And as a result, being an active investor and owning a higher active share is going to be crucial.
One obviously cannot time exactly when the market will move back in the right direction for those renewable energy companies, but this is where being both active and diverse across several sectors will be key.
Sustainable funds should be naturally looking to achieve a high active share given the focus on not only delivering healthy returns but also investing in solutions to the climate crisis.
Given the large indexes’ weightings to US tech, this will ultimately help with diversification and give exposure to those companies where an interest rate cut will produce the strongest reaction.
This in turn will help produce the strong risk-adjusted returns across both the short term and the longer term.
Last year was a good year for sustainable investments, however confidence has not yet returned.
Over the long-term, structural growth themes like the energy transition and resource efficiency remain the strongest investment opportunities ahead and will be supported by consumer demand and government policy providing robust spending in decarbonisation and energy connectivity.
With interest rate cuts in sight, it is crucial to have exposure to these sectors, as it wouldn’t be a surprise to see valuations bounce back going forward.
Claudia Quiroz is head of sustainable investment at Quilter Cheviot
