EM transition investing will outlast US backlash NinetyOne’s Cooper says
Energy security, steady fundamentals and mispriced opportunities are strengthening investor confidence, NinetyOne's Deirdre Cooper predicts
Nearly 6000 drilling permits approved. Record-high LNG exports. A rollback of scientific consensus underpinning climate laws and $625m invested in reportedly ‘beautiful’ coal. President Trump’s ‘energy dominance agenda’ is unabashedly hostile to energy transitions.
Yet, despite it all, emerging market transitions have thus far outlasted headwinds. Their transitions have accelerated in the face of crises, drawing investor attention along the way.
The case for emerging market transition investing has not only survived the American backlash but also thrived despite it.
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Energy security
President Trump’s dominance agenda is, by official decree, aimed at two objectives – energy independence and economic prosperity. Ironically, amidst the war in Iran, emerging market transitions are being fuelled by precisely the same concerns.
A note from emerging markets specialist asset manager NinetyOne expects rising oil prices to strengthen the case for renewables-backed electrification.
“Periods of energy shock tend to accelerate structural change. This is not just volatility, it is a potential inflection point for electrification, particularly in emerging markets where energy security is critical”, writes Matt Christ, emerging market transition debt portfolio manager at NinetyOne.
Dierdre Cooper, NinetyOne’s head of sustainable equity, spoke with Net Zero Investor in the early days of the war. “Even if this settles down, it still increases the imperative to build renewable, non-imported energy because now you are acutely aware of the risks involved in fossil fuel imports”, she outlined.
Market-led investing
Cooper’s conviction in the investment case for emerging market transitions precedes the war. Decarbonisation, she reckons, is a much deeper, structural shift.
“A lot of the companies we invest in, that have structural growth from decarbonisation, have delivered higher earnings growth than the general market”, she points out.
Historically, the transition investment case in developing economies was policy-led. Today, Cooper notes, markets have taken over the steering wheel. Transitions are therefore market-led, albeit policy-enabled.
That in turn, has translated into an investment opportunity she is optimistic about. “The shit from policy to economics has led to a mispricing opportunity”, Cooper explains.
NinetyOne’s note reaches a similar conclusion. “As oil and gas supply routes come under pressure, emerging markets opportunities remain wide open”, it reads.
Growth engines
In previous research notes, Cooper referred to emerging markets as ‘growth engines’ of the energy transition. A view she stands by.
The most notable growth engine in that regard has been China – a country which Cooper says is still central to emerging market transitions.
“The EM growth story has historically been in China. What China has started to do now, is export the transition”, she says.
Beijing’s transition export – of electrical equipment and renewable energy technologies for instance – has bolstered transitions in other developing countries. Cooper cites Pakistan’s record high installations of solar energy and storage in 2024 as a case in point.
“Electricity as a share of primary energy – the most important indicator for decarbonization – has significantly increased in China and across Asia. That is China exporting electrical equipment across Asia”, she notes.
The Chinese energy transition investment case, Cooper points out, is also strengthened by technological improvements from Chinese companies.
Those improvements have garnered attention. In March this year, BYD – a Chinese EV manufacturer – unveiled its 2nd generation blade battery. It set a new world record for charging speed. CATL – another Chinese battery behemoth – hosted a ‘super technology day’ in Beijing last week. It too, offered a glimpse of its technological breakthroughs.
There are, however, concerns that growing Chinese exposure in transition technologies risks replacing one supply dependence with another. Cooper’s view is that such fears are misplaced.
“What is often misunderstood is the difference between relying on the Middle East for oil and gas versus relying on China for solar panels and batteries”, she affirms, “one is a flow and the other is a stock”.
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