New momentum for environmental stocks?

At first glance, the second quarter of 2025 seemed almost unspectacular on the global equity markets: the S&P 500 and the MSCI World recorded a slightly positive performance – in the US, we are now trading at an all-time high again.

Anyone who keeps an eye on the markets knows, of course, that the truth is different. Developments in the first six months of the year were sometimes highly volatile – driven by headlines that were mostly dominated by US President Donald Trump. Despite incisive events such as “Liberation Day” and the tariff discussions that have repeatedly flared up since then, or the geopolitical escalation in the Middle East, the stock markets proved resilient on the whole.

The performance of environmental technology stocks was also quite similar in the first half of the year – the slump around Liberation Day was followed by a clear and rapid recovery, resulting in a small gain since the beginning of the year. For investors in the cleantech sector, however, a particular focus in the year to date has not been on the tariff discussions, but on the US government’s new tax law.

One Big Beautiful Bill vs. Inflation Reduction Act

Mit dem Inflation Reduction Act (IRA) brachte Joe Biden, Donald Trumps Vorgänger im Weißen Haus, 2022 ein großes Steuerpaket auf den Weg, das vor allem Anbietern erneuerbarer Energien zu Gute kam. Das Paket mit seinen milliardenschweren Steuerbegünstigungen hat in den vergangenen Jahren für mächtig Aufwind beim Ausbau der Erneuerbaren in den USA gesorgt.

However, as soon as he took office, Trump made it clear that his aim was to repeal the IRA. Our opinion was always that there would only be a partial repeal of individual passages, as too many Republican states benefit from the IRA. Texas, for example, is now one of the most important states in the solar sector.

The end product – the “One Big Beautiful Bill” (OBBB), which has now been passed in the House of Representatives – is in line with this assessment. The IRA has indeed been trimmed, but with a scalpel rather than a chainsaw. However, the path to this was a bumpy one with enormous volatility. The various proposals from the Senate and House of Representatives caused many 180-degree turns with corresponding market reactions in equities. In total, there were 5 proposals from the Senate and House of Representatives – and each had a completely different interpretation of the clean tech tax credits from the IRA than the previous proposal.

The final version of the tax law now includes some improvements for renewable energies compared to the previous versions:

• Wind and solar: In the area of large-scale wind and solar projects, the text regarding the start of construction is particularly important – this enables developers to generate tax credits until 2032.
• FEOC / Foreign Entities of Concern: FEOC is basically the anti-China clause, which stipulates that renewable projects should be implemented with as little influence from China as possible – be it in the supply chain or in terms of ownership. In the final text, some FEOC clauses were softened and the entry into force was postponed.
• Made in America: Building on the anti-China stance, producers whose value creation is located in the USA are rewarded – be it in the solar, wind or supplier sectors. These credits remain untouched, which was also in line with our expectations and positioning.
• Residential solar leasing: The final version is significantly better for residential solar, i.e. solar installations in private households, than in the previous drafts. Although the tax credit for the direct sale of solar systems will expire at the end of 2025, sales via leasing contracts – the most common form of sales – have not been affected. The tax credits will continue to be available until 2032.

Now that the uncertainty surrounding the future rules of the game has been put to one side, the focus could shift away from political stock markets and back towards fundamentals. In this respect, the clean tech segment has recently surprised on the upside in some cases.

Reporting season brings better than expected figures

In the utility-scale solar segment, i.e. large-scale solar installations, some companies were able to exceed the low expectations in the current reporting season. Even more important is the outlook for the sector, which remains subject to some political uncertainties (keyword: tariffs), but nevertheless turned out better than expected.

The next few quarters could bring momentum, especially for larger projects. There has been a delay here in recent months due to political uncertainty. Now the opposite is more likely to be the case – developers of solar and wind systems want to install them as quickly as possible in order to be able to access all remaining tax credits.

Companies from the solar segment are hoping for a catch-up effect for large-scale projects. Source: unsplash

Was auffällt? Trotz der jüngsten Zugewinne bei einigen Vertretern der Erneuerbaren-Energie-Branche, handelt das Segment Umweltaktien weiterhin auf einem niedrigeren Bewertungsniveau als der breite Aktienmarkt. Das Kurs-Gewinn-Verhältnis im ERSTE WWF STOCK ENVIRONMENT liegt derzeit bei rund 18, während das KGV des MSCI World bei 21 liegt. Historisch betrachtet weisen kleine und mittelgroße Unternehmen einer Wachstumsbranche, wie es Umwelttechnologien sind, eine höhere Bewertung als der breite Markt auf. Das könnte also ein Hinweis auf langfristiges Performancepotenzial im Segment sein.

Company in focus: Siemens Energy

One company from the renewables segment that has performed very well so far this year is Siemens Energy. The share is up 87% since the beginning of the year and has even gained 1,300% since the low in October 2023. What are the reasons for the good performance of the share, which is also part of the ERSTE GREEN INVEST portfolio?

Das Unternehmen arbeitet in 4 Segmenten: Klassische Stromerzeugung, Stromübertragung, Windenergie und Transformation of Industry und ist ein Paradebeispiel für den Bereich Transformation bei Umwelttechnologien. Siemens Energy konnte zuletzt einige Großaufträge im Netzausbau gewinnen. Der Vorteil dabei: Egal um welche Form von Strom es sich handelt – der Ausbau von Netzen ist auf jeden Fall notwendig und Siemens Energy ist eines von wenigen Unternehmen weltweit, die darauf spezialisiert sind. Der Auftragsbestand über das gesamte Unternehmen ist auf einem Rekordniveau, die Margen und der Gewinn haben sich deutlich verbessert und die Prognosen werden laufend angehoben. Das Thema künstliche Intelligenz und der Trend der Elektrifizierung geben weiteren Rückenwind.

But there are also risks – because not all segments are doing equally well. For example, the wind power subsidiary Siemens Gamesa has been in crisis for some time, after a necessary guarantee from the German government led to the share price plummeting in 2023.

However, the high order backlog in grid expansion continues to benefit Siemens Energy and supports a positive outlook. The company therefore remains a top pick in our ERSTE GREEN INVEST and ERSTE WWF STOCK ENVIRONMENT clean tech portfolios and one of our largest positions. It is also one of the few European companies that plays a pioneering role in technology – the increased public investment in Germany should also help Siemens Energy.

Conclusion

The environment for environmental technologies remains very volatile. No sooner has Trump pushed through his tax reform than he turns back to a politically motivated tariff policy, as was recently seen in Brazil and the price of copper. However, purely in terms of the US market and our segment, the legislation passed should provide more planning security for the time being, as demand for electricity continues to rise. Wind and solar can fill this gap as a cost-effective alternative that can be connected to the grid quickly. The basic scenario has not changed – without renewable energies, there will be no expansion of the electricity grids or smart solutions for providing energy in the immediate future. Accordingly, our positioning in ERSTE GREEN INVEST and ERSTE WWF STOCK ENVIRONMENT remains focused on these megatrends.

You can find more information on our website 👉 Investing in environmental technologies

 

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