For investors looking to make an impact, the theme of electrification has always played a significant role in the investment universe.
Electrification: a driver of resilience for emerging economies
The electrification of an economy enables it to benefit both from greater energy efficiency and from the increasing power of renewable energy. Even though electrification relies on a generation system that is still based on fossil fuels, it paves the way for the replacement of polluting power stations with lower-carbon alternatives, such as renewables, nuclear, and hydroelectricity, thus improving the long-term flexibility of the energy system.
For a long time, the goal of electrification seemed better suited to developed countries, which had older and more extensive infrastructures. In recent years, this issue has become increasingly important in emerging economies for at least two reasons.
First, the production of electrical equipment is increasingly dominated by companies based in emerging market countries. For example, the world’s top manufacturer of electric motors for industrial applications is a Brazilian company. Unsurprisingly, Asia dominates the value chain, and the industry’s leaders in China, Taiwan and South Korea account for a growing share of the international market in cables, batteries, switches and other transformers.
Second, emerging economies are electrifying their own consumption faster than expected. China, along with Bangladesh and Vietnam, have seen the share of electricity in final energy demand rise by more than 10 percentage points since 2010. Substantial gains have also been made in most other emerging countries, such as India, Indonesia and Mexico1.
China, along with Bangladesh and Vietnam, have seen the share of electricity in final energy demand rise by more than 10 percentage points since 2010
Some countries have seen their markets transform rapidly. Sales of electric cars have exploded in Nepal over the last five years, to the point where they now account for over 50% of car sales. Last year, Ethiopia banned the import of cars with combustion engines, which has also led to the rapid electrification of its domestic market. Such developments would not be possible without China exporting electric vehicles at affordable prices, which is something that Western manufacturers have so far failed to achieve. Chinese industry leaders such as BYD for cars and CATL for batteries are reaping the rewards of this trend.
AI: a new driver of electricity demand
The biggest catalyst for electrification is not to be found in the transport sector, but rather in the field of artificial intelligence. Its development requires infrastructure that consumes large amounts of electricity, which represents both a challenge and an opportunity for the sector: it is a challenge because the additional demand for electricity comes on top of all the other requirements; an opportunity because the major players in the sector have very deep pockets and can bring about a rapid expansion of infrastructure, which will enable electrification to accelerate.
Here too, the role of emerging market countries is crucial. These investments represent a spectacular surge in demand for the semiconductor industry, the manufacture of which is largely dominated by South Korea and Taiwan. The sector’s rapid growth has led these two countries to become the two largest constituents of the MSCI Emerging Markets Index, ahead of China. The index’s three biggest names (TSMC, Samsung Electronics and SK Hynix) are all from this sector and together account for 30% of the index’s weighting2.
Energy resilience and political consensus
For many countries, whether emerging or not, electrification is a factor in resilience. The majority of nations must import a significant proportion of the fossil fuels they use. To a lesser extent, this is also true for some electricity generators. At the end of the day, electrification leads, for most countries, to greater energy independence and an improvement in the balance of trade – two objectives around which it is easy to build political consensus.
Electrification is therefore a driver of decarbonisation but also a source of opportunity in emerging markets, both in terms of end-use demand and the production of upstream equipment. By bringing together the sectors of electrical equipment, semiconductors, electric transport (cars, but not exclusively) and infrastructure, you can achieve a very significant allocation to this theme. This is especially true for impact portfolios, which combine a highly active approach to portfolio construction while placing an explicit value on the environmental benefits delivered by certain players in these sectors.
The current acceleration is benefiting investors who have long since been committed to this theme. However, there is still a long way to go before the levels required by emissions reduction targets are reached. The presidency of COP31, which will be held in Turkey in November, is promoting the ‘35 by 35’ target3: ensuring that 35% of global energy demand is met by electricity by 2035. Today, this figure is 20%.
1The Electrotech Revolution, https://ember-energy.org/latest-insights/the-electrotech-revolution/
2 https://www.msci.com/documents/10199/c0db0a48-01f2-4ba9-ad01-226fd5678111
3 https://unfccc.int/news/cop31-presidency-announces-new-targets-on-global-electrification-cutting-waste-resilient-cities
The opinions expressed herein are correct as at 27 July 2026 and are subject to change without notice. This information should not be relied upon by the reader as research or investment advice regarding any particular fund, strategy or security. Past performance is not a guide to current or future results. Any forecast, projection or target, where provided, is indicative only and is not guaranteed in any way.
The views and opinions expressed by fund managers (internal or external) may differ from the house view. They are shared for informational purposes and do not constitute investment advice or a recommendation.
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