Real Assets
The Case for Buying Renewables Now
Article
Mar 10, 2022
We believe markets today offer an especially attractive entry point into renewables. In a break from the past, we find current equity prices for renewables appear to only minimally factor in the industry’s strong growth story, offering a unique opportunity for investors.
Share prices for renewables companies have come down significantly over the past year due to a variety of factors, including concerns about higher interest rates and legislative delays in the U.S. In our view, industry share prices have now reached levels that mostly reflect the cash flows of existing operational assets and no longer account for the multi-decade, high-growth outlook for the industry.
Renewable power assets’ cash flows are also much more stable than that of global equities. Over the last 10 years, renewables cash flows have had consistently positive year-over-year growth—and average annual growth roughly twice that of global equities, according to our estimates.
We see this stronger cash flow growth persisting in the years to come, as more renewables assets are brought into operation and more of the world’s power generation transitions to renewable energy over the next three decades. This evolution could also be pulled forward by geopolitical developments in Europe, as the region seeks to reduce its reliance on fossil fuels amid an energy supply crunch exacerbated by Russia's invasion of Ukraine.
In our view these cash flows, coupled with today’s share prices, offer a compelling risk/reward proposition vs. the broader equity market. We believe this buying opportunity may not last for long. We could see the U.S. pass legislation that would further bolster renewables development and renew excitement in the asset class. In the meantime, renewables today are as attractive on a growth-adjusted basis as we have seen since before the COVID-19 pandemic began. Read more in the full Real Assets Monthly.
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This material is not, and is not intended as investment advice, an indication of trading intent or holdings or the prediction of investment performance. All information is current as of the date of this material. Views and information expressed herein are subject to change at any time. Brookfield Public Securities Group LLC disclaims any responsibility to update such views and/or information. This information is deemed to be from reliable sources however, Brookfield Public Securities Group LLC does not warrant its completeness or accuracy. This presentation is not intended to, and does not constitute an offer or solicitation to sell or a solicitation of an offer to buy any security, product, investment advice or service (nor shall any security, product, investment advice or service be offered or sold) in any jurisdiction in which Brookfield Public Securities Group LLC is not licensed to conduct business, and/or an offer, solicitation, purchase or sale would be unavailable or unlawful. Indexes are unmanaged and are not available for direct investment. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results.