Meeting the Markets Where They Are
by Adam Bernstein, Impact Analyst
Over the past few years, many people in the investing world have been talking about what is sometimes referred to as a transition economy. This is where a country or region looks to undergo a comprehensive shift from relying on traditional fossil fuel systems to more renewable forms of energy. The implications of a transition economy may also involve broader economic changes, including investments in new technologies, changing industrial / manufacturing practices, and broader regulatory and social adjustments.
Yet, we feel that what has unfolded over the past several years more closely resembles what we would call an addition economy. This is a scenario where, despite the increasing integration of renewable energy sources, overall energy demand has continued to rise, in part due to such factors as new technologies and changing consumer and industrial behaviors.
So, while interest in renewable energy sources like wind and solar is accelerating, as total energy consumption grows, the global energy system’s dependency on fossil fuels isn’t decreasing proportionately. Fossil fuels still account for a large share of the global energy mix due to the expanding overall energy demand driven by economic growth, AI, EV adoption, and increased electrification.
We feel that it is important for investors to have a meaningful dialogue about what this means for the market and how we translate it into our investments because it has real asset allocation implications.
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