In the current environment of health and economic uncertainty and, above all, of high public debt and negative real interest rates (net of inflation), understanding the impacts of monetary policy is more important than ever for optimising economic decisions across many business areas. Its influence is particularly strong on valuations and prices of a host of assets, from real estate to financials, to non-conventional assets such as private equity and commodities.
We have observed the noteworthy upward effect of monetary policy on the price of many assets, one of which has been particularly popular for some time now: renewable energy. In this report, we define the context of monetary policy required to support the current valuations of renewable energy companies and take a stance on whether they are realistic or not. We note the potential risks that should be monitored within our central scenario. Finally, we run a sensitivity analysis of renewables’ current valuation to different inflation and sovereign bond rates.