How to invest in green hydrogen and other clean energies?
10 APR, 2025
Hydrogen is set to play a key role in the decarbonization process of the economy, not only because it does not produce polluting emissions (green hydrogen), but also for its efficiency: it generates more energy than other fuels, such as gasoline. In addition, it can be stored and distributed very easily, and is a perfect complement to intermittent energy sources such as wind or photovoltaic.
The global demand for hydrogen is around 95 million metric tons (Mt) per year, according to data from the International Energy Agency (IEA). Most of the hydrogen (approximately 95%) is produced from natural gas and coal through processes such as steam reforming and gasification, which makes it gray or black hydrogen, with a high carbon footprint. Only about 1% is green hydrogen, that is, generated by electrolysis of water using electricity from renewable sources.
One of the aspects that will support the development of green hydrogen is the commitment of governments to comply with the Paris Agreement, and there are already many countries that have formulated their individual objectives for the production of green hydrogen. When green hydrogen is cost-competitive, several sectors could benefit:
- On the production side: we could mention electrolysis equipment manufacturers and fuel cell manufacturers, as well as renewable energy producers.
- On the application side: it will benefit the transport sector, especially heavy trucks, long-distance buses, ships and airplanes, not to mention private cars. The heating sector will also be positively impacted.
How to invest in green hydrogen?
In the race towards climate neutrality, green hydrogen has emerged as one of the most promising energy vectors. Driven by public policies, tax incentives and a powerful narrative around the energy transition, this clean fuel has captured the interest of institutional investors and thematic fund managers.
What vehicles offer real exposure to this trend? Since it is an emerging technology, it is not easy to find investment funds focused "exclusively" on green hydrogen, but they are usually included along with other clean energies. Next, we analyze the universe of funds that bet on green hydrogen, their strategies and the prospects of an emerging market.
Robeco Smart Energy
Robeco's Smart Energy Team
Despite the promising initial signals and the growing importance of green hydrogen in our future energy mix, enthusiasm for this sector has faded in recent years. Companies are reassessing their portfolios due to political uncertainty and high production costs. In fact, the number of project cancellations reported in 2024 increased compared to the previous year.
In fact, most of the funding for green hydrogen still depends on government support, with EU grants and US tax credits being the main financing mechanisms. The sector faces significant challenges, including higher than expected costs and a demand that is slow to take off. Costs remain high, partly due to insufficient renewable energy capacity, and the market is not yet scalable, as most projects are small-scale pilot initiatives that are costly to build and operate. The lack of subsidies has further hampered the ability to cover initial startup costs. Many listed companies in this sector face substantial R&D expenses and have limited visibility on their path to profitability, making investment and capital allocation in this area complex, also due to liquidity constraints.
As for private investment, there have been some announcements to fund projects, but these are usually linked to direct industrial applications and are addressed on a case-by-case basis (for example, a nearby factory financing the project).
In March 2025, hydrogen-related investments in our portfolio represent less than 1%, mainly in companies involved in the production of electrolyzers. Despite the challenges and its limited use in some industrial applications, we believe that green hydrogen will continue to be part of the solutions on the path to decarbonization and the achievement of net zero emissions goals. On a positive note, the recently announced 500 billion euro fiscal package by Germany could potentially benefit hydrogen investments, although the precise allocation of these funds for climate initiatives remains uncertain. The catalyst for growth in this sector will be the effective implementation of government grants and, subsequently, the reduction of production costs.
Pictet-Clean Energy
Manuel Fernández Losa, co-manager of the fund
Green hydrogen -generated with renewable energies- will be used in some industrialization processes that cannot be changed. For example, it is used in the manufacture of fertilizers from methane and in the future green hydrogen will be used to decarbonize its manufacture. It is also likely that green hydrogen will be used to decarbonize industries such as steelmaking. The main problem is that green hydrogen is very expensive and requires, and will require, subsidies to be profitable. It implies that the role of hydrogen will be less than many want.
On the other hand, the hydrogen industry is going to be more local than exporting. There are those who want to create hydrogen hubs, but transporting it requires high energy cost and it already happens that companies that produce oxygen, nitrogen and other types of gases form local industries.
As most of the decarbonization is going to be with renewables -solar and wind and batteries-, hydrogen will have a supporting role when the sun does not shine or the wind does not blow, and the batteries are discharged. Indeed, once an 85/90% decarbonization is reached, decarbonizing the rest requires oversizing solar, wind and batteries, and with current technologies this last stretch is cheaper with green hydrogen. The question is whether we want to afford the luxury of decarbonizing that last 10%, as the electrical system is designed so that 80% of the costs occur in 20% of the time, that is, to guarantee continuity.
Nevertheless, land mobility will be electric, by batteries. Green hydrogen loses 30% of energy when transforming the MWh of electric energy into MWh of hydrogen and another 30% in the opposite process. In the best case, it has a 49% efficiency, rather a real 30%. However, the efficiency of batteries exceeds 90% and their improvement in energy density is continuous.
Candriam Sustainable Equity Climate Action
Tanguy Cornet, Head of Global Thematic Equity - Environment
Green hydrogen is emerging as a very promising and profitable theme for capital investment, driven by its fundamental role in global decarbonization efforts, growing demand projections, and significant government support.
However, the current level of green hydrogen demand remains relatively low compared to its potential. In 2024, clean hydrogen production targets reached between 27 and 35 million tons (Mt), but demand targets stagnated at only 14 Mt. According to estimates, this figure is expected to skyrocket in the future to contribute to 6% of the accumulated emission reductions necessary for 2050 in the Net Zero scenario.
Hydrogen demand should then be between 125Mt/year and 585Mt/year to meet environmental objectives. This increase is due to its potential to decarbonize hard-to-eliminate sectors, such as steel, cement, chemicals, and heavy transport, where direct electrification is a challenge. In addition, green hydrogen can be stored and transported efficiently, providing a reliable energy source that complements intermittent renewable energy sources, such as wind and solar.
With the current levelized cost (from 3 to 6 dollars/kg), green hydrogen is still less competitive than hydrogen obtained from fossil fuels (1.5 dollars/kg) due to the costly electrolyzers and the renewable energy needed to power them. This gap between demand commitments and the willingness to pay green premiums limits the scalability of green hydrogen for many companies operating with low profit margins.
However, government initiatives around the world are beginning to drive the green hydrogen market. The European Union's REPowerEU plan aims to produce 100 Mt of renewable hydrogen by 2030. China and India aspire to turn their country into a global hub for the production and export of green hydrogen, with significant financial incentives and strategic interventions.
Greater political and regulatory support for the green hydrogen market, combined with a larger production scale thanks to international collaboration, should further support green hydrogen, making it cost-competitive with carbon-intensive alternatives in the coming years.
The managers of our Candriam Sustainable Equity Climate Action fund closely follow all recent political and technological advances in electrolyzer efficiency and are strengthening their position in this expanding market. The fund invests in companies that enable climate change mitigation or adaptation. Investing in green hydrogen not only promises substantial returns, but also aligns with the broader goal of a sustainable future with low carbon emissions.
