Will decarbonisation be the mega-trend of the next decade?

Wind turbines

US equities have led global stock markets higher over the past decade. In the last ten years, US equities have returned a stellar 292%, compared to just 73% for global equities (as measured by the MSCI USA Index and MSCI AC World ex US Index respectively, in US dollar terms, as at 31 August 2020).

But the past isn’t always a good guide to the future. As climate change moves up the political and social agenda, decarbonisation could be the mega-trend of the next decade. And we think many of the companies best placed for the transition to a low carbon future are listed outside the US.

Who are the major wind and solar players?

The US has a number of companies who are the dominant players in their field. But this isn’t always the case if we look at renewable energy.

Take the wind energy industry, which is dominated globally by a handful of companies. Only one of the major manufacturers – GE – is a US firm. The biggest global operators are Denmark’s Vestas Wind and the German-Spanish group Siemens Gamesa. Chinese firms tend to have a strong focus on their domestic market.

Meanwhile, the solar industry is heavily dominated by Chinese firms. China leads the way in the production of polysilicon, as well as in solar cell manufacturing capacity. This is a fairly commoditised industry, with limited scope for generating above-average profit margins. Nonetheless, if there is a boom in solar then it is these Chinese firms who will benefit. First Solar, a US company, is one of the only notable non-Chinese firms in the industry.

View Full Article – published by Schroders on 16th September 2020

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