Summary
- Hannon Armstrong is riding the solar wave to newer highs.
- The growth of ESG investing and strong investor sentiment towards renewable form long term tailwinds.
- The company's Q3 2020 financials point to an even brighter future ahead.
The global shift towards a zero-carbon economy is a macro trend that will see tens of billions invested every year for the next few decades to decarbonise the energy supply of the world's most developed economies. This ambitious effort which was initially driven by altruism is now commercially viable. This means stopping a future where humanity is besieged by the effects of climate change now comes with the potential benefits of material financial returns.
Generating energy from renewable energy sources and investing in greater energy efficiency will play a vanguard role in this generational shift. Hannon Armstrong (HASI) has helped build and is now riding the solar wave, the sentiment from which has spilt over to anything green or electric. As more states draft and implement ambitious zero-carbon regulations and laws, we now stare at a golden age for renewable energy and its relevant stocks.
The opportunity ahead is material as the total market for renewable energy is only set to gain even higher highs in the future from its current low base. As at the end of 2019 electricity from wind accounted for just 7% of total US electricity with solar accounting for markedly less. So while valuations across the renewables space might seem somewhat extended now we are still in quite early innings in the transition towards a lower-carbon economy.
Further, the unencumbered rise of ESG investing now means the onboarding of even more capital chasing green investments.
When set against this intersection of rising investor sentiment towards renewable energy and the compounding of capital allocated broadly to ESG stocks the euphoric expectations that is inherent across the sector is understandable. This is an industry that is set for multi-decade growth.
