Key takeaways
- The Ecofin Global Renewables Infrastructure strategy has outperformed sector and global indices in the 10 years since inception with a lower beta.
- It offers direct exposure to the electrification super‑cycle, which will require substantial investment and offer potentially greater return opportunities.
- As electricity continues to take share from traditional energy, we believe investors need explicit exposure to electricity within their energy allocation.
- The strategy offers a mix of growth, yield, diversification benefits and low carbon intensity, trading on undemanding valuations.
A portfolio specifically designed for the electrification era
In November 2015, Ecofin launched the Global Renewables Infrastructure strategy (GRI) to capture the attractive investment returns arising from the structural changes underway in electricity and energy production. The strategy is designed to offer investors direct access to one of the fastest-growing segments of the energy complex as no/low carbon electricity takes share from other forms of electricity and electricity takes share from other forms of energy. By focusing on the infrastructure assets central to this technology shift, it provides exposure to the secular growth in electricity and cleaner power in particular, with less volatility and cyclicality inherent in the technology, equipment and industrial sectors involved in the space. The strategy therefore invests in companies that are likely to be the beneficiaries of innovation and declining cost curves with much lower levels of technology risk and economic cyclicality.
At the outset, we set the objective of delivering an annualised 8-12% absolute return while taking less risk than the market (lower beta). We believed that this target return was anchored in consistent rates of returns by developers and operators of newbuilt power assets (see the section on NextEra below). From an infrastructure perspective, we had the conviction that, based on our investment universe, we could create a portfolio that could deliver earnings growth of 6-8% and a dividend yield of 2-4%. Moreover, investing in real assets that are mainly regulated and/or contracted creates a low beta portfolio with high earnings visibility. Finally, given its preference for faster-growing cleaner power generation, we expect the strategy to deliver a very low carbon intensity profile without compromising on returns, a tangible benefit for sustainability-conscious investors.
The strategy has outperformed all indices
We are pleased to report that the strategy has delivered on expectations in the 10 years since inception – see Chart 1. It returned 10.69% gross and 9.74% net on an annualised basis with a beta of 0.74 to the MSCI AC World Index in an eventful decade, as we discuss later in the piece.
Moreover, investors will be happy to see in Charts 1 and 2 that the strategy has:
– Outperformed its official benchmark, the S&P Global Infrastructure Index, on a reported basis and even more on a beta-adjusted basis (Jensen’s Alpha);
– Outperformed the MSCI World Utilities Index and S&P Global Clean Energy Transition Index that are considered as relevant benchmarks by some of our investors, here also on a reported basis and even more on a beta-adjusted basis;
– Outperformed the MSCI AC World Index on a beta-adjusted basis despite having no exposure to the Tech sector, neither the FAANGS nor the Magnificent 7, that have carried markets higher.
Chart 1: The strategy (GRI) – Annualised performance since inception
Chart 2: The strategy (GRI) – Annualised Jensen’s alpha over each index since inception
Note: Chart 2 shows risk-adjusted performance of the strategy expressed as Jensen’s alpha. For each benchmark, we estimate the strategy’s return in excess of what would be expected given its market sensitivity (beta) and the benchmark’s return over the same period: i.e., the portion of performance not explained by systematic exposure. This differs from simple excess return (strategy return minus benchmark return) because excess return does not adjust for differences in beta; Jensen’s alpha explicitly accounts for beta and the benchmark’s realised return. The figures above have been calculated using 12-month returns over a 10-year period to the end of November 2025. Alpha figures have not been adjusted for the risk-free rate and are presented on an annualised basis. Alpha does not equal simple excess return but rather risk-adjusted excess return.
This outperformance has of course not been achieved every year given the sometimes-divergent headwinds faced by the sector and the market, but infrastructure investors who are and must be intrinsically long-term investors should find solace in looking at the past decade and its complexity when thinking about the coming decade.
How strong IRRs compound into shareholder returns: NextEra Energy as a case study
To illustrate how the strong internal rates of return we target in the portfolio flow through to equity performance over time, we look at NextEra Energy, the largest company in our investment universe and one of the true champions of innovation within the space.
For many types of public equities, small changes in growth or other fundamentals can trigger disproportionate moves in share prices, as investors periodically overreact to perceived risks or extrapolate good news too far. By contrast, in infrastructure we typically see a tighter, more mean‑reverting relationship between fundamentals and equity performance over time.
