Political Upheaval In Germany Is Good News For Ethical Investors

Justin Freeman

German election results

With Wall Street taking a break for the Thanksgiving holiday, attention has naturally turned to the other major markets. Right on cue, Germany has announced a political shake up that looks set to change the way investors view the market. One significant move includes shifting towards a more environmentally friendly agenda that taps into the current zeitgeist for ethical investing.

A surprising coalition of three disparate political parties has resulted in the incumbent Christian Democrats (CDU) losing power and the first new Chancellor for 16 years, Olaf Scholz. He will head up the combined forces of the Social Democrat, Green Party and Free Democrat Party. Angela Merkel, and a lot of the policies associated with her, will leave the political landscape.

A seat at the top table for the Greens hammers home the unlikeliness of Germany backtracking on its move away from nuclear power. Bad news for holders of uranium mining firms could be good news for those with exposure to renewable energy stocks. Nuclear power has been confirmed as off the table at the same time as new policies have been announced regarding coal and other carbon-based energy supplies. The accelerated phase-out of coal now targets 2030 as the date by which that will be “ideally achieved”. That leaves renewables accountable for filling the gap in energy supply for Europe’s largest economy.

Is Now The Time To Buy Renewables?

Industrial giant RWE AG (RWE) looks set to benefit from the new dawn for renewables. The company is the world’s number two in offshore wind power and Europe’s third largest in renewable energy, and in early trading on Thursday, RWE stock was up 3.88% on the day. The intraday price high of EUR 34.31 representing the highest the firm’s stock has printed since April 2021.

RWE Stock Price – Daily Candlestick Chart 2021

RWE Stock Price – Daily Candlestick Chart 2021

Source: IG

RWE chief executive Markus Krebber said the new coalition was an “encouraging outcome”, and the coalition agreement will give the energy transition a “considerable boost”.

The energy supplier continued.

“It is also positive that a large number of very specific proposals have already been developed on how this is to be achieved.

“RWE is confident that these measures, which cover permitting processes, grid connectivity, provision of sites and much more, can provide a huge boost to the expansion of renewable energy.”

Germany’s New Ethical Economy

The change in mood is not limited to clean energy, and other statements confirm this as being something of a paradigm shift for the German economy. The South China Morning Post reported that the coalition text contains more than a dozen references to China, including that Germany will seek China’s cooperation ‘on the basis of human rights’ where possible.

EURUSD Weakness Will Also Help

One old friend of the German economy, a weak currency, might also play a part in the country’s economic revival. The article EURUSD – How Low Can Eurodollar go?  highlights the challenges facing the eurozone currency. There is potential for individual sectors of the economy, such as renewables, to take advantage of improved currency terms and develop their export markets.

 

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Justin Freeman
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