Clean technology and renewable energy trends are a clear investment play and offer opportunities for investors seeking to make a difference or appreciable investment growth, says asset and investment company Foord Asset Management portfolio manager Brian Arcese.
He adds, however, that the strategy needs long-term investment.
Investors must diligently assess investments for long-term returns by analysing their long-term earnings prospects. They should invest only on a deep understanding of the market and valuations, instead of just blindly following market sentiment, he advises.
"Clean technology and renewable energy are poised to be the biggest areas of global capital allocation. The sector should offer investment opportunities in the areas of renewable sources such as solar and wind, green hydrogen as an alternative to natural gas, and infrastructure investments to support electrification.
"However, this does not mean that opportunities will translate into outsized returns. It is easy for investors seeking outsized returns to get caught up in the hype.
"Investors seeking long-term alpha returns (exceeding an index) or just positive returns should be wary of lofty valuations in the clean technology sector," Arcese points out.
There are, nevertheless, some opportunities in better valued companies. Investors should also consider how companies diversify their earnings, he says.