The outcome of the US presidential election could well increase uncertainty and market volatility in the short term, but is unlikely to have a broad, long-lasting impact on smart energy-related sectors in our opinion. This might surprise some investors, given Donald Trump’s positive stance on fossil fuels and how closely Democrat Kamala Harris is tied to the clean energy-promoting Inflation Reduction Act (IRA), passed under the current Biden administration in 2022. The IRA was designed to promote clean energy solutions, while boosting local manufacturing to improve the security of supply.

Trimming back the IRA?

While both candidates’ spending plans have increased, creating concerns about sharp rises in the US national debt, the election of Trump would likely have economic and fiscal implications well beyond clean energy; not least, his stated policies would increase US government debt to levels that are widely considered to be unsustainable. It is unclear whether his policy of substantially increasing import tariffs would meaningfully cover his spending plans. However, it will have a considerable impact on many supply chains and very likely drive up US inflation. Increased expectations of a Trump win have been a factor in the increase in US bond yields over the past few weeks. The potential impact of the appointment of Elon Musk to the planned government efficiency commission is also unclear.

There has also been speculation about a Republican government repealing part(s) of the IRA, partly to offset the budgetary impact of the announced tax cuts. A total repeal would need support from both the House and Senate, requiring a so-called ‘red sweep’ with the Republicans taking both chambers. Interestingly, the impact of the IRA has so far been mostly beneficial to Republican rather than Democrat-controlled states. This includes new permits of investment and production tax credits for wind and solar (ITCs and PTCs) and the buildup of battery manufacturing facilities. Bloomberg estimates that c80% of CleanTech manufacturing investment has gone to red (i.e. majority Republican) states1. As a consequence of the IRA, the CleanTech-related workforce has increased rapidly and now numbers close to 3.5 million – an electoral segment that it would be politically risky to alienate2.

Interestingly, the impact of the Inflation Reduction Act has so far been mostly beneficial to Republican rather than Democrat-controlled states.

The main growth drivers of electricity demand in the US are the new power-hungry AI data centres of the four big hyperscalers (Amazon*, Alphabet (Google)*, Meta Platforms (Facebook)* and Microsoft*). The ‘big four’ all have commitments to cover their electricity needs by carbon-neutral energy only and these are essentially covered through clean power purchase agreements (PPAs).

Over the past five years, the big four alone were responsible for c40% of the total additional demand for the US utility-scale solar market3. Given their ambitious expansion plans and wish to significantly increase their carbon-free electricity supply, these companies have recently announced meaningful new supply deals, including nuclear energy capacity starting in the 2030s. Some of these involve new SMR (small modular reactor) technologies, many of which have not yet been approved and/or still need to demonstrate economic and technical viability. We are sceptical about whether these announcements will come to fruition given the vast regulatory, economic and technical hurdles. On the other hand, we see the buildout of renewable power generation in combination with battery storage continuing unabated. Given the important time-to-market constraints as well as greater potential for cost reduction, we remain very constructive on further solar deployments.

Besides the potential repeal of the $7,500 subsidies for buying electric vehicles, we expect the overall protectionist approach adopted by the Biden administration not to be seriously changed under a new Republican administration. Being in fact a ‘buy America’ programme, we would instead expect some aspects of the IRA to become even more accentuated under a second Trump presidency. This would apply particularly to the onshoring of production and the protection of critical minerals for manufacturing batteries and electric motors.

Tariff wars

Many of the IRA's measures target a lower supply dependency on China now it has become a dominant supplier of clean energy solutions, be it for solar power, batteries or electric vehicles. Reshoring and the application of tariffs to Chinese imports are policies shared by both parties. This might become even more pronounced under a Trump government, as indicated by his announced policy to introduce up to 60% import tariffs on goods from China.

The choice of JD Vance by Trump as his vice-presidential running mate reinforces our view. The senator has mostly focused on opposing China and promoting US domestic manufacturing. He seems to oppose the electric vehicle subsidies. In our opinion, this would be a symbolic but limited IRA ‘repeal’ to undo the Democrats' work without affecting clean energy drastically, while still being down the list of key issues for Trump and Vance.

In fact, the IRA is far from the minds of most American voters, who are instead focusing on immigration, the economy, tax cuts and reproductive rights. We would therefore mostly expect a Trump administration to use its political goodwill to push through tax cuts and stricter immigration laws if elected.

