Fidelity: How Investors Can Approach the Energy Transition

The decarbonisation of the economy brings about fresh challenges, but with them also comes fresh opportunities for investors.

This is the view of Fidelity International — whose parent company is American multinational financial services corporation Fidelity Investments — who offers insights into how investors can ready themselves for the energy transition, how real estate is leading the way and how to invest in transition materials.

In an exclusive webinar, Investing in the Energy Transition, three Fidelity International executives share their expertise. They are:

• Gabriel Wilson-Otto, Head of Sustainable Investing Strategy
• Kim Politzer, Director of Research, European Real Estate
• James Richards, Portfolio Manager

Highlights from Fidelity International’s webinar: Investing in the Energy Transition

Throughout the briefing, Fidelity International’s three spokespeople guided the audience through a number of topics around the energy transition, investments and climate change.

Gabriel began by talking about tackling climate change before handing over to Kim who detailed how real estate is leading the way in the energy transition and finally James, who shared his expertise on investing in commodities for the energy transition, a space he is personally passionate about.

Investing in the energy transition 

“What we’re seeing is increasing demand for energy-efficient assets, as well as assets that are able to contribute towards the objectives of tenants in terms of that alignment with sustainability and their own missions as a corporation,” Gabriel says.

Shifting from a risk to an opportunity mindset, Gabriel also emphasises:

“What we want to highlight here is that the energy transition really is a critical foundation for addressing and decarbonising the world. Some of the most interesting examples here are from power generation and other sectors such as batteries and EVs, where we already have economic technology that can be deployed to drive these solutions and is increasingly getting policy support."

This, Gabriel says, is creating a huge tailwind and bringing momentum to actionable and meaningful change.

What part does real estate play in the energy transition?

Moving on from Gabriel’s expertise when it comes to the energy transition more generally, Kim then offers insights into the role of real estate in this space.

Real estate includes smart buildings as well as traditional homes and commercial properties that are being retrofitted and redesigned to meet incoming green standards.

Kim says that the real estate sector can offer significant opportunities for being part of the energy transition.

“36% of Europe’s greenhouse gases come from the built environment,” she begins. “If you look at cities, that figure rises to 60%, yet only 20% of commercial buildings have any form of green certification.

“When it comes to the energy transition, not only do we need to move to green energy but move to using less energy. With 75% of buildings being energy inefficient, there’s a significant opportunity here.”

She outlines three main takeaways from her address, reemphasising that real estate offers investors a unique opportunity to invest in the energy transition.

• The greening of the real estate sector is driven by Europe’s net zero carbon goals and should be taken advantage of
• A supply/demand imbalance for green buildings is driving up the premium
• There is a window of opportunity to benefit from pricing correction and capture the green premium.

Investing in the commodities for the energy transition

“There is a need for commodities to enable the world’s transition to net zero,” James begins. “The scale of the supplier side drives very significant demand for commodities over the coming decades.

“At the same time, it has never been so difficult to bring on new supplier commodities. Doing things sustainably takes significantly longer than doing things in a traditional way. 

Commodities, James adds, are a bottleneck in the clean energy transition, as decarbonisation-driven demand is hitting supply networks that aren’t always set up to meet it. 

Material needed for the energy transition vary across the technologies required to meet the challenge ahead, James adds. Solar PV, for example, has high demands for copper and aluminium but cobalt, nickel, lithium, chromium, zinc, for example, remain critical minerals but not as essential, according to the International Energy Agency (IEA).

“The technologies that we are going to rely on require a wide range of commodities,” James continues. “In many cases, they require different commodities to the technologies they are replacing. 

“This poses challenges for what is a relatively underdeveloped supply chain.”

One thing that James is keen to inform audiences of – something he feels often remains unknown, is that clean energy technologies are generally more commodity-intensive than their traditional counterparts, with EVs and renewables in particular driving additional metals demand.

“The intensity of what we’re replacing existing technologies with is much higher and so the demand ask is significant,” he adds. “The opportunity set however is significant.”

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