Analysts see ‘buyer’s market’ in clean energy stocks

Renewables stocks have taken a battering in recent years as developers struggled with macroeconomic headwinds chiefly characterised by high inflation and rising interest rates.

The S&P Global Clean Energy Index, which tracks the performance of global clean energy companies, including renewable power producers and technology firms, went from highs of $2,114 in January 2021 to a low point of $706 in January 2025.

The world’s largest wind developer Ørsted went from 1,351 DKK in January 2021 to a dismal 271 DKK in February 2025, an 80% wipeout in value.

Yet some energy stock analysts think the market has now bottomed out and will only increase in value going forward.

Tancrede Fulop, senior equity analyst at Morningstar, told Net Zero Investor that he saw a “buyer’s market” consisting of “depressed valuations” for renewable developers, meaning their stock prices are lower than expected based on fundamentals.

The discount of listed renewables developers versus transaction multiples of companies like Neoen (a French renewable energy company) and Encavis (a German renewable energy firm),  which were acquired at very high prices, are "hard to justify", he continued.

Underpinning the fundamentals of renewables developers is the fact that “PPA [power purchase agreements] prices are holding well while construction costs are stabilising for onshore wind and receding for solar”, he said. “More M&As and a fall in interest rates" would further support the sector and drive up stock prices.

In January, the European Central Bank cut three key interest rates by 25 points while the US Federal Reserve held rates steady.

Inflation and interest rates are expected to continue to fall, at least in Europe, in the near future, though uncertainty around the potential for Trump’s policies, especially tariffs, to increase inflation and make interest rates higher for longer muddles the outlook.

Not all that is green and glitters is gold

Chris Berkouwer, equity portfolio manager at Robeco, also sees a “buyer’s market” for clean energy stocks emerging, but advocates for a selective approach.

“Several tough years” consisting of “tectonic geopolitical shifts, inflation shocks and, drastically changing interest rate regimes”, have given a “reality check” to sustainable investors, he argued.

The main lesson learnt is that investors should stick to classic investment principles and prioritise “quality business models” instead of painting “all green stocks with the same brush” and chasing “everything that is green”.

“It’s a company’s operational and financial track record that counts – not whether its business model needs incentives and ultra-low interest rates to survive, as has been the case with offshore wind and green hydrogen,” he said.

Regardless of government policy, he expects the buildout of renewable energy and clean tech to continue unabated.

Moreover, now that “expectations have been reset” and “valuation levels normalised”, the “hunting ground for climate transition investors looks attractive once again”.

Opportunities are especially apparent in areas related to “power infrastructure, building efficiency and the decarbonization of hard-to-abate sectors”.

William de Vries, director of impact equities & bonds at Triodos IM, also noted “clear differences between companies in the renewable energy sector, which makes thorough bottom-up research a necessity”.

Despite the recent hard macroeconomic times faced by renewable developers, and certain “political headwinds”, especially in the US, Triodos IM’s view is that the “necessary” energy transition is far from completed. This means that the long-term growth prospects for the sector, backed by ambitious green transition plans, remain in place.

In addition, clean energy companies are taking action to adjust to the new realities, which will “likely support future profitability and performance”.