In this edition of Asia Infrastructure Commentary, we delve into the subject of Energy Transition and discuss the various aspects of Energy Transition. We expect some pragmatic re-calibration of “Energy Transition policy” in view of its potential impact on inflation and economic growth. First it was China, which dialled back to “focus on carbon intensity reduction” instead of “absolute reduction in carbon emission” with renewed emphasis on nuclear power. Now EU has included investment in gas infrastructure and nuclear energy as part of their “green Investment” mandates.
This sets up the scene for us to discuss different facets on Energy Transition in greater detail in this note. We believe that Energy Transition, a much-talked topic, has an overarching impact on the global environment, decarbonisation agenda and ESG investment. At the same time, Energy Transition may also have its unintended consequence on economy like slower growth, higher inflation, increasing income disparity. We also dwell on this subject along with the infrastructure investment enabling this Energy Transition.
As the ambition behind ‘Net Zero’ gains momentum globally, the suppliers of traditional energies (viz. fossil fuel, nuclear) are scaling back investment, probably at a faster pace than at which demand is tailing off. At the other side of the Energy Transition lies a new, stable system, but the path is turbulent. This commentary is not about the destination, but about the journey.
The Tribeca Asia Infrastructure Fund ‘TAIF’ believes that gas can play a key role in Energy Transition. Geothermal energy can also play a role as baseload renewal in certain countries. TAIF has a ~17% of its exposure to entire gas value chain across the Asia Pacific market and geothermal power generators.
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Susanta Mazumdar is the Portfolio Manager for the Tribeca Asia Infrastructure Strategy, which aims to earn superior, risk adjusted total returns through a mix of long-term capital appreciation and cash yield by investing in infrastructure companies across the Asia-Pacific universe using an index-unconstrained concentrated portfolio approach.
