy to become more efficient and sustainable are not going away. And while the headlines [around clean energy] are largely negative, his policy agenda could potentially benefit many sustainable technologies. 

Nanuk believes that, counterintuitively, the impact of short-term uncertainty on investment markets has potentially improved the investment outlook in many of the areas that Trump seeks to undermine.

In Nanuk’s view, investing in sustainable technologies at the beginning of Trump’s first term delivered good investment outcomes over the subsequent four years – it is possible that this could occur again.
 

Confidence in clean-tech suffers, but the transition continues

As Trump embarks on his second term, many industries face a period of heightened uncertainty, particularly those he has singled out as part of what he describes as the “Green New Scam”. 

Trump and his administration’s early actions, from halting subsidies for electric vehicles (EVs) to enacting emergency powers to aid domestic fossil fuel extraction, have understandably shaken investor confidence in clean-tech – not to mention his radical approach to shifting US trade balances. 

His further desire to reverse both recent and long-standing federal legislation to remove policy support and incentives only serves to exacerbate that.

There is no doubt that some of his actions may have their intended effect. Revoking the federal tax credit for electric vehicle purchases is expected to reduce sales in the US and potentially slow industry growth in coming years. 

However, in Nanuk’s view, EV sales in the US will increase significantly through the remainder of this decade and beyond as the technology matures and becomes more competitive. Even if the US EV market contracts, it comprises only 15% of the global market, and growth in other countries is likely to see the global market continue to expand [1]. 

Similarly, in Nanuk’s view, efforts to hinder or halt development of renewable energy will have a significant impact in the US, particularly for the offshore wind industry. 

However, the need to add generating capacity to meet growing electricity demand and the fact that in many cases renewables (solar in particular) are the cheapest and most quickly deployable solution, suggest that ongoing investment in these industries is expected to continue in the US. 

As is the case for EVs, the US represents only a small part of annual global demand for solar and wind installation. 

Nanuk’s view is that for companies serving these markets, the impacts may be material, but in many cases are not as significant as recent share price reactions might suggest.
 

Winners and losers in the energy transition

While Trump’s policies will slow the momentum of some transition-aligned industries, they may also create opportunities in others. Trump’s initial executive actions signal strong support for energy infrastructure, nuclear energy, hydropower, and geothermal energy, as well as rebuilding domestic manufacturing and technology leadership. A deeper analysis reveals potential beneficiaries as well as industries facing setbacks. These include:

1. Energy infrastructure

The strength of Trump’s intent to support the fossil fuel industry is evident in his declaration of an Energy Emergency and executive orders promoting domestic energy production. The powers he has enacted may enable fast tracking of permitting and the bypassing of environmental approvals. Increasing private investment in drilling, however, is contingent on oil prices, though broader policy support and eased permitting could stimulate investment in electricity infrastructure and grid modernisation.
 

2. Low carbon energy

Trump has paused permitting for the development of wind and solar on Federal land and cancelled offshore wind projects, but he has indicated support for investment in clean technologies such as nuclear, geothermal, and hydropower. It is also possible that large-scale solar development could continue to benefit from the need to increase energy supply, even with reduced federal support.
 

3. Industrial automation & onshoring

Trump’s emphasis on revitalising US manufacturing and his support for developing advanced semiconductor manufacturing in the US may potentially benefit companies offering automation and process efficiency solutions.
 

4. Biofuels and sustainable aviation fuel

Despite favouring fossil fuels, Trump has voiced support for biofuels, including ethanol, renewable diesel, and sustainable aviation fuel – potentially creating opportunities for US-based producers.
 

Navigating Market Volatility

Market reactions to Trump’s election and subsequent policy developments have been dramatic, particularly in the clean tech sector. 

Clean tech stocks underperformed in the fourth quarter following Trump’s election victory, with the S&P Global Clean Energy Transition Index falling 18% in Q4 2024 and 27% over the year.

After several years of arguably inflated valuations, in Nanuk’s view, prices for clean technology companies have in many cases fallen to levels not seen since before COVID-19.

Nanuk argues that while this reaction is understandable, it may also create selective opportunities. In some cases, share prices may be reflecting an overly pessimistic outlook regarding Trump’s potential impact on clean energy companies. 

Companies operating primarily in regions not subject to US policy shifts may still experience growth and improving profitability, provided current order volumes and pricing trends continue.
 

Conclusion

While Trump’s policies will affect sustainable technology industries in the short term, in Nanuk’s view, they have done little to alter the longer-term drivers behind the structural transformation of the global economy. 

The shift towards a more efficient, electrified, automated, sustainable, and decarbonised global economy remains a likely outcome, driven by economic growth and resource constraints and the ongoing declines in the cost of more sustainable solutions.  

The last point should not be overlooked, as the disruption to global demand from US tariffs is likely to result in further price declines. Any attempts to slow this transition in the near term may increase the likelihood of more decisive action in the future. 

Over time, macro trends such as decarbonisation, digitisation, and resource efficiency are expected to persist. 

In the meantime, investors need to accept short-term uncertainty.  But for those who can identify areas where sentiment and prices have diverged from fundamentals, and who remain focused on the likely longer-term global outcomes, there may be opportunities. 

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[1] International Energy Agency, Global EV Outlook, 2024

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This article was prepared by Nanuk Asset Management Pty Ltd (‘Nanuk’) (AFS Licence no. 432119) for wholesale clients only. The information contained in this article is of a general nature only, does not take into account the objectives, financial situation or needs of any particular person and is not to be taken into account as containing any personal investment advice or recommendation.  Before making an investment decision, you should consider whether the investment is appropriate in light of those matters.  While this article has been prepared with all reasonable care, no responsibility or liability is accepted for any errors, omissions or misstatements however caused. No warranty is provided as to the accuracy, reliability and completeness of the information in this article and you rely on this information at your own risk. Any prospective yields or forecasts referred to in this article constitute estimates which have been calculated by Nanuk’s investment team based on Nanuk’s investment processes and research. To the extent permitted by law, all liability to any person relying on the information contained in this article is disclaimed in respect of any loss or damage (including consequential loss or damage) however caused, which may be suffered or arise directly or indirectly in respect of such information. Any past performance information in the article is not a reliable indicator of future performance.  This article should not be construed as an offer to sell or the solicitation of an offer to buy any financial services or financial products. Performance results are shown for illustration and discussion purposes only.

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