Sustainable Future: Outperformance Runs On Electricity

What Is It All About

Sustainable Future invests in the core systems that make electrification possible. We focus on the parts of the energy system where demand is rising, pricing power exists and growth happens irrespective of political slogans.

The strategy is built around three pillars:

Power Generation (~40 %):

A selective mix of utility-scale solar (U.S. manufacturing, trackers, inverters), wind (leading turbine makers and cable suppliers), geothermal and established nuclear equipment providers. These companies already generate profits and supply the clean and reliable electricity the system needs as consumption rises.

Power Grid (~35 %):

This is the part of the system that is visibly constrained, with long equipment delivery times and long connection queues (i.e. long waiting lists for projects trying to access the grid). Without grid expansion, new power simply cannot be delivered to consumers.

Energy Storage (~15 %):

Battery energy storage systems that absorb electricity when supply is high and release it when needed. Storage stabilizes the grid, supports data centers and makes solar and wind usable at all hours. We invest in global battery leaders and component suppliers with clear cost advantages.

Together, these pillars capture the scalable and economically essential parts of electrification where physical bottlenecks create durable growth opportunities.

A Look In The Rearview Mirror

2025 has been a strong recovery year for the sector. We participated in the upside without chasing the froth. We kept clear of pre-revenue nuclear developers or loss-making fuel-cell rallies. By focusing on profitable, scalable companies with real demand and pricing power, Sustainable Future is up around +36% as of mid-December, slightly ahead of its peer group and well ahead of the MSCI World (+20%).

Many investors started the year convinced that a Trump administration would dismantle the Inflation Reduction Act (IRA). That did not happen. The One Big Beautiful Bill Act (OBBBA) tightened conditions and pulled some timelines forward, but it landed better than feared and, crucially, clarified the rules of the game in the U.S. Policy uncertainty eased, allowing investment decisions to move forward.

At the same time, the AI data center buildout moved to the forefront of market attention. The constraint is not chips, it is power. In several major U.S. demand hubs, new projects are now facing grid connection queues measured in years. Power generation and grid infrastructure, the systems required to deliver electricity at scale, moved back to the center of the investment discussion.

What We Are Watching

The power demand shock is real

Across developed markets, electricity demand forecasts have been revised higher again and again. Globally, demand is now expected to grow around 3-4% per year through 2030, up from roughly 2-2.5% over the past decade. That shift may look modest in percentage terms, but it is not in physical terms. On a multi-thousand-terawatt-hour base, a one-point acceleration in electricity demand forces hundreds of gigawatts of new generation, grid capacity, and storage to be built each year.

In the U.S., the break is even sharper. After nearly two decades of flat consumption, utilities now expect electricity demand to grow at roughly 5.7% (five-year CAGR), driven in large part by data centers but embedded in a broader electrification push.

As highlighted in our recent note, even a mid-range demand scenario pushes the U.S. power system into uncharted territory. Solar deployment would need to run at roughly twice its historical pace, battery storage must scale at record speed, and gas capacity has to expand faster than at any point in the past. The system is operating with virtually no margin for delays, whether from permitting, supply chains, or execution.

For markets, the question is about near-term execution: who can actually build capacity at scale, and who can connect it to the grid in time.

Grid is the real choke point

The top binding constraint is getting power delivered, stepped up, stepped down, and connected on time. That is where projects stall, and where pricing power lives.

Lead times for critical equipment have moved from months to years. Large transformers and key distribution gear now routinely require two to three years to deliver, and connection queues are stretching for both new generation and large loads because upgrades cannot keep pace.

As we highlighted (and than detailed in recent notes), the winners are the suppliers sitting inside the bottleneck with full order books and constrained global capacity. Our 2025 additions in Korea are a good example: LS Electric Co Ltd, Hyosung Heavy Industries Corp, and HD Hyundai Electric Co Ltd. They are sold-out manufacturers with backlog visibility into 2027–2028, resilient pricing, and earnings that are increasingly driven by multi-year infrastructure spend rather than a one-year cycle.

The key point for 2026 is simple: even if parts of generation normalize, the grid does not. Transmission and distribution (T&D) capex has shifted from catch-up to structural buildout, and the equipment layer is still the gating factor. That is exactly where we want to be.

Storage is moving from optional to mandatory

Energy Storage Systems (ESS) are becoming standard infrastructure for power systems under stress.

Global ESS battery shipments are projected at ~620 GWh in 2025 and ~960 GWh in 2026, implying ~55% YoY growth next year. This is now one of the fastest-growing segments in the power value chain, driven by grid congestion, rising electricity price volatility, and the need to deliver reliable power alongside intermittent generation and large new loads.

Oversupply exists in batteries, just not where it matters. Utility-scale storage relies on large-format stationary cells (314Ah+), which lower system costs and execution risk at scale. Supply of these formats remains constrained into 2026, with the market already shifting toward 500Ah+ platforms, supporting utilization and pricing discipline for established manufacturers.

Global leaders already operate at high utilization and expand their margins. Our storage exposure is concentrated in this segment, not in commoditized battery capacity where oversupply risks dominate.

Where We Stand, And What’s Ahead

We enter 2026 with high conviction in our positioning because the capex cycle is already visible and spending is increasingly mandatory. Electricity demand is rising faster than infrastructure can absorb it, and the response requires sustained investment over several years. We expect that buildout to continue.

Positioning that matches the bottlenecks

Most clean energy strategies are still dominated by upstream renewables and beta. Our mix is built around system constraints. Power grids represent roughly 35% of Sustainable Future versus about 13% for peers. Energy storage is around 15% versus roughly 3 to 4% for peers. This is not a marginal tilt. It is where capital is being forced to go as grid congestion and flexibility become the limiting factors.

Solar offers asymmetric upside

Selectivity remains critical, but one area now looks under-appreciated: solar. Our current exposure is measured at roughly 10%, reflecting caution around near-term deployment. If 2026 deployment, or storage attachment rates continue to rise, we are prepared to increase exposure selectively.

Focus on quality growth

2026 will favor manufacturers and integrators with scale, backlog visibility and operating track records. 100% of the portfolio is profitable, asset backed and exposed to real order books. We deliberately avoid pre revenue nuclear developers, loss making fuel cell plays and other concept stocks without cash flow that can re-rate violently.

Macro conditions are turning supportive

Our base case remains a soft landing with gradual rate cuts over the coming quarters. This matters for the sector. Power generation, grids and storage are capital intensive by nature. Lower rates improve project economics, unlock deferred investment decisions and support higher deployment volumes. Even modest easing should act as a tailwind for infrastructure-heavy names with visible backlogs.

Global exposure for greater returns

Power capex cycles depend on local specifics. The portfolio is diversified across the U.S. at about 40%, China about 25%, Korea about 15% and Europe about 15%, which reduces single regime risk and lets us capture multiple infrastructure cycles.

Market level valuations for twice the growth

Sustainable Future trades around 2.2x forward sales and about 23x forward earnings for a consensus three year earnings CAGR of roughly 22%. MSCI World trades at a similar multiple with expected earnings growth closer to 11%. Investors are paying market level valuations for structurally higher growth.

Looking ahead, we expect the recovery to continue with sharper differentiation. The winners will be the companies that convert demand into delivered capacity, revenues and cash flow. That remains the lens through which we will manage the strategy through 2026.