By Darius McDermott, managing director of FundCalibre
Last year, a “massive and unpredictable” swarm of jellyfish forced French energy group EDF to shut down one of its nuclear power plants. Over the summer, low water levels in the Rhine cut off an important transit route for German businesses. ‘Clear air turbulence’ caused by erratic air currents is leading to more injuries on flights. The impacts of climate change are myriad and unexpected.
Global warming is accelerating. The 1.5°C average warming is now expected to be breached by February 2029. This is 16 years earlier than initial forecasts. Part of the problem is unpredictable ‘tipping points’: these are factors such as the thawing of permafrost (which releases stored carbon dioxide), or the destruction of carbon sinks (including forests and oceans).
Companies are having to adapt. For example, after two years of jellyfish disrupting energy production, EDF now deploys commercial fishing vessels to patrol coastal waters around affected plants to catch and divert jellyfish before they reach problem zones. Fidelity International reports that in the second quarter of 2026, ‘extreme heat’ was mentioned in around 440 company filings, across all sectors, around 3x the level of five years ago.
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The mitigation costs are significant and it creates significant impetus for electrification. Fidelity estimates that around $2.3trn was spent on the global energy transition alone in 2025. That is more than the $1.5trn spent on AI, but it garners far fewer headlines. That spending is diverse, covering clean energy, transport, buildings, industry and grids.
It has taken on a new urgency, following two fossil fuel energy crises in five years. Global governments are starting to recognise the urgency of energy independence. Insurance and risk management group DNV found in its 2026 Energy Transition Outlook that energy-importing countries are scaling clean energy three times faster than exporters.
In normal circumstances, this would look like a huge opportunity for investors. Vast spending collides with a significant problem. If anything, the spending is more urgent than on AI because the impact of inaction is far bigger.
Yet it has been a relatively moribund segment of financial markets in recent years. The sector has been hit by the unwinding of the post-Covid bubble in clean energy stocks, nerves over political direction, and the impact of higher interest rates on a sector that requires plenty of capital.
There is a range of ways into this trend. For example, electrification has driven certain parts of the commodities markets. For the WS Amati Strategic Metals fund, it has been an important factor in the strong performance of certain metals over the past 18 months.
Copper and aluminium, for example, are needed for wind turbines, solar farms, cabling, inverters, transformers and transmission lines. They are also crucial for the development of grid infrastructure to support greater electricity needs.
Lithium, nickel, cobalt, manganese and graphite are required for battery cathodes and anodes for energy storage, range, stability and performance. This is vital for the development of electric vehicles. Many of these areas are also benefitting from the growth of data centres, which has been an important factor in share price performance.
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This type of strategic commodities fund remains one way to tap into the vast spending on climate change mitigation and the energy transition. Infrastructure funds are another route. The VT Gravis UK Infrastructure Income fund includes a range of renewable energy assets, including the Renewables Infrastructure Group, Greencoat UK Wind and Foresight Environmental Infrastructure. It balances this with traditional infrastructure assets such as HICL Infrastructure Company.
Chinese funds can be another option. China is spending around 2x more than any other country on electrification – it is spending as much as the US and Europe combined. While government spending has created over-supply in areas such as electric vehicles, fund managers are finding opportunities elsewhere in the value chain.
The FSSA All China fund, for example, invests in Hongfa Technology, which has seen strong revenue growth from areas such as new energy and power generation, and battery maker CATL.
Some global funds are also taking an interest. The JOHCM Global Opportunities fund, for example, is looking at opportunities across five key areas: domestic energy production, LNG infrastructure, renewables, nuclear power and electrification.
Manager Ben Leyland says: “Geopolitical uncertainty may create the conditions for a second wave in wind and solar deployment, this time driven less by decarbonisation targets and more by energy security and industrial competitiveness. Countries which invested early in renewables, and as a result enjoy lower and more stable power prices, are now seeing the benefits. There is growing evidence of a pick-up in order growth for both onshore and offshore wind projects.”
He believes electrification, of transport, heating and industrial processes, is another structural lever for reducing fossil fuel dependence. “Enterprises are also electrifying. Data centres and industrial facilities are building their own renewable or gas-powered micro-grids to reduce reliance on national grids. This trend reflects a broader shift toward energy autonomy at both the national and corporate level.”
There are other potential routes into this segment. The Regnan Sustainable Water and Waste fund, launched in 2021, focuses on sustainable companies providing solutions to global water and waste-related challenges.
Manager Bertrand Lecourt believes many businesses don’t yet recognise the centrality of water and waste management to the global economy and this is likely to become more important to businesses as the impact of climate change becomes more apparent.
Companies are increasingly having to deal with the realities of climate change. Its impact cannot be wished away by optimistic politicians. There is a spending wave every bit as large as that of AI, but without the hype. It remains a fertile area for investors.
