“When tankers slow in the Strait of Hormuz, fertiliser shipments are delayed, and an oil price spike hits power prices, the case for electrification and regenerative agriculture stops being a long-term argument and becomes a short-term risk-management target,” the report states.

Mathieu Nègre highlighted that electrification is everywhere and gaining ground in emerging markets. “Every kilowatt-hour of power use electrified is a kilowatt-hour less exposed to the oil shock waves that the Middle East crisis has reintroduced,” the report states. The firm is invested in Schneider Electric (electrical distribution and industrial automation), Hubbell (grid components), Prysmian (high voltage cabling) and HD Hyundi Electric (high voltage equipment) as infrastructure investments that the firm is exposed to.  

This was echoed recently by Edmund Shing, global chief investment officer at , who said that the increased need for energy security has accelerated the energy transition.

Nègre said while there are questions about the renewables boom, appetite on the demand side remains significant, albeit mixed depending on specific technologies.

“People sometimes focus on the fact that there has been a falling level of commitment in the US and a falling level of subsidies in most of the Western world due to the costs it represents. Solar panel manufacturers are losing money but the appetite is still very strong for solar deployment,” he said. The firm is invested in Nextpower which provides utility-scale solar infrastructure and tracking technology that helps maximise power from domestic solar resources. “Demand for wind power remains more difficult and has slowed down. Solar itself represents over 50 per cent of all electricity capacity additions last year while wind is a fraction of that,” he continued.

“At the Dubai COP28, there was a commitment to triple renewables by 2030 but we are not on track for that,” Nègre said. “On battery deployment, which is dominated by Chinese producers for solar energy storage, it is going really, really well,” he added. He invests in BYD – a Chinese manufacturer of batteries for electric vehicles. The recent surge in data centre-related investments has pushed that logic further.

Chi Lo, senior market strategist, Asia-Pacific, BNP Paribas Asset Management, also emphasised this week how the Hormuz disruption and the possibility of a recurring energy crises are decisive push factors for Asia to speed up the energy transition in the coming years. “China is the leader in this technology in terms of production capacity in the region. Its share of global production is overwhelming across many elements of green energy technology. Solar panels and batteries are notable examples, with China’s production accounting for more than 50 per cent of the world total,” Lo said. “Data shows that Asia’s oil and gas imports from the Middle East dropped significantly and quickly since the Strait of Hormuz disruption from over 60 per cent of the regional total to about 35 per cent.”

“Alongside their search for alternative oil suppliers, Asian buyers are also trying to reduce oil and gas imports by drilling more at home (as India is trying to do), use more bio-fuel blends (like in Malaysia and Indonesia by raising the share of palm oil blended into diesel), and accelerate the shift to renewable energy,” Lo continued. “The last response suggests that Asia will make a big energy shift that will power regional growth through green tech investment, with China playing a central role in the efforts.”

Impacts

Nègre reflected on another impact of the Hormuz disruption - the effect on fertiliser production and supply. About a fifth of global ammonia and urea goes through the Strait. Price volatility in ammonia, urea and potash is already reshaping farm economics, particularly in Europe and South Asia, with farmers feeling the squeeze. This could have an impact on food prices over time.

UBP invests in precision agriculture, to produce more using fewer resources. A holding is US-based agriculture machinery producer John Deere which has revealed two new technologies, ExacShot and an electric excavator. ExactShot uses a sensor to register when each individual seed is going into the soil and allows farmers to reduce the amount of starter fertilizer needed during planning by more than 60 per cent. The electric excavator, powered by a Kreisel battery, reduces jobsite noise, enhances machine reliability, and produces zero emissions. The see and spray system cut herbicide use by nearly 60 per cent across one million acres in 2024. AGCO and Trimble also offer precision agriculture technologies which support more accurate application of inputs. Precision agriculture adoption is expected to accelerate in the future.

Regenerative agriculture extends the same logic. The firm's holdings include Ahold, Sprouts Farmers Market and Darling Ingredients. Paul McMahon, a co-founder and managing partner of SLM Partners, an asset manager, is also positive about the benefits of investing in regenerative agriculture and forestry which offer attractive risk-returns, increase climate resiliency and deliver positive impacts for nature.

After Germany and the EU hiked defence spending, Nègre said it is a hot topic, with many firms increasing their investment in defence. But Nègre said he is not yet invested in it, highlighting the difficult relation between defence stocks and ESG-focused portfolios and whether they can sit together. This was also examined at a conference held by Natixis Investment Managers. Mathilde Dufour, head of research at , a subsidiary of Natixis IM, stressed the importance of both defence and ESG-focused investments. “They are not contradictory,” she told this news service. “Sustainable finance has to be used to finance what is useful for society,” she said. “It’s about investing in all areas. We have to invest in security.” However, she does not hold defence stocks in her portfolios as she wants clearer rules on ESG and defence investing. See more here.