Portfolio context

While the upcoming election has had an impact on certain subsets of the clean energy sector, with investors preferring to take a ‘wait and see’ approach, we see few long-term impacts on any of our portfolio holdings. This is also because we favour companies where we see strong bipartisan support, and/or do not need any further protective measures in order to thrive. This is particularly true for those companies driving the global energy sector towards electrification and grid optimisation, with the new demand growth drivers of data centres, electric vehicles and heat pumps. Our portfolio holdings tend to show a wide technical moat, reflected by high R&D spending and intellectual property, and represent interesting subsegments of structural growth, addressing global end markets.

* not held


1. https://www.bloomberg.com/graphics/2024-opinion-biden-ira-sends-green-energy-investment-republican-districts/

2. https://e2.org/reports/clean-jobs-america-2024/

3. UBS Global Research, “100% Renewable Powered AI Data Centers”, 21 May 2024

Risks:

  • Capital is at risk and there is no guarantee the Fund will achieve its objective. Investors should make sure their attitude towards risk is aligned with the risk profile of the Fund before investing.
  • Past performance is not a reliable guide to future performance. The value of investments may go down as well as up and you might get back less than you originally invested as there is no guarantee in place.
  • The value of a fund’s assets may be affected by uncertainties such as international political developments, market sentiment, economic conditions, changes in government policies, restrictions on foreign investment and currency repatriation, currency fluctuations and other developments in the laws and regulations of countries in which investment may be made. Please see the Fund’s Prospectus for details of all risks.
  • The Fund invests in the shares of companies and share prices can rise or fall due to several factors affecting global stock markets.
  • The Fund uses derivatives which carry the risk of reduced liquidity, substantial loss, and increased volatility in adverse market conditions, such as failure amongst market participants.
  • The Fund invests in assets denominated in currencies other than the Fund's base currency. Changes in exchange rates may have a negative impact on the Fund's investments. If the share class currency is different from the currency of the country in which you reside, exchange rate fluctuations may affect your returns when converted into your local currency.
  • The Fund invests in emerging markets where there is a greater risk of volatility due to political and economic uncertainties, restrictions on foreign investment, currency repatriation and currency fluctuations. Developing markets are typically less liquid which may result in large price movements to the Fund.
  • The Fund invests in a relatively concentrated number of companies and industries based in one sector. This focused strategy can produce high gains but can also lead to significant losses. The Fund may be less diversified than other investment funds.


Important Information
: This is a marketing communication and does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments. Any opinions expressed may change. This document does not contain information material to the investment objectives or financial needs of the recipient. This document is not advice on legal, taxation or investment matters. Tax treatment depends on personal circumstances. Investors must rely on their own examination of the fund or seek advice. Investment may be restricted in other countries and as such, any individual who receives this document must make themselves aware of their respective jurisdiction and observe any restrictions.

A decision may be taken at any time to terminate the marketing of the Fund in any EEA Member State in which it is currently marketed. Shareholders in the affected EEA Member State will be given notification of any decision and provided the opportunity to redeem their interests in the Fund, free of any charges or deductions, for at least 30 working days from the date of the notification.

Investment in the Fund is an investment in the shares of the Fund and not in the underlying investments of the Fund. Further information about fund characteristics and any associated risks can be found in the Fund’s Key Investor Document or Key Investor Information Document (“KID” or “KIID”), the Prospectus (and relevant Fund Supplement), the Articles of Association and the Annual and Semi-Annual Reports. Please refer to these documents before making any final investment decisions.  Investment in the Fund concerns shares of the Fund and not in the underlying investments of the Fund. These documents are available free of charge at Polar Capital Funds plc, Georges Court, 54-62 Townsend Street, Dublin 2, Ireland, via email by contacting Investor-Relations@polarcapitalfunds.com or at www.polarcapital.co.uk. The KID is available in the languages of all EEA member states in which the Fund is registered for sale; the Prospectus, Annual and Semi-Annual Reports and KIID are available in English.

The Fund promotes environmental and/or social characteristics and is classified as an Article 9 fund under the EU’s Sustainable Finance Disclosure Regulation (“SFDR”). For more information, please see the Fund Supplement and Prospectus or by visiting www.polarcapital.co.uk.

ESG and sustainability characteristics are further detailed on the investment manager’s websites. - https://www.polarcapital.co.uk/ESG-and-Sustainability/Responsible-Investing/.

A summary of investor rights associated with investment in the Fund is available online at the above website, or by contacting the above email address. A link to the document can be found here.

This document is provided and approved by both Polar Capital LLP and Polar Capital (Europe) SAS.

Polar Capital LLP is authorised and regulated by the Financial Conduct Authority (“FCA”) in the United Kingdom, and the Securities and Exchange Commission (“SEC”) in the United States. Polar Capital LLP’s registered address is 16 Palace Street, London, SW1E 5JD, United Kingdom.

