The renewable energy market has undergone a turbulent evolution over the past few years. "Despite this context, long-term opportunities remain attractive for investors in this sector," says Stian Ueland, manager of the DNB Renewable Energy fund at DNB Asset Management.
Since the peak reached in early 2021, the renewable energy sector has experienced considerable price declines. Many companies in this sector, including Ørsted, a pioneer of offshore wind, and Vestas, one of the largest wind turbine manufacturers, have suffered severe setbacks. Utilities and renewable energy project developers have also suffered from this negative market development.
Olivier Wurlod
This is partly explained by a market overheating phenomenon: after a phase of intense euphoria, the 'green bubble' collapsed. However, it is often in the periods following the bursting of a bubble, when enthusiasm has faded, that the best opportunities are created for investors with a long-term vision. Historically, declines in stock prices have often provided good entry opportunities, especially when the underlying growth drivers are still present.
Despite short-term challenges, the long-term growth potential of renewable energy remains intact. The sector is only at the beginning of a transformation process that will last several decades. A long-term process that, as in the past, will require several decades to fully take hold. Companies that are laying the foundations for this evolution today could benefit from structural growth over the next 50 to 100 years.
It is often in the periods following the bursting of a bubble, when enthusiasm has faded, that the best opportunities are created for investors with a long-term vision.
Companies that focus on resource optimization, that is, that develop technologies to reduce energy consumption and emissions, are particularly interesting. Manufacturers of heat pumps or insulation materials that contribute to building energy efficiency are examples. Such companies have often generated stable returns for years and are well positioned to benefit from the growing environmental awareness.
A smart approach to investing in renewable energy is built around three key areas:
Volatility in this sector is high, due to the impact of political decisions and market trends. To minimize these risks, targeted diversification is essential.
Of course, investments in green technologies are not without risk. Volatility in this sector is high, due to the impact of political decisions and market trends. To minimize these risks, targeted diversification is essential. A broad portfolio of 40 to 60 positions, less influenced by the same market developments, can reduce volatility.
Despite recent setbacks, the renewable energy sector is attractive in the long term. Investors who are willing to weather market cycles and invest selectively in companies with clear competitive advantages have a chance of achieving attractive returns. The transformation process in the energy sector is a marathon, not a sprint. Those who think long-term and patiently accompany the developments have the best chance of reaping the fruits of this revolution.
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