Political Figures Trump, Harris, and Project 2025: Their Influence on Energy Transition Investors' Landscape

In the lead-up to the 2024 US presidential elections, the clean energy market is experiencing a wave of uncertainty. This uncertainty stems from the potential return of former president Donald Trump, who has announced measures to roll back the Biden administration's green industrial policies.

Trump's campaign includes opposing projects like offshore wind farms and criticising regulations seen as limiting industrial growth. He has expressed hope for the cancellation of key renewable energy initiatives, such as the Atlantic Shores South offshore wind project. However, it's important to note that this project was later invalidated.

Trump is expected to change and tweak the Inflation Reduction Act (IRA), a key component of the green industrial plan, but not completely reverse it. The implementation of the IRA has led to a 71% increase in business and consumer investment in clean technologies, totalling $493 billion over a two-year period.

Energy transition investors are nervous about the prospect of a second Trump administration, as threats to U-turn on the Biden administration's green industrial plan could potentially disrupt this growth. As a result, they are currently in a "wait and see" mode, wanting to know the outcome of the elections before committing to any major new investments, especially ones that take advantage of the IRA tax credits.

The uncertainty about the future of the IRA has, to a large extent, been "priced in" to the clean energy market, which has already been affected by two years of severe macroeconomic challenges.

Ashley Keet argues that many clean energy projects are competitive with fossil fuels, even without subsidies. This sentiment is echoed by Chris Berkouwer, portfolio manager of Robeco's Sustainable Global Stars Equities fund, who has stated that the IRA has generally been popular among investors due to its tax credits.

However, Republican proposals, such as Project 2025, aim to reverse the progress made by the Biden's Administration's green industrial plan. Berkouwer estimates that the chance of Trump actually following through with threats to attempt to fully repeal the IRA is only 20%, largely due to the bipartisan nature of the legislation and the benefits to swing states and Republican states.

Despite these uncertainties, companies are committed to reducing their emissions in response to customer/consumer demand, independent of policy. This commitment is evident in Microsoft's signing of the largest clean energy deal in history for renewable energy.

Project 2025 targets parts of the net zero value chain that still depend on subsidies, such as renewable energy equipment or electric vehicles. Berkouwer expresses confidence that common sense will prevail over anti-ESG ideology.

In the end, the future of the clean energy market will depend on the outcome of the elections and the policies that will be implemented. For now, the market remains in a state of uncertainty, with investors and companies alike waiting to see how the situation unfolds.