Polar Capital (Europe) SAS is authorised and regulated by the Autorité des marchés financiers (AMF) in France. Polar Capital (Europe) SAS’s registered address is 18 Rue de Londres, Paris 75009, France.

Polar Capital LLP is a registered Investment Advisor with the SEC. Polar Capital LLP is the investment manager and promoter of Polar Capital Funds plc – an open-ended investment company with variable capital and with segregated liability between its sub-funds – incorporated in Ireland, authorised by the Central Bank of Ireland and recognised by the FCA. Bridge Fund Management Limited acts as management company and is regulated by the Central Bank of Ireland. Registered Address: Percy Exchange, 8/34 Percy Place, Dublin 4, Ireland.

Polar Capital (Switzerland) AG is the investment manager of the Fund and is authorised and regulated by the Swiss Financial Market Supervisory Authority (“FINMA”). Registered address Klausstrasse 4, 8008, Zurich, Switzerland. Bridge Fund Management Limited acts as management company and is regulated by the Central Bank of Ireland. Registered Address: Percy Exchange, 8/34 Percy Place, Dublin 4, Ireland.

Benchmark: The Fund is actively managed and uses the MSCI ACWI Net TR Index. The benchmark has been chosen as it is generally considered to be representative of the investment universe in which the Fund invests. The performance of the Fund is likely to differ from the performance of the benchmark as the holdings, weightings and asset allocation will be different. Investors should carefully consider these differences when making comparisons. Further information about the benchmark can be found https://www.msci. com/acwi. The benchmark is provided by an administrator on the European Securities and Markets Authority (ESMA) register of benchmarks which includes details of all authorised, registered, recognised and endorsed EU and third country benchmark administrators together with their national competent authorities.

Third-party Data: Some information contained herein has been obtained from third party sources and has not been independently verified by Polar Capital. Neither Polar Capital nor any other party involved in or related to compiling, computing or creating the data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any data contained herein.

Country Specific Disclaimers: Please be aware that not every share class of every fund is available in all jurisdictions. When considering an investment into the Fund, you should make yourself aware of the relevant financial, legal and tax implications. Neither Polar Capital LLP, Polar Capital Funds PLC or Polar Capital (Switzerland) AG shall be held liable for, and accept no liability for, the use or misuse of this document.

None

The outcome of the US presidential election could well increase uncertainty and market volatility in the short term, but is unlikely to have a broad, long-lasting impact on smart energy-related sectors in our opinion. This might surprise some investors, given Donald Trump’s positive stance on fossil fuels and how closely Democrat Kamala Harris is tied to the clean energy-promoting Inflation Reduction Act (IRA), passed under the current Biden administration in 2022. The IRA was designed to promote clean energy solutions, while boosting local manufacturing to improve the security of supply.

Trimming back the IRA?

While both candidates’ spending plans have increased, creating concerns about sharp rises in the US national debt, the election of Trump would likely have economic and fiscal implications well beyond clean energy; not least, his stated policies would increase US government debt to levels that are widely considered to be unsustainable. It is unclear whether his policy of substantially increasing import tariffs would meaningfully cover his spending plans. However, it will have a considerable impact on many supply chains and very likely drive up US inflation. Increased expectations of a Trump win have been a factor in the increase in US bond yields over the past few weeks. The potential impact of the appointment of Elon Musk to the planned government efficiency commission is also unclear.

There has also been speculation about a Republican government repealing part(s) of the IRA, partly to offset the budgetary impact of the announced tax cuts. A total repeal would need support from both the House and Senate, requiring a so-called ‘red sweep’ with the Republicans taking both chambers. Interestingly, the impact of the IRA has so far been mostly beneficial to Republican rather than Democrat-controlled states. This includes new permits of investment and production tax credits for wind and solar (ITCs and PTCs) and the buildup of battery manufacturing facilities. Bloomberg estimates that c80% of CleanTech manufacturing investment has gone to red (i.e. majority Republican) states1. As a consequence of the IRA, the CleanTech-related workforce has increased rapidly and now numbers close to 3.5 million – an electoral segment that it would be politically risky to alienate2.

Interestingly, the impact of the Inflation Reduction Act has so far been mostly beneficial to Republican rather than Democrat-controlled states.

The main growth drivers of electricity demand in the US are the new power-hungry AI data centres of the four big hyperscalers (Amazon*, Alphabet (Google)*, Meta Platforms (Facebook)* and Microsoft*). The ‘big four’ all have commitments to cover their electricity needs by carbon-neutral energy only and these are essentially covered through clean power purchase agreements (PPAs).

