UBS Wealth Calls Green Investor Angst Over Trump ‘Overblown’

It’s improbable that the instrumentality of Donald Trump to the White House volition undermine the lawsuit for greenish investments, according to UBS Group AG’s planetary wealthiness absorption arm.

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Published Dec 11, 2024  •  3 infinitesimal read

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(Bloomberg) — It’s improbable that the instrumentality of Donald Trump to the White House volition undermine the lawsuit for greenish investments, according to UBS Group AG’s planetary wealthiness absorption arm.

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Despite a abrupt selloff successful accepted greenish stocks specified arsenic star and upwind aft Trump’s Nov. 5 predetermination victory, semipermanent request for continued concern successful everything from renewable infrastructure to electrification volition stay strong, according to a enactment to clients written by strategists including Amantia Muhedini.

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“Politics and geopolitics aside, the economical lawsuit for renewable energy, electrification and infrastructure remains attractive, with semipermanent request visibility,” they wrote. “Concerns from Trump’s re-election whitethorn beryllium overblown, and we spot worth successful selective segments.”

It’s the latest enactment of greenish optimism to antagonistic the anxiousness Trump has dispersed among proponents of the clean-energy transition. A portfolio manager astatine Janus Henderson Investors precocious suggested a caller Trump epoch whitethorn supply a “compelling” backdrop for greenish investments, arguing the president-elect’s rhetoric — specified arsenic “drill, baby, drill” — hasn’t historically been matched by action. 

And Impax Asset Management, 1 of the world’s biggest green-transition investors, says it’s not expecting Trump’s policies to beryllium arsenic atrocious for capital-intensive clean-tech assets arsenic galore fear. That’s chiefly due to the fact that Impax says it doesn’t expect the caller medication volition let a spike successful inflation.

But greenish investors person been rattled by a agelong database of Republican threats that — if carried retired — would apt wounded their portfolios. Concerns person been fueled by Trump’s pledge to upwind backmost Biden-era greenish policies specified arsenic the Inflation Reduction Act, and to ratchet up fossil-fuel production.

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Such rhetoric follows much than 2 years of Republican Party attacks connected ESG (environmental, societal and governance) finance, which person spanned everything from bans to lawsuits.

Against that backdrop, strategists astatine UBS Global Wealth Management enactment that US-domiciled funds saw a 3rd twelvemonth of nett outflows, chiefly driven by equity strategies. They besides constituent retired that conscionable 3 index-based strategies “drove the bulk of the outflows from US equity funds for the full year,” amid precocious levels of money attraction that person added to the volatility of reported flows.

Meanwhile, much US ESG funds underperformed accepted peers than their European equivalents this year, with much than 50% of European funds ranked successful the apical fractional of their peers twelvemonth to date, compared with 42% of US funds. “This underscores the request for selective concern and diversification” crossed antithetic sustainable investing strategies and plus classes, they said.

At the aforesaid time, the interaction of clime alteration is becoming progressively costly, adding to the hazard of losses for companies and investors that disregard its fallout. Swiss Re AG estimates that insured losses from earthy catastrophes volition apt transcend $135 cardinal successful 2024, marking the 5th consecutive twelvemonth successful which the $100 cardinal threshold has been breached.

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And this twelvemonth is acceptable to beryllium the hottest connected record, with the mean planetary somesthesia soaring to 1.62C supra pre-industrial levels successful November, according to the European Union-backed Copernicus Climate Change Service. That’s coincided with an summation successful utmost weather, including an unusually progressive hurricane season.

The UBS Global Wealth strategists besides enactment that the beforehand of artificial quality — and the immense vigor demands associated with that improvement — volition inevitably adhd to the entreaty of renewables.

“The request for energy is expected to emergence owing to AI and electrification, expanding the request for solar, wind, and earthy gas,” they wrote. “We expect this inclination of expanding capableness to continue.”

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