At first glance, the first half of 2019 was a gloomy time for renewable energy. Global capital investment on wind, solar, and hydropower fell 14% to its lowest level in five years, according to Bloomberg New Energy Finance. This follows two years of declining spending on renewables, based on data from the International Energy Agency.

But we believe that the aggregate capital spending data understates the progress being made by clean energy. In our view, the long-term outlook for investments in renewable energy—both equities and green bonds—remains positive.

* Potentially higher returns are in store for renewable investors. In the EU, for example, carbon prices last week hit their highest levels in over a decade, at EUR 28 a tonne. The price has now climbed more than 250% since the start of 2018. This should lead to more investment in renewable energy and increased spending on energy efficiency.

* Clean energy is becoming progressively less reliant on government subsidies. Much of the recent fall in renewable capital spending has been led by reduced government support, notably in China where clean energy spending fell 39% in the first half of the year. However, we expect renewable sources to become less reliant on subsidies as costs fall. Between 2009 and 2017, prices of solar panels dropped 76% and wind turbines 34%, making them competitive or cheaper than fossil fuels in most major markets.

* Falling costs also explain why the growth of installed capacity for renewables has continued to rise even though the dollar value of investment in green energy has been falling. Meanwhile, we expect renewable investment in China to pick up in the second half, following a successful renewable power auction this week.

* The range of investment options has been increasing. Issuance of bonds used to finance clean energy projects—green bonds—hit a record USD 85bn so far this year. Green bonds as an asset class have gone from nonexistent to a USD 600bn market in just over a decade, and issuance of higher yielding green bonds from emerging markets has also been rising. Liquidity has been improving as well. Over half of the emerging markets' green bond issuance last year was benchmark-sized, at USD 500m or more.So we believe clean energy offers potential for long-term investors. For more details, see our long-term themes on renewable energy and energy efficiency. Green bonds, meanwhile, are becoming an established asset class and have so far been offering comparable returns to conventional bonds, while allowing investors to align their portfolios with their ethical values.