Over the period, the book value has compounded at an annualised 8.8% and earnings per share at an annualised 9.9%, while the average dividend yield has been 2.9%. This solid fundamental underpin supported a total annualised return of +16.1% – exactly the kind of compounding of growth and yield we aim to capture at portfolio level.
The share price can be volatile at times, like in 2023 when there were substantive reasons for concern on project funding costs amidst rapid interest rate changes, and material and labour cost escalations. This happened despite the absence of cuts to forward or realised earnings, creating an opportunity as the share price reverted to fundamentals.
Chart 3: NextEra – 10-year share price performance
We review below the operating environment and challenges faced in the past 10 years before moving to the outlook for the next 10 years when we see a once-in-a-lifetime super-cycle for power.
An eventful decade
The past 10 years have been eventful at the geopolitical and policy levels. We list on the right-hand side the saliant developments that, in our view, had a direct or indirect impact on our strategy. These events were sometimes powerful positive catalysts while others proved to be extremely disruptive to the fundamentals of the sector.
Against that backdrop, interest rate moves were violent and, as we explored in a recent paper[1], interest rates are an important factor affecting infrastructure returns. When these moved sharply from low levels to higher levels as we experienced in the past decade, they proved to be a powerful headwind to the capital-intensive companies we invest in. The good news, as we look forward, is that we are in a much higher interest rate environment, which is a more favourable starting point for the next decade.
- The 2015 Paris Agreement
- The EU emission reduction targets (European Climate Law 2021, Fit for 55 2021-2023, 2040 binding targets)
- Brexit
- COVID
- Russia’s invasion of Ukraine
- President Biden’s IRA
- President Trump’s OBBB
Chart 4: US government – 10Y Yield
Chart 5: Euro government bond – 10Y Yield
As far as the electricity market is concerned, in the past decade, developed economies recorded very modest growth in electricity consumption. The lack of substantial new sources of demand in developed markets and progress in energy efficiency (e.g. LEDs) can explain this subdued growth. Emerging markets during the same period experienced very substantial growth, particularly in those economies with a rising manufacturing and export-based economy or coming from very low bases of industrialisation [2].
Looking under the surface, despite slow electricity growth (see Chart 6), electricity has taken share from other forms of energy (see Chart 7) and renewables have taken share from other forms of electricity (see Chart 8). Renewables were therefore one of the fastest areas of growth in energy. While a decade ago, the appeal of renewables was linked to climate change as equipment prices were elevated, the sharp decline in the cost of solar panels, wind turbines and batteries has allowed these technologies to compete on their merits, adding an economic argument to the climate change argument to support adoption. Moreover, since the start of the war in Ukraine, renewables have benefited from the realisation, especially in Europe, that energy security was a condition to ensure economic independence and sovereignty. This has reinforced the sentiment in Europe that substitution of fossil fuels by renewables was necessary sooner rather than later.
Chart 6: Global electricity generation – TWh
Chart 7: Electricity share of total energy demand
Chart 8: Electricity generation – Share of renewables
Chart 9: Costs of renewables (USD/MWh)
The next 10 years
Our key message for the next 10 years is that when investors think about energy, they need to allocate or increase their allocation to electricity in their portfolio. Our conviction is that electricity is bound to gain market share and several electricity companies will become the majors that will eventually populate every global portfolio.
We believe that the super-cycle of electricity demand is real and will become more visible over time. Datacentre and AI growth has only just started in the US and China and they will scale up, while Europe and Latin America are a few years behind. Electric cars have become competitive alternatives to combustion engine vehicles in terms of price, range, features and appeal. A simple rule of thumb is that the electricity demand of an AI chip is equivalent to the consumption of an EV or a home. Of course, it varies by country as domestic electricity consumption varies widely, depending on whether there is air-conditioning and a heat pump, and whether the average car owner drives shorter or longer distances. But it is a fair assumption and we can therefore estimate that datacentres will create incremental demand for electricity equivalent to the electricity consumption of some of the largest cities in each country multiplied several times over during the next decade [3]. Moreover, replacing the entire automobile park by electric vehicles (China is already selling more electric cars than petrol cars) will be equivalent to doubling the population in Europe, for instance, and most other countries in terms of domestic electricity consumption[4].
