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2024 Trends: Can Investments in Renewable Energy Weather Geopolitical Storms?

2024 Trends: Can Investments in Renewable Energy Weather Geopolitical Storms?

Dominik Hass, Investment Specialist at Sycomore AM, part of Generali AM ecosystem, explores the evolving landscape shaped by escalating tensions in Eastern Europe and the Middle East.

The escalating tensions in Eastern Europe and the Middle East have highlighted the pressing need for energy independence and the reduction of supply chain risks. Although higher interest rates and limited capital require greater selectivity in focusing on the most financially viable solutions, the journey toward the energy transition remains central and is supportive of both these objectives.

Western economies have implemented substantial policy measures to strengthen their domestic providers of environmental solutions. For example, the Inflation Reduction Act on Renewable Energy offers access to attractive tax credits and more affordable financing, making it a significant driver of investments in this sector for 2024. Our perspective is further reinforced by the fact that companies offering eco-friendly solutions faced significant headwinds in 2023 and now trade at appealing forward price-to-earnings valuations similar to pre-Covid levels. Additionally, fiscal policies are starting to materialize and will bolster growth in the coming years.

Are Companies Ready for the Human-Tech Revolution?

While it is set to be an exciting year for environmental developments, we must not overlook major social trends. We have discussed the fast rise of Artificial Intelligence forming projections that a replacement of all human work processed is just a matter of time. For this reason, we believe it will become increasingly important for companies to pay attention to the importance of human capital within their businesses. The optimal co-integration of human capital and technology will be a key driver for making processes more efficient and reducing costs. Companies achieving this balance will have a competitive advantage in our view and should generate additional returns for investors.

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