Speed to power: Why Cleantech equities keep catching up

The third quarter of the current year brought a welcome boost to environmental technology equities. While geopolitical tensions and domestic political uncertainties (particularly in the United States) continue to dominate the headlines, the clean tech industry is proving increasingly resistant to short-term disruptions.

Political uncertainty not denting optimism

The political landscape in the United States remains volatile. President Trump regularly causes irritation with his rhetoric – especially in the context of renewable energies and climate protection measures. That being said, a comprehensive legislative package was passed in July with the “One Big Beautiful Bill” (OBBB), which creates better-than-expected conditions for many clean tech companies.

The discrepancy between public rhetoric and actual legislation in the United States is noticeable. Whereas various government agencies and departments are striking a negative tone, many companies in the environmental sector are optimistic behind the scenes. The results of the past two quarters confirm this confidence: sales and earnings development have exceeded expectations by a significant degree, even though companies are publicly cautious in order to avoid political attacks.

Artificial intelligence: driver of energy demand

The rapid development in the field of artificial intelligence (AI) remains a key issue. The expansion of data centres is causing a veritable investment boom – especially among tech giants such as Google, Amazon, and Microsoft. At the moment, there is no indication that said boom should end anytime soon. In a recent interview, Facebook CEO Mark Zuckerberg said that while it would be “unfortunate” if Meta “misinvested a few hundred billion (!) in data centres,” the risk “on the other hand is higher.”

These infrastructure projects are extremely energy-intensive and increase the demand for a reliable, scalable power supply. Renewable energies offer a decisive advantage here: they are available at shorter notice than conventional power plants.

The term “speed to power” aptly describes the competition to provide energy as quickly as possible. The shortage of readily available electricity in the United States is now so extreme that old nuclear power plants are being reconnected to the grid to meet demand – but even these are finite in number. It takes over four years to restart a decommissioned nuclear power plant and at least ten years to build a new one. In comparison, wind, solar, and battery power are often operational within a year – an advantage in a race where no one wants to fall behind.

Company focus: Bloom Energy

Bloom Energy provides a special solution in the area of speed to power. The company offers fuel cells that can be powered by hydrogen, biogas, or natural gas. The fuel cells use these fuels to produce electricity by way of an electrochemical process that reduces air pollution by more than 99% compared to combustion and reduces CO2 emissions by up to 45%.

With these fuel cells, data centre operators, for example, can disconnect 100% from the grid and generate their own electricity. This also means that long waiting times for grid connection can be avoided, allowing data centres to become operational more quickly. Compared to the years of lead times for various power sources and the lengthy process of connecting to the grid, Bloom Energy can produce electricity within 90 days from the time of ordering.

In the year to date, Bloom Energy shares have gained about 300%, and over the past year, the increase has been more than 700%. In the ERSTE GREEN INVEST equity fund, we remain invested in Bloom Energy and are optimistic about its long-term prospects.

Fund performance: substantial recovery

The two equity funds focusing on environmental technologies, ERSTE GREEN INVEST and ERSTE WWF STOCK ENVIRONMENT, have gained significantly in the wake of Liberation Day in April. The recovery since then has been driven mainly by short covering – generalists are still hardly invested. This opens up further potential should interest from institutional investors increase.

Individual shares such as Array Technologies have more than doubled since April. Despite these gains, valuations remain attractive. We used the third quarter for targeted reallocations by expanding positions in heavily sold-off shares such as Shoals Technologies, Sunrun and Solaredge. At the same time, we took profits in Bloom Energy and Nextracker. The focus remains on the energy segment, which offers the greatest opportunities in structural terms, both in the area of power generation and in storage solutions and grid infrastructure.

Valuation and outlook: fundamental strength as driver

The valuations of our funds remain attractive by historical comparison. The (forward) P/E ratio of ERSTE WWF STOCK ENVIRONMENT is 18.3x, while that of the ERSTE GREEN INVEST is 20.7x – significantly below that of the US technology share index Nasdaq 100 at 30x. At the same time, 87% and 95% of the companies in our funds, respectively, expect to be profitable in 2026, compared to only 64% in the Russell 2000, a US equity index for small-cap companies.

This fundamental strength is a central pillar of our investment strategy. With political uncertainty receding and interest rates looking stable, the focus is shifting back to corporate quality. If the Q3 reporting season comes down on the convincing side again, we expect the momentum to remain positive until the end of the year.

 

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