Trump's inauguration sparked a wave of backlash against ESG, but it did not hinder the continued bullishness of asset management giants in the energy transition subsector.

After seeing wind power and CECEP Solar Energy stocks plummet hours after Trump won the election, asset management companies are now turning their attention to a sector of green transformation that they say will ignore the anti-ESG agenda of the president-elect: the power grid. The day after the election, analysts at Morgan Stanley told clients that the power grid and the equipment needed to build it are now "among the best-positioned subsectors in the energy transition." This call has paid off. Since the election on November 5th, a key stock market index measuring transmission grid equipment has risen by about 6%, while the broader S&P Global, Inc. Clean Energy Fuels Corp. index has fallen by about one-tenth. Asian and European suppliers, a large portion of whose revenue comes from the US market, have also seen rebounds, with Japan's Hitachi Corporation rising by over 8% during the same period. Fund managers say that investing in American Electric Power Company, Inc. and the power grid is a way to mitigate the impact of tariffs on other industries. With Trump's protectionist policies seeming to force more manufacturing back to the US, the demand for energy in the US is expected to surge, providing further reasons for investment. "We are very bullish on US power demand," said Ran Zhou, portfolio manager at New York-based hedge fund Electron Capital Partners LLC, "with a focus on long-term clean energy." Since the election on November 5th, companies developing power grid equipment have seen their stock prices rise, including Eaton Corp. Plc (ETN.US), Rockwell Automation, Inc. (ROK.US), and AMETEK, Inc. (AME.US), all of which have risen by over 6%. Emerson Electric Co. (EMR.US) has risen by over 7%. Even before the US election, companies related to the power grid had outperformed other sectors in the green industry. The NASDAQ OMX Clean Edge Smart Grid Infrastructure Index rose by 20% last year. Asset management companies interviewed say that under the push of Trump's tariffs, larger US manufacturing is likely to trigger a new wave of growth in US power grid stocks. Trump has made it clear that he wants to rescind unused funds from the Biden administration's landmark climate law, the 2022 Inflation Reduction Act. His support for fossil fuels has sparked concern among green investors, who fear that a Trump presidency will hinder the development of renewable energy projects in the US. However, at the same time, the president-elect has promised that US companies can access cheap electricity, and analysts say that this will not be possible without investing in renewable energy. US Energy Corp. policies are changing, and demand is at a historic high. Consultancy firm Wood Mackenzie estimates that the US is currently facing the largest energy consumption growth in decades, with energy consumption in some regions expected to increase by 15% in the next five years. Much of this demand will come from tech companies building data centers to drive the development of artificial intelligence. In recent months, Amazon.com, Inc. (AMZN.US), Alphabet Inc. Class C (GOOGL.US), and Microsoft Corporation (MSFT.US) have each announced nuclear energy deals to power their operations with carbon-free electricity. Analysts at Morgan Stanley wrote in a report released on the second day of the US election that current estimates of the renewable energy market have not taken into account the further changes in renewable energy demand from the data center market. Under Biden's leadership, the development of the power grid has received over $300 billion in government support. In May of this year, US regulators finalized regulations implementing the largest industry reform in at least a decade, aimed at accelerating the construction of the power grid. Jerry Goh, investment director at Abrdn Plc, says that the upgrading of the power grid over the next two to three years will benefit global equipment manufacturers. He added that this is because US production is insufficient, and equipment "backlogs are increasing, so it's a fairly large narrative." The NASDAQ Power Grid Index currently has a forecasted P/E ratio of 20.3. Although this valuation is high relative to global benchmark indices, it is still close to the average level of the past decade, and compiled data shows that earnings per share are expected to increase by about 11% in the next year. Yi Shi, portfolio manager at Pictet Asset Management, says that the company's Clean Energy Fuels Corp. transformation fund had already invested in companies catering to the needs of the American power grid before the election and has no intention of withdrawing funds. Shi said, "We not only focus on overall valuations, but also on potential profit growth."