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As the wheels of the global economy shift back into motion, the energy transition continues in 2026 to be one of the most significant economic realignments of our time. The shift toward lower-carbon systems is driving meaningful changes in capital allocation, regulation, consumer preferences and technological innovation.
These forces are already reshaping the fundamentals many companies across global markets, creating a rich field of opportunities for active managers.
Even so, policy shifts in the last year have introduced uncertainty, particularly around the incentives for decarbonization and what that might mean for the future cash flows of businesses exposed to the transition.
Nowhere is this more evident than in the US, where policy reversals under the current administration have altered the momentum of clean energy growth. While US decarbonization spending today may be moderate, we still see significant growth in clean energy investment over the coming decade – the long-term logic remains intact and clean power continues to outcompete fossil fuels on cost.
Still, it is important to place the US in a global context. While the US matters enormously – and we continue to find compelling investment opportunities in the world’s largest economy – it is not the primary driver of global decarbonization.
China, in particular, sits firmly at the centre of the global decarbonization story. It is responsible for roughly a quarter of global emissions and essentially all of the increase in emissions over the past decade. Yet also it has simultaneously become the engine of the global renewables drive. Last year alone, China installed about seven times more renewable electricity capacity than the US.
Elsewhere in Asia, India is rapidly following suit. It is on track to become the second-largest renewables growth market globally, after China, supported by ambitious national targets and a growing pipeline of clean energy projects. Emerging economies in the Middle East and Africa also show strong momentum, underscoring why the energy transition remains a global megatrend.
Making real-world impact
Despite compelling evidence for climate action, many climate-focused investors continue to sidestep or underweight the hard-to-abate sectors where transformational change is most critically needed. While this approach yields attractive low overall portfolio emissions, it also has a limited real-world impact.
Real progress demands looking beyond the solutions providers to the parts of the economy where decarbonization incentives are strongest but implementation pathways remain contested. Heavy industries – such as utilities, materials and industrials – represent these critical transition zones. These sectors face unique challenges including capital-intensive legacy assets, complex production processes requiring specific chemical reactions and competitive global markets that limit unilateral action.
Unfortunately, many businesses positioned to become vital contributors to a future sustainable economy continue to be misunderstood and, consequently, misvalued. By strategically investing in these overlooked opportunities and actively engaging with the management teams, investors can unlock value potential by holding these businesses accountable to becoming more sustainable and more relevant in the future green economy.
A good example is Hitachi, a firm committed to decarbonization through both its internal operations and the solutions it delivers to customers. The company has set science-based targets aligned with the Paris Agreement, aiming for carbon neutrality at its own sites by 2030 and net-zero emissions across its entire value chain by 2050. Beyond reducing its own footprint, Hitachi plays a systemic role in decarbonization by providing technologies, such as renewable-ready power grids, electrified rail systems and digital energy management solutions, that enable customers and societies to lower emissions at scale.
Decarbonizing rise of AI
Power generation is undergoing rapid transformation, driven not just by climate policy but by the surge in electricity demand from data centres powering the artificial intelligence ( AI ) phenomenon. In our view, decarbonization will be central to AI’s ongoing power needs, particularly given that many large tech companies have made stringent clean-power commitments.
Investors have been keeping a close eye on utilities able to grow meaningfully as grids expand and shift to cheaper, cleaner sources of generation. In Asia, accelerating digital transformation and expanding data centre footprint present unique decarbonization challenges and investment potential, with markets like India and China balancing technological advancement with renewable energy adoption.
A good example of another company on the right side of change here is Hyundai Motor, a company that invests heavily in electrification and hydrogen technologies, including electric vehicles, fuel-cell systems and low-carbon manufacturing processes, while committing to carbon neutrality across its operations and product lifecycle by 2045.
Elsewhere, materials producers connected to electrification trends, such as copper miners, also remain central to the transition. Despite their heavy environmental footprint, excluding these companies ignores their essential role as enablers of electrification. Here Nippon Sanso has been a strong beneficiary.
Looking ahead, regardless of shifting policy backdrops, energy efficiency remains a strong structural theme, as it always makes economic sense for businesses to optimise resources. At the same time, Europe’s regulatory leadership – with the implementation of the Carbon Border Adjustment Mechanism and the withdrawal of free carbon allowances coming into force – is creating ripple effects worldwide. Countries must now adapt their strategies to maintain access to European markets, potentially accelerating their own decarbonization timelines. This combination of tightening regulation, new technologies and changing customer demand is likely to create volatility, but also, we believe, a rich opportunity set for investors.
Alexandra Christiansen is the portfolio manager of Nordea’s Global Climate Transition Engagement strategy.