Over the past five years, the big four alone were responsible for c40% of the total additional demand for the US utility-scale solar market3. Given their ambitious expansion plans and wish to significantly increase their carbon-free electricity supply, these companies have recently announced meaningful new supply deals, including nuclear energy capacity starting in the 2030s. Some of these involve new SMR (small modular reactor) technologies, many of which have not yet been approved and/or still need to demonstrate economic and technical viability. We are sceptical about whether these announcements will come to fruition given the vast regulatory, economic and technical hurdles. On the other hand, we see the buildout of renewable power generation in combination with battery storage continuing unabated. Given the important time-to-market constraints as well as greater potential for cost reduction, we remain very constructive on further solar deployments.

Besides the potential repeal of the $7,500 subsidies for buying electric vehicles, we expect the overall protectionist approach adopted by the Biden administration not to be seriously changed under a new Republican administration. Being in fact a ‘buy America’ programme, we would instead expect some aspects of the IRA to become even more accentuated under a second Trump presidency. This would apply particularly to the onshoring of production and the protection of critical minerals for manufacturing batteries and electric motors.

Tariff wars

Many of the IRA's measures target a lower supply dependency on China now it has become a dominant supplier of clean energy solutions, be it for solar power, batteries or electric vehicles. Reshoring and the application of tariffs to Chinese imports are policies shared by both parties. This might become even more pronounced under a Trump government, as indicated by his announced policy to introduce up to 60% import tariffs on goods from China.

The choice of JD Vance by Trump as his vice-presidential running mate reinforces our view. The senator has mostly focused on opposing China and promoting US domestic manufacturing. He seems to oppose the electric vehicle subsidies. In our opinion, this would be a symbolic but limited IRA ‘repeal’ to undo the Democrats' work without affecting clean energy drastically, while still being down the list of key issues for Trump and Vance.

In fact, the IRA is far from the minds of most American voters, who are instead focusing on immigration, the economy, tax cuts and reproductive rights. We would therefore mostly expect a Trump administration to use its political goodwill to push through tax cuts and stricter immigration laws if elected.

Portfolio context

While the upcoming election has had an impact on certain subsets of the clean energy sector, with investors preferring to take a ‘wait and see’ approach, we see few long-term impacts on any of our portfolio holdings. This is also because we favour companies where we see strong bipartisan support, and/or do not need any further protective measures in order to thrive. This is particularly true for those companies driving the global energy sector towards electrification and grid optimisation, with the new demand growth drivers of data centres, electric vehicles and heat pumps. Our portfolio holdings tend to show a wide technical moat, reflected by high R&D spending and intellectual property, and represent interesting subsegments of structural growth, addressing global end markets.

* not held


1. https://www.bloomberg.com/graphics/2024-opinion-biden-ira-sends-green-energy-investment-republican-districts/

2. https://e2.org/reports/clean-jobs-america-2024/

3. UBS Global Research, “100% Renewable Powered AI Data Centers”, 21 May 2024

Related Fund

Risks:

  • Capital is at risk and there is no guarantee the Fund will achieve its objective. Investors should make sure their attitude towards risk is aligned with the risk profile of the Fund before investing.
  • Past performance is not a reliable guide to future performance. The value of investments may go down as well as up and you might get back less than you originally invested as there is no guarantee in place.
  • The value of a fund’s assets may be affected by uncertainties such as international political developments, market sentiment, economic conditions, changes in government policies, restrictions on foreign investment and currency repatriation, currency fluctuations and other developments in the laws and regulations of countries in which investment may be made. Please see the Fund’s Prospectus for details of all risks.
  • The Fund invests in the shares of companies and share prices can rise or fall due to several factors affecting global stock markets.
  • The Fund uses derivatives which carry the risk of reduced liquidity, substantial loss, and increased volatility in adverse market conditions, such as failure amongst market participants.
  • The Fund invests in assets denominated in currencies other than the Fund's base currency. Changes in exchange rates may have a negative impact on the Fund's investments. If the share class currency is different from the currency of the country in which you reside, exchange rate fluctuations may affect your returns when converted into your local currency.
  • The Fund invests in emerging markets where there is a greater risk of volatility due to political and economic uncertainties, restrictions on foreign investment, currency repatriation and currency fluctuations. Developing markets are typically less liquid which may result in large price movements to the Fund.
  • The Fund invests in a relatively concentrated number of companies and industries based in one sector. This focused strategy can produce high gains but can also lead to significant losses. The Fund may be less diversified than other investment funds.


