Do US President Trump’s Initial Policy Decisions Put Energy Transition Investments at Fundamental Risk?

No. In President Trump’s first week back in office, he issued several executive orders related to climate and energy. These initial actions aim to reverse President Biden’s climate policies by withdrawing the United States from the Paris Climate Agreement (for the second time), curtailing growth of the clean energy sector, and boosting US fossil fuel production via declaration of an “energy emergency.” Still, we believe the long-term investment thesis on the energy transition remains intact.

We believe one key reason is because the energy transition train has already left the station. Solar and wind, combined, generated more electricity than coal in the United States for the first time in 2024, and the growth rates of both renewable technologies outpaced the growth rate of gas generation. The transition has been—and will continue to be—driven by both market fundamentals and policy design. Cost, performance, and customer value proposition are still key factors. Most established clean energy sectors should still grow, though we recognize the pace of change may moderate in certain sectors, such as offshore wind. As we’ve previously noted, private capital should continue to flow to innovative, cost-effective, and scalable solutions that address energy needs globally.

Another reason we believe the transition remains intact is we have seen a version of this movie before. Despite the first Trump administration’s policies, global renewable energy production still grew at a pace 5.5x that of overall energy production. And despite the Biden administration’s pro-climate policies, the United States still became the largest oil & gas producer in the world. Market data also illustrate this apparent contradiction. For instance, the WilderHill Clean Energy Index outperformed the S&P 500 Energy Index by 516 percentage points (ppts) during Trump’s first presidency, only to underperform by 247 ppts in the Biden era. While conditions may be different this time, the point is that energy markets are driven by a host of factors, including technological advancement, economic growth, interest rates, and local dynamics, in addition to policy.

US power demand growth will also help fuel the transition. The recently announced Project Stargate set out plans to invest up to $500 billion by 2029 in data centers and energy infrastructure to support the American AI industry. While DeepSeek—the new AI language model that has captured the market’s attention in recent days—highlights that AI assumptions are indeed assumptions, many still expect US power demand to grow by 2.5%–3.0% annually for some time. This is a higher level compared to the 0.5% annual growth between 2001 and 2024. Solar, in particular, should benefit, given cost competitiveness compared to fossil power generation. According to Lazard, unsubsidized utility scale solar’s levelized cost of energy (LCOE) are $29/MWh to $92/MWh and onshore wind LCOE range from $27/MWh to $73/MWh. This compares favorably to gas-fired generation, which has LCOE of $45/MWh to $108/MWh.

Some transition investments likely do have a more difficult path, given the shift in policy. These include US wind (and, in particular, offshore wind), US electric vehicles (EV), and some newer technologies that depend on US governmental programs, such as the Department of Energy’s (DOE) Loan Programs Office to finance early projects. While the US executive branch will likely change fuel economy standards and freeze DOE funding, other actions such as repealing tax credits would require Congressional action. These actions still face an uncertain outcome since most new clean energy and EV manufacturing jobs are located in Republican districts. While policy shifts can present headwinds, they are one force in an industry driven by many forces.

Other less obvious energy technologies, such as geothermal and nuclear, as well as grid infrastructure may benefit. Geothermal and nuclear may also see tailwinds as sources of low-carbon baseload power, with the former having the additional benefit of employing fossil fuel industry skilled labor. With growing demands on the power grid, any focus on grid modernization and transmission infrastructure coupled with the Trump’s administration’s focus on reducing permitting bottlenecks, which have hindered development for all energy sectors, may unlock long-term boons for the clean energy sector.

Ultimately, we believe investors should continue to focus on unsubsidized unit economics and market fundamentals. Managers that underwrite investments with that lens should be well-positioned to deliver value regardless of near-term policy shifts. Also, investors should consider a comprehensive approach to the energy transition, especially since energy touches every sector in the economy, including agriculture, industrials, logistics, and technology. In every sector, there are value-creation opportunities to invest in innovative solutions to drive resource efficiency and to optimize existing systems. Indeed, investors need to navigate carefully and select managers that are clear-eyed, rigorous, and flexible in their approach. But the long-term thesis supporting energy transition investments should remain Trump-proof.

Liqian Ma, Head of Sustainable and Impact Investing Research