Earth Overshoot Day nears but is the clean energy rebound real?

The 24^th July marks Earth Overshoot Day, the depressing annual reminder that the world continues to live beyond its means. It is the day by which the earth has used up all the natural resources it can generate in a year, meaning the rest of the year is spent borrowing from the future. 

The Footprint Network calculates the date and also calculates when the day would fall if we lived like certain countries. That’s bad news for Luxembourg, which would use up the planet’s resources by 17 February. Unsurprisingly, the US does little better (13 March). The UK fares surprisingly well relative to its international peers (20 May), but in reality, we should all be living like the Indonesians or Uruguayans who make their resources last almost to the end of the year*.

Against this backdrop, the UK continues to plough ahead with its net zero targets, despite political opposition from groups such as Reform. However, it has not been a smooth ride. Energy Secretary Ed Miliband has recently had to take action to remove Chinese solar panels from the UK supply chain, which could make the UK’s net zero push more expensive. 

If it is not smooth in the UK, it is even less so in the US. Donald Trump recently cancelled subsidies for wind and solar. “We don’t want wind, and we don’t want solar, because they’re a blight on our country,” Trump said during a cabinet meeting on 8 July. “They hurt our country very badly.” 

This political ambivalence has contributed to weak performance from the clean energy sector. It also struggled with inflation, which raised its build costs and made certain projects uneconomic. However, there have been the smallest of green shoots in recent months. The iShares Global Clean Energy ETF, which has been a proxy for the health of the clean energy sector, is up 16% year-to-date**.

A similar phenomenon has been evident in the renewable energy infrastructure investment trust sector. Trusts in the IT Renewable Energy Infrastructure sector are up 21.5% over the past six months and 17.4% over the past three months***. Corporate activity in the sector has been picking up, with Downing Renewables & Infrastructure the latest trust to be bought. It was acquired by Bagnall Energy in June. Foresight Group’s acquisition of Battery Energy Storage Solutions (BESS) owner Harmony Energy also completed in June.

William Argent, manager of the VT Gravis Clean Energy Income fund, which invests in a portfolio of renewable energy and energy-efficiency related projects, says: “This M&A activity is very positive for our companies’ share prices. We’ve said for some time that if public markets don’t rate these companies appropriately, then someone else will step in, and that’s exactly what has happened. We’re active investors and have been working hard to encourage boards and companies to get the best price that reflects the true value of these high-quality platforms.”

He believes infrastructure valuations may be bottoming out: “Interest rate expectations have reset and although expectations for the number of cuts may have been too high in 2024 and ultimately led to the market being disappointed, we think recent economic and softening labour data paves the way for further cuts in 2025.” He is also encouraged by the policy clarity that has emerged in the UK over the past year across clean energy, water, and health. 

Another option is the Ninety One Global Environment fund. This has provided a smoother ride than some of its peers during the difficult period for the sector, but has not bounced as strongly. It is up 8.9% for the year to date^. It is a global fund, with 34% in Europe and 30% in the US^. 

Manager Deirdre Cooper still thinks the sector has further to go: “The equity market is underappreciating our companies’ potential for long-term structural growth and stable returns – a consequence of extreme negative sentiment towards the decarbonisation theme, partly due to high interest rates. As rates decline towards neutral in the future, and as investors seek growth opportunities amid the potential for a cyclical growth decline, we expect opportunities for valuation re-ratings. 

“In the meantime, we are seeing compelling opportunities to own high-quality businesses that are leveraged to decarbonisation at valuations we consider highly attractive….We expect these companies will provide a valuable uncorrelated growth footprint when decarbonisation reaccelerates.”

The clean energy theme has been in the wilderness, but there are green shoots of recovery in spite of continued policy uncertainty in the US. Decarbonisation remains a long-term necessity, which is likely to support the renewable sector’s long-term growth.  

*Source: Earth Overshoot Day, 2025

**Source: iShares, at 30 June 2025

***Source: FE fundinfo, at 15 July 2025

^Source: fund factsheet, 30 June 2025