Investing in the Energy Transition through Emerging Markets Equities (Lazard Asset Management)

The International Energy Agency (IEA) identified five priorities to keep “1.5℃ alive” in its 2023 World Energy Outlook.1 Most notable was the need for three times the current level of investment in clean energy in emerging markets (EM) ex-China by 2030 compared to 2022. This is in line with our research, published in November 2022. We noted that without developing standards that account for differing paces of transition, technological penetration, and cost of capital for EM countries, investors focused on decarbonization risk decarbonizing their portfolios by divesting from EM rather than investing in EM and the clean energy transition. We also believe this may result in missed chances for alpha generation, with significant investment opportunities anticipated in clean energy and the clean energy value chain in EM countries.