Chart 10: Electricity consumption (‘000 TWh)
We believe that all this will solidly maintain electricity demand on a growth trajectory for the decade to come and require substantial investments in electricity generation, transmission and distribution.
As the contribution of intermittent renewables to total electricity generation (wind and solar) increases, we would expect price volatility to continue or rise, with 24/7 power attracting premium prices compared to intermittent power. However, once batteries and baseload power generation such as nuclear and geothermal are deployed at scale, we would expect price stabilisation.
Over the next 10 years, new technologies such as SMRs (Small Modular Reactors) and EGS (Enhanced Geothermal Systems) are likely to move from concepts to reality. Both share the benefits of being baseload and carbon-free and they will make generation more predictable, but they are not expected be a driver of deflation in the cost of generating electricity.
Attractive attributes amid pervasive disruption
In a world that is becoming less predictable due to geopolitics and innovation, many industries are being disrupted at an unprecedented pace. Globalisation is in retreat and supply chains are being redesigned. Consider how AI is affecting the software or healthcare industry and its potential impact on numerous other industries. Or how electric vehicles are impacting the auto industry and Western OEMs in particular. GLP-1 agonists and their impacts on food, alcohol, fashion and transportation are yet another example.
In that context, we feel that the predictability of the companies that the strategy invests in – featuring business models that are regulated or contracted over long periods of time, that have a low exposure to volatile commodity prices, and that are beneficiaries and not victims of innovation and declining cost curves – should be a welcome feature in investors’ portfolios.
We believe that the attributes of the strategy that have been appealing in the past 10 years will continue in the coming 10 years, with a probability of a slight tilt to more positive outcomes given where we are today.
– Attractive returns and risk-adjusted returns: We aim to deliver returns in the range of 8-12% p.a. with a lower beta than the market.
– Moderate correlation with the market: The strategy profile provides diversification from an asset allocation perspective with an unusual mix of growth, yield and low beta.
Table 1: The strategy (GRI) – Correlation to key indices since inception
• Cheaper than the market: The strategy trades at lower multiples than the benchmark and the broader market.
Charts 11 and 12: The strategy (GRI) – Forward P/E (x) and Price to Book (x)
– Combination of yield and growth: The strategy combines a 3.6% dividend yield with around 8% expected EPS growth p.a. over the next few years. [5]
– Exposure to the mega-theme of electrification: This theme is not going away any time soon as rising demand for electricity stems from emerging datacentre/AI demand, still relatively low levels of penetration of electric vehicles globally, and the benefits of electricity over fossil fuels across many other applications.
– Low carbon intensity: In terms of decarbonisation impact, Scope 1 CO2 emissions from power generation are 63% lower per USD 1m invested in the fund compared to USD 1m invested in the MSCI World Utilities Index.[6]
Owning the infrastructure of electrification‑led growth
In its first 10 years, the strategy has delivered attractive returns and even stronger beta-adjusted returns against sector and broader indices. It offers a yield to satisfy income-oriented investors and a low carbon intensity to satisfy sustainability-oriented investors. Taken together with the secular demand growth in electricity that is inflecting upward, low correlation and undemanding valuations, we believe that the strategy has the ingredients to appeal and succeed in the coming decade as well.
Key Information
No investment strategy or risk management technique can guarantee returns or eliminate risks in any market environment. Past performance is not a guide to the future. The prices of investments and income from them may fall as well as rise and investors may not get back the full amount invested. Forecasts and estimates are based upon subjective assumptions about circumstances and events that may not yet have taken place and may never do so. The statements and opinions expressed in this article are those of the author as of the date of publication, and do not necessarily represent the view of Redwheel. This article does not constitute investment advice and the information shown is for illustrative purposes only.
References
[1] See ‘Navigating market currents: Utilities are more than an interest rate play’, Redwheel, November 2025
[2] Bloomberg
[3] Source: US DOE Lawrence Berkeley National Laboratory & Barclays Research, January 2025; IEA, November 2024.
[4] Source: The global ‘trade war’ over China’s booming EV industry, China Passenger Car Association (CPCA), Carbon Brief, 2025.
[5] Source: Bloomberg, Redwheel estimates, January 2025
[6] Source: Carbon Analytics, Redwheel, December 2025
