Goldman to RBC see a slow-but-sure European green stocks revival

European renewable-energy stocks, battered for much of this year, present a buying opportunity because their growth story remains intact.

The way Goldman tells it, with governments promising to phase out fossil fuels and the environmental, social and governance mantra still resonating, the sector is bound to eventually provide rich rewards for the long-term investor.

“For us, the recent correction represents a good opportunity to build strategic positions in these stocks, which should benefit from strong secular growth,” said Frederique Carrier, head of investment strategy at the firm.

The European Renewable Energy index is down 27 per cent from its January peak, and three of the 10 worst-performing Stoxx 600 constituents in 2021 are renewable-energy plays — tumbling an average of 35 per cent.

Many factors have coalesced to pull the sector down, leaving renewable-energy equities trading at a discount to other growth stocks.

“Renewable companies have just been stuck in with all the other growth stocks,” said Randeep Somel, portfolio manager on the M&G Climate Solutions fund, suggesting that’s a mistake.

For instance, even after declines this year, wind-turbine maker Vestas Wind Systems A/S trades at around 34-times forward earnings, while Siemens Gamesa Renewable Energy SA is at nearly 43-times, according to Bloomberg data.

I have no idea, and nor does anyone else, whether inflation proves to be transitory.” If it doesn’t, pricey clean-energy stocks could be “very vulnerable,” he said.

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