Sustainable Future: shifting to infrastructure and reliable power

What happened

The clean energy sector is entering a new phase. For years, the main challenge was building enough solar panels and wind turbines. That's changing. Now the real challenge is integrating this surge of intermittent power into the system, which requires smarter, more flexible and resilient grids to avoid congestion, blackouts and wasted renewable output.

This shift drove us to reshuffle 30% of our portfolio. We reduced our exposure in solar/wind generation and electric vehicles, moving that money instead into:

1. Companies building and upgrading power grids
2. Reliable 24/7 power sources like nuclear and geothermal (which complement intermittent renewables by providing stability and baseload capacity)
3. Utilities companies leading this transformation

Impact on our Investment Case

The grid takes center stage

Over1,650 GW of renewable projects worldwide are stuck waiting for grid connections. That is more than double all the solar and wind power currently operating globally. It is like having thousands of power plants built, but no way to plug them in.

The reason is simple: the “roads” to deliver electricity are outdated and overwhelmed. Three pieces of equipment are in desperately short supply:

Transformers - They adjust voltage levels to move power safely from plants to homes. They're essential for everything from renewable energy to data centers. The shortage is severe: prices have jumped 70% since 2021, and wait times for large units have ballooned from 1 to 3-5 years.

Switchgear - They are the traffic controllers of the electrical grid, switching power flows and protecting against faults to keep electricity moving safely. Every new solar farm or data center needs them. Prices have risen 60% since 2021, and wait times have stretched from a few months to 2-3 years.

High-voltage cables - The highways for long-distance power transmission, vital for offshore wind and cross-border grids. Demand is outpacing supply globally, with some components now facing 10-year wait times (up from 3-4 years previously).

While solar panels and wind turbine makers face oversupply and shrinking profits, grid equipment manufacturers enjoy full order books, premium pricing, and years of guaranteed demand. Governments are committing massive funds. The UK alone is spending £60bn on grid upgrades. And despite all these efforts and new factories built, relief won’t come soon. Meaningful new supply won't arrive before 2027-2028. Until then, companies making this critical equipment hold all the cards.

Reliable 24/7 power is making a comeback

We've increased our investments in power sources as the grid needs steady, always-on power sources to keep the power on when renewables from solar and wind can’t be delivered.

• Nuclear power is surging back

After years of stagnation, the world is building nuclear reactors again, jumping from about 6 per year in the 2010s to an expected 30 annually this decade. The revival is strongest in Asia, the Middle East, and parts of Europe that are restarting their nuclear programs.

What makes this opportunity compelling? Very few companies worldwide can build nuclear plants. We've invested in one of these rare suppliers, which is already building traditional reactors and is positioned to capitalize on next-generation small modular reactors.

• Geothermal energy offers another solution

Unlike wind or solar, geothermal plants tap into the Earth's heat to generate power 24/7. Critically, while government support for other renewables has been scaled back, geothermal kept its full subsidies in recent U.S. legislation.

The result? Premium buyers like data centers and industrial companies, who need guaranteed clean power every hour of every day, are signing long-term contracts at attractive prices. It's the only zero-carbon renewable that can deliver constant power in regions with suitable geothermal resources.

Shifting our geographic focus to where opportunity is strongest

• South Korea (mid-teens % allocation)

Korea jumped from a tiny position to a significant allocation. The country offers a unique combination: political stability, world-class manufacturers of critical grid equipment, and companies perfectly positioned to export to booming markets worldwide. As the global grid shortage intensifies, Korea's advanced manufacturers are becoming the go-to suppliers for everyone from the U.S. to the Middle East.

• Europe (high-teens % allocation)

This was our most significant increase. Why? Europe has committed over €500 billion to upgrading its power grids this decade, one of the most extensive infrastructure programs in the world. This creates years of guaranteed demand for equipment suppliers and utilities.

• China (mid 20% allocation)

We reduced our positions in China slightly but still maintained significant exposure, more than most of our peers. We kept our exposure to market leaders backed by strong government support.

• United States (low 40% allocation)

We trimmed our U.S. exposure by reducing investments in residential solar companies where competition has intensified. We kept our strongest positions in companies serving large-scale projects.

After reshuffling 30% of the portfolio, here's what the financial picture looks like

Our portfolio companies are expected to grow earnings at about 20% annually over the next three years, which is more than twice the rate of the average global company, despite our shift toward more stable infrastructure plays.

We're not overpaying for this growth. The portfolio trades at similar price multiples to the MSCI World but with double the growth potential. All portfolio companies are profitable and carry manageable debt levels.

This rebalancing allows us to maintain strong growth potential while adding more stable, predictable businesses. We've traded some of the volatility for more visibility, without sacrificing returns.

Our Takeaway

After a few challenging years, the energy transition is hitting its stride, but not where most expect. The world's electricity demand is exploding, driven by EVs to AI data centers, heat pumps, broader industrial expansion, and surging air conditioning use.

We now have plenty of renewable energy, but not the infrastructure to connect and deliver it.  This is where we've positioned ourselves: right at the bottleneck.

We bought companies growing twice as fast as the market average, but at similar prices. With governments committing trillions to infrastructure upgrades and no quick fix for equipment shortages, we're positioned exactly where value is being created.

The energy transition isn't slowing down, just changing direction, and we are following suit.