Renewable energy is profitable, not fashionable
Posted 3 March 2026
You would’ve thought the last year would be tough for ESG investors. Donald Trump and his allies are openly opposed to environmental, social or governance constraints on companies – calling ESG “woke capitalism”. The US president promised to “drill baby drill” and declined to send any delegation to November’s COP30 summit in Brazil. Incredibly, though, despite all those headwinds, renewable energy stocks did very well last year.
Renewable energy beats the market – and comfortably beats fossil fuels.
Renewable energy stocks were among the world’s best performers in 2025 and have continued that outperformance in 2026. L&G’s renewable energy ETF, which invests in a broad range of clean energy producers and related companies, has comfortably beaten the S&P 500 since Donald Trump’s re-election, and is even ahead of the Magnificent Seven tech stocks. Tellingly, renewables are well ahead of the global energy sector – including the biggest oil companies.
Not all clean energy firms have benefitted. While the Nasdaq clean energy index has outpaced the regular Nasdaq (which tracks big US tech firms), nearly all of that outperformance comes from the just three stocks: Nextpower Inc, Bloom Energy Corp and MP Materials. Bloom’s shares have soared nearly 1200% since the 2024 US election. In contrast, Danish wind farm specialist Oersted has lost more than 60% of its value.
That’s partly because wind power has been one of the worst affected areas by Trump’s anti-environmental agenda. The White House has halted several ongoing windfarm developments and suspended new licenses last year.
Performance disparity notwithstanding, the trend for renewables is up. The sector’s strong returns stand in stark contrast to the bearish sentiment around ESG investing. According to Morningstar, investors pulled a net $5.7bn out of US sustainable funds in the second quarter of 2025 alone, and 39 funds shut down in the first half of last year. In the background, the White House has been active in trying to curtail renewables’ investment and development through the One Big Beautiful Bill Act.
The world needs more energy, and renewables are delivering.
The underperformance of oil and gas companies this year is a fascinating contrast to renewables’ outperformance. Trump positioned himself as a pro-oil president, but his “drill baby drill” promise is about boosting oil production, not about boosting oil majors’ profits. A year ago, we pointed out in our Tatton Weekly that encouraging overproduction amid sluggish oil demand would hurt big oil. So it has proved.
At the same time, there’s been a strong push to upgrade energy infrastructure, strongly linked to the AI datacentre theme. Renewables are seen as the most viable way of meeting this demand. A report from Deloitte last year showed that, from January to September 2025, 93% of the growth in US energy capacity came from renewables. Solar and storage made up 83% alone.
Ironically, Trump’s removal of future clean energy tax credits may have accelerated building projects, as developers rush to get them done before next year’s deadline. And the focus on energy build-out is not just in the US but around the world.
It’s no coincidence that some of the sector’s biggest winners are involved in energy grid expansion. AI-related investment has now filtered through to energy infrastructure expansion, and renewable energy providers are a key beneficiary. The soaring Bloom Energy, for example, makes fuel cells for data centres.
The very fact renewables are able to benefit from these trends shows how cheap renewable energy production has become. Past investment has made it cheap and relatively easy to increase capacity – particularly following China’s historic overproduction of solar panels.
The ‘E’ in ESG has matured.
It’s astounding that renewable energy stocks are doing well when there is so much political pressure against them. The backlash is not just in the US either: the EU has recently softened its emissions reporting directives, and net-zero targets have been the focus of so much ire here in the UK. At the same time, institutional investors are much less enthusiastic about ESG investing than they were a few years ago – though surveys show sustainability is still important to individual investors.
Performing well in this environment shows that we are in a new phase for clean energy investment. The “E” in ESG is being split out from the rest, with investors focussing on renewable energy as a specific economic theme, rather than as part of a background investment trend.
This is a sign of maturity. A few years ago, when ESG investing was growing rapidly, renewable energy stocks were vastly popular, but there were doubts about their growth or profitability. Now, we are in the opposite situation: renewables are profitable, but unfashionable. For the long-term growth of the industry – and the global energy transition it is powering – that is ultimately a good thing. Politicians might flounder on environmental objectives, but renewable energy is good business.