By Daniel Lurch, portfolio manager of the Green Planet fund at J. Safra Sarasin Sustainable Asset Management
The US presidential election will likely be very close. While the outcome will matter greatly in many respects, the green transition is too far along and too global for it to be derailed by the result, as it is now driven more by market forces than politics. Nevertheless, the next US president will influence developments – by prioritising certain infrastructure investments, for example, or putting a thumb on the scales of international commerce.
Trump would not derail the energy transition
We are in the midst of a market-driven green transition. Key sectors such as onshore wind, solar power, and battery storage have become cost-competitive and should continue to thrive. Whilst Trump has been promoting more fossil energy production, onshore wind and solar enjoy broad bipartisan support. In fact, much of the investment under the Inflation Reduction Act (IRA), the single largest investment in climate and energy in American history, is being channelled into Republican states, promoting development and economic growth. The IRA provides long-term stability and growth for the green theme and its related sectors. Based on US Department of Energy data, more than 150’000 clean energy jobs were created or onshored between 2022 and 2023, most of them in states with Republican majorities. Seven of the 10 states where clean energy jobs are growing the fastest are represented by Republican senators.
Trade policy, tariffs, and Trump
During his campaign, Trump has spoken a lot about tariffs. Under his leadership, there could be an elevated risk of tariffs on clean energy imports, particularly on solar and storage equipment from China. This is not new, as both Democratic and Republican administrations have utilised and expanded tariffs. For example, recall that Trump already implemented a 30% tariff on imported solar cells under Section 201, which Biden extended at 15%. We believe that any new tariffs will incentivise developers to further onshore and boost their supply chains, which should benefit domestic manufacturers of solar and storage equipment.
A similar picture presents itself for the auto industry. The sector has already faced substantial trade tariffs under the Biden administration. Moreover, in light of Trump’s growing relationship with Elon Musk, he has appeared to waver on electric vehicles (EVs) recently. In any case, global advancements in EVs and battery technologies are too robust to be undone. Road electrification will continue to progress, with the auto market already offering a wide range of competitive EVs that are well-received by consumers. To stay globally relevant, North America’s auto industry cannot isolate itself from these irreversible global trends.
Harris generally more favourable for green investing
Whilst she has been moving more centre on climate and energy policies compared to her 2019/2020 presidential run, where she supported the Green New Deal and opposed drilling on public land as well as fracking, Harris remains more focused on sustainability, climate resilience, and reducing carbon emissions than her opponent. This will translate into a supportive environment for long-term green investing.
Under Harris, clean energy developers are expected to continue benefiting from IRA tax credits. Tax credits from the IRA are also expected to boost consumers’ purchasing power for energy-efficient home renovations and solar installations. This could drive further growth in residential clean energy adoption and home efficiency markets.
A focus on solar under Harris
Harris has demonstrated a strong commitment to solar energy, which will likely remain a central focus of US clean energy strategy. This creates ongoing investment opportunities in solar infrastructure and innovation. While Harris has no explicit, aggressive EV agenda, the general positive stance toward clean technology suggests continued support. This opens up opportunities for further innovation and development in the EV market. A Harris win would provide a stable, supportive environment for green investing. The continued focus on policy reforms would further accelerate clean energy adoption across the US.
A common threat for key issues
Both administrations would face global realities resulting similar constraints and opportunities. Their solutions and policies would forcibly also be similar. In this vein, solar and battery storage are crucial to overcoming grid constraints and supplying the much-needed electricity to power data centres. By 2030, data centres are expected to account for 6% of global electricity consumption, making them a key driver of electricity demand growth.
Moreover, regional conflicts and geopolitical tensions have exposed significant vulnerabilities in today’s global energy system, underscoring the urgent need in the US for stronger policies and greater investments in cleaner and more secure technologies. The latest edition of the World Energy Outlook, the leading global source of energy analysis and projections, identifies advancing clean energy transitions as a key determinant of and a suitable solution for energy security.
The takeaway is more balanced than expected
When a new administration comes in, there is usually greater investment and capital expenditure, which is positive for US infrastructure spending and the main green themes. While some areas may encounter more obstacles under one administration than the other, the broader green investment landscape is unlikely to face significant disruption. Moreover, the major trends in green investing are global, resilient, and likely to weather any political distractions. In such an environment, we recommend a diversified exposure to reduce volatility while profiting from this deep secular trend.
