Returning to work this spring, after 12 months of maternity leave, has been a bushtucker trial like no other. It’s no easy feat to juggle nursery pick-ups and drop-offs and the relentless sickness bugs (hand, foot and mouth disease have got to be the five words every parent most dreads to hear!) while navigating the complicated, changeable world of sustainable investing. Just my luck that 2025 has proved a particularly turbulent backdrop for sustainability.
Stormy times for wind power
Before President Trump came to office, he’d called wind turbines “ugly” and a “disaster”. So it was very much on brand for him to sign an executive order to pause funding for clean energy-related projects within the Inflation Reduction Act (IRA) on his first day in office. Then-President Joe Biden pushed through the IRA in 2022. Alongside measures to combat inflation, it provided the largest investment in renewable energy and emissions reduction in US history. In total, it allocated about $369 billion to clean energy initiatives, including big tax credits. In true Trump fashion, none of the details about exactly what was going to be repealed were ironed out ahead of time. Unsurprisingly, this lack of clarity wasn’t good for renewable energy stocks overall. Those focused on wind energy were hit particularly hard as Trump showed just how much he dislikes wind power by peremptorily cancelling federal funding for infrastructure projects supporting offshore wind power.
Fortunately, our sustainable Rathbone Greenbank Multi-Asset Portfolios had very limited exposure to the worst-hit stocks. But even companies such as our holding Hannon Armstrong Sustainable Infrastructure Capital (HASI), a quality lender to sustainable infrastructure projects, didn’t escape entirely unscathed. And HASI’s shares got battered even though its project pipeline was mostly already complete or under construction, with the necessary components (and therefore the associated tax credits) already in hand. The market didn’t care – it reacted as though anything to do with clean energy was under threat.
Fast forward a few months and the renewable energy landscape looks to be in much better shape. The cloud of uncertainty hanging over the sector has largely cleared and the final rulebook wasn’t as bad as initially expected. Although clean energy credits are going sooner than before, under Trump’s new One Big Beautiful Bill Act (OBBBA), there is a phase-out, with credits retained until the end of 2027 as long as project construction has begun before then. The likelihood of future policy changes has also dropped so companies now feel a lot more confident about committing to projects and spending, especially as they rush to complete things before the 2027 deadline. Just take HASI, which is up by more than 50% since its April lows. A big sigh of relief from us!
AI is hungry for clean energy
All the OBBBA noise has definitely been a headache for sustainable investors this year, but now things are quieter, attention can turn to something many have overlooked: renewable energy will play a critical role in supplying the extra power required to drive the AI boom.
As my colleague Michael Cumberlidge notes here, the world’s insatiable appetite for AI can only be met by massive increases in energy capacity. That explains why the AI hyperscalers’ billions of dollars of capex spending incorporate big investments in renewable energy. AI may require an ‘all of the above’ energy future that includes fossil fuels and nuclear energy. But more renewable energy will be a critical part of that future. The hyperscalers have carbon emission targets to meet and, crucially, they need a lot of extra energy quickly. It can take years to build new nuclear and gas power plants and there are already huge order backlogs.
Here’s a stat that puts the scale of extra energy needed into perspective: if just six US companies (Amazon, Microsoft, Google, Meta, Oracle and Apple) continue to grow their energy requirements at recent rates (~25% per year), their electricity demand will exceed that provided by the entire US utility-scale solar industry within the next couple of years!
Perhaps it’s no wonder then that Utilities has been the second-best performing stock market sector so far this year (Technology, of course, is in pole position) as it’s benefited from the sector’s stable business models and surging demand from AI data centres. SSE and National Grid, which we hold in our sustainable multi-asset portfolios, have done very well in 2025. In early November, SSE announced a transformational £33bn capital expenditure programme that runs through to 2029/2030, tripling its investment over the previous five-year period. The programme is focused primarily on electricity networks and renewables infrastructure. Without grid investment, valuable renewable energy power gets lost. Indeed, here in the UK our grid can’t handle all the energy generated on windy days, so we have to pay wind farms to shut down to avert grid overload. This SSE investment project is absolutely crucial.
Short-term political noise is likely to keep reverberating across the sustainable investing world (just last month, the COP30 summit in Brazil took place). But it’s important for investors to understand that the long-term case for sustainable investing remains solid. Sentiment can change, but ultimately we still need clean energy to power our electricity demand. And we need network and infrastructure investment to get this power to our homes, businesses and data centres as efficiently as possible. That’s positive for firms like Schneider Electric, another company we own, that are helping to modernise grid infrastructure and fully integrate clean energy power. Schneider has delivered strong returns this year as investors have recognised its growth potential, given its innovative products that help convert renewable energy power into electricity.
Now, I’m off to deal with another rewarding, but sometimes irrational, part of my life… my son!
