Emerging markets (EM) are entering a new phase of growth characterized by a shift towards sustainability and clean energy. After decades where EM economies were defined by cheap labor, manufacturing, and commodity exports, a renewable energy revolution is reshaping their growth models and energy independence.
Source: Emerging Markets Energy Investment Outlook 2024 | BloombergNEF, International Monetary Fund, Organization for Economic Co-Operation and Development, United Nations, World Bank.
Emerging markets have firmly established themselves as engines of global growth. From 2000 to 2020, EM economies grew ~5% annually on average, versus ~2% annual growth in developed markets, with the gap expected to persist. Such momentum is underpinned by favorable demographics (a young, growing workforce) and a burgeoning middle class, which drive demand for goods and services and fuel what Rocky Mountain Institute is calling The Cleantech Revolution.
Two Visions of the Global South Energy Future
Source: Powering Up the Global South – The cleantech path to growth | RMI; EIA International Energy Outlook
Not long ago, the idea of emerging markets leading the world in clean energy seemed far-fetched. Today, emerging markets are at the vanguard of this shift: EM regions are contributing over 80% of global energy demand growth through 2026, and much of that demand is being met by renewables. Not long ago, the idea of emerging markets leading the world in clean energy seemed far-fetched. Today, EM regions are contributing over 80% of global energy demand growth, and much of that demand is being met by renewables. This confluence of economic dynamism and green transition is creating new investment opportunities and altering the risk landscape.
In our latest Emerging Markets report, Portfolio Manager, Liz Su, CFA, and Tim Nixon of Signal Climate Analytics offer detailed analysis of the emerging risks and opportunities in EM arising from projected economic growth and the renewable energy revolution. Our authors examine regional examples—from Asia’s clean energy surge to Eastern Europe’s coal pivot, from Sub-Saharan Africa’s leapfrogging to South America’s green industrialization— illustrating how traditional EM narratives are shifting.
Takeaways include:
1Higher economic growth and the renewable revolution in EMs are tangible, mutually reinforcing, and accelerating.
2Sectors like transport, utilities, and manufacturing in EMs will increasingly be transformed by electrification, automation, and sustainable innovation, providing new investment opportunity.
3To capture this opportunity, it is increasingly important to evaluate energy transition planning, corresponding corporate capex, and the latest data science risk monitoring analysis.
4Emerging market societies are a growing force for sustainability, creating markets for green products and services and supporting commensurate policy frameworks with implications for global innovation and energy dependency.
This piece is intended as an editorial review of a survey of risk considerations and does not constitute investment advice, a solicitation, or an offer to buy or sell any security. Past performance does not guarantee future results. All investments involve risk, including the risk of loss of principal.
References to third-party research, publications, and data sources are provided for informational purposes only. Boston Common Asset Management does not warrant the accuracy or completeness of third-party information cited herein. Readers should consult original sources and qualified professional advisors before making any investment decision.
