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Environmental Solutions Outlook

Outlook
14 July 2025

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Latest Environmental Solutions outlook. 

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The second quarter began with some extreme volatility for global equities caused by the Trump Administration’s erratic and at times extreme tariff policies. But since then equity markets have regathered their poise, as proposed tariffs have been delayed and watered down. That said, the backdrop remains uncertain with many risk factors to contend with, including stretched government finances in many major economies, elevated geopolitical tensions in many parts of the world, and a lack of visibility relating to the impact of the One Big Beautiful Bill on the environmental space. That said, generally the direction of travel in terms of US policy is less positive for environmental themes. Whilst the portfolio has very little exposure to the specific policies being discussed in the Bill, it is likely to impact sentiment in the environmental space.

We continue to be overweight Europe, where markets have been performing relatively better than the US in recent months. Macro momentum has been improving from a very depressed starting point, valuations remain relatively low, and policy is more supportive. We also have significant exposure to Emerging Markets, which should benefit from a weaker dollar that provides scope for central banks to spur growth by cutting rates.

Over the quarter we bought Elia, a grid company operating in Belgium and Germany. It is benefiting from increased investment to shore up grids for growth in electrification. Elia stands out as being one of the fastest-growing grid stories, with very significant regulatory asset base growth expected. There had been an overhang on the stock up until recently because Elia needed to raise capital to fund this growth. However, after undertaking a rights issue and a private placement, this overhang has cleared, and we now believe the stock is better placed to perform well.

Another purchase was CATL, which has leading positions in EV batteries and energy storage solutions. Importantly, it has been consolidating these leadership positions versus Korean competitors, and has positive earnings momentum. Despite this, the stock trades on just 15x earnings. CATL recently announced a Hong Kong IPO, which we believe will drive more interest and a re-rating in the shares.

Conversely, we took some profits in KWS after strong performance and sold Cadeler due to increasing concerns about the outlook for offshore wind as developers are cutting their capital allocations.

Important Information:

Nothing in this document constitutes or should be treated as investment advice or an offer to buy or sell any security or other investment. TT is authorised and regulated in the United Kingdom by the Financial Conduct Authority (FCA).

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