Important Information
: This is a marketing communication and does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments. Any opinions expressed may change. This document does not contain information material to the investment objectives or financial needs of the recipient. This document is not advice on legal, taxation or investment matters. Tax treatment depends on personal circumstances. Investors must rely on their own examination of the fund or seek advice. Investment may be restricted in other countries and as such, any individual who receives this document must make themselves aware of their respective jurisdiction and observe any restrictions.

A decision may be taken at any time to terminate the marketing of the Fund in any EEA Member State in which it is currently marketed. Shareholders in the affected EEA Member State will be given notification of any decision and provided the opportunity to redeem their interests in the Fund, free of any charges or deductions, for at least 30 working days from the date of the notification.

Investment in the Fund is an investment in the shares of the Fund and not in the underlying investments of the Fund. Further information about fund characteristics and any associated risks can be found in the Fund’s Key Investor Document or Key Investor Information Document (“KID” or “KIID”), the Prospectus (and relevant Fund Supplement), the Articles of Association and the Annual and Semi-Annual Reports. Please refer to these documents before making any final investment decisions.  Investment in the Fund concerns shares of the Fund and not in the underlying investments of the Fund. These documents are available free of charge at Polar Capital Funds plc, Georges Court, 54-62 Townsend Street, Dublin 2, Ireland, via email by contacting Investor-Relations@polarcapitalfunds.com or at www.polarcapital.co.uk. The KID is available in the languages of all EEA member states in which the Fund is registered for sale; the Prospectus, Annual and Semi-Annual Reports and KIID are available in English.

The Fund promotes environmental and/or social characteristics and is classified as an Article 9 fund under the EU’s Sustainable Finance Disclosure Regulation (“SFDR”). For more information, please see the Fund Supplement and Prospectus or by visiting www.polarcapital.co.uk.

ESG and sustainability characteristics are further detailed on the investment manager’s websites. - https://www.polarcapital.co.uk/ESG-and-Sustainability/Responsible-Investing/.

A summary of investor rights associated with investment in the Fund is available online at the above website, or by contacting the above email address. A link to the document can be found here.

This document is provided and approved by both Polar Capital LLP and Polar Capital (Europe) SAS.

Polar Capital LLP is authorised and regulated by the Financial Conduct Authority (“FCA”) in the United Kingdom, and the Securities and Exchange Commission (“SEC”) in the United States. Polar Capital LLP’s registered address is 16 Palace Street, London, SW1E 5JD, United Kingdom.

Polar Capital (Europe) SAS is authorised and regulated by the Autorité des marchés financiers (AMF) in France. Polar Capital (Europe) SAS’s registered address is 18 Rue de Londres, Paris 75009, France.

Polar Capital LLP is a registered Investment Advisor with the SEC. Polar Capital LLP is the investment manager and promoter of Polar Capital Funds plc – an open-ended investment company with variable capital and with segregated liability between its sub-funds – incorporated in Ireland, authorised by the Central Bank of Ireland and recognised by the FCA. Bridge Fund Management Limited acts as management company and is regulated by the Central Bank of Ireland. Registered Address: Percy Exchange, 8/34 Percy Place, Dublin 4, Ireland.

Polar Capital (Switzerland) AG is the investment manager of the Fund and is authorised and regulated by the Swiss Financial Market Supervisory Authority (“FINMA”). Registered address Klausstrasse 4, 8008, Zurich, Switzerland. Bridge Fund Management Limited acts as management company and is regulated by the Central Bank of Ireland. Registered Address: Percy Exchange, 8/34 Percy Place, Dublin 4, Ireland.

Benchmark: The Fund is actively managed and uses the MSCI ACWI Net TR Index. The benchmark has been chosen as it is generally considered to be representative of the investment universe in which the Fund invests. The performance of the Fund is likely to differ from the performance of the benchmark as the holdings, weightings and asset allocation will be different. Investors should carefully consider these differences when making comparisons. Further information about the benchmark can be found https://www.msci. com/acwi. The benchmark is provided by an administrator on the European Securities and Markets Authority (ESMA) register of benchmarks which includes details of all authorised, registered, recognised and endorsed EU and third country benchmark administrators together with their national competent authorities.

Third-party Data: Some information contained herein has been obtained from third party sources and has not been independently verified by Polar Capital. Neither Polar Capital nor any other party involved in or related to compiling, computing or creating the data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any data contained herein.

Country Specific Disclaimers: Please be aware that not every share class of every fund is available in all jurisdictions. When considering an investment into the Fund, you should make yourself aware of the relevant financial, legal and tax implications. Neither Polar Capital LLP, Polar Capital Funds PLC or Polar Capital (Switzerland) AG shall be held liable for, and accept no liability for, the use or misuse of this document.