Global energy demand is set to increase significantly in the coming decades, which is creating attractive investment opportunities across both the alternative energy landscape and the traditional energy value chain. This Knowledge Center will help you understand the implications and how investors can take advantage of emerging opportunities. Learn more by exploring our Insights.

Energizing the future

We believe global energy demand will grow annually through 2040, and beyond, due to both population and economic growth, which will result in global energy consumption reaching unprecedented levels in the coming years. Cohen & Steers believes the future of energy should be viewed through the lens of an “energy addition” rather than “energy transition”, as the world will need more of all types of energy (ex-coal) to satisfy demand.

Growing population means more energy needs

“Meeting 2040 energy estimates would require ~48,000 TWh⁽²⁾ of alternative additions. This is roughly equivalent to the entire global oil industry as it stands today.”
– Benjamin Morton, Portfolio Manager

At December 31, 2023. Source: Our World in Data, Bloomberg and Cohen & Steers estimates
The views and opinions are as of the date of publication and are subject to change without notice. There is no guarantee that any market forecast set forth in this material will be realized.
(1) Alternative energy comprised of solar, wind, hydropower, nuclear and other renewable sources
(2) Terawatt-hour

We foresee economies becoming more energy efficient through utilization of new technologies. But even with increasing adoption of alternative energy sources, traditional energy is still projected to make up the majority of energy production through 2040. If the industry is to meet energy demand by 2040, record investments in energy must be made. Put simply, the marketplace requires all the reliable—and, ideally, clean—energy sources it can summon.

Alternatives set to spike

“Meeting projected 2040 energy estimates will require an additional spending of roughly $13.3 trillion.”
– Tyler Rosenlicht, Portfolio Manager 

At December 31, 2023. Source: Our World in Data, Bloomberg and Cohen & Steers estimates.
The views and opinions are as of the date of publication and are subject to change without notice. There is no guarantee that any market forecast set forth in this material will be realized.
(1) Alternative energy comprised of solar, wind, hydropower, nuclear and other renewable sources.
(2) Terawatt-hour

Understanding an evolving energy landscape

The energy industry is undergoing significant transformation. While energy once focused predominately on fossil fuels, alternatives are now not only desired but will become essential in the coming decades.

Traditional energy is defined as the industries within Bloomberg Industry Classification Standard (BICS)⁽²⁾ Oil & Gas sector.

Alternative energy is comprised of a broad array of industries within BICS⁽²⁾ sectors such as Renewable Energy, Electric Utilities, and Engineering & Construction. There is no common, universally accepted definition of alternative energy.

At December 31, 2023. Source: Bloomberg and Cohen & Steers
There is no guarantee that any market forecast set forth in this material will be realized. There is no guarantee that any historical trend illustrated above will be repeated in the future, and there is no way to predict precisely when such a trend might begin.
(1) Alternative energy includes securities of renewable companies that are owners or operators of “clean” assets, as well as those developing technologies, products, processes and services relating to more efficient or cleaner use, storage, delivery, management, conservation or conversion of natural resources or products derived therefrom or the transition to cleaner and more efficient use of natural resources or products derived therefrom
(2) Bloomberg Industry Classification Standard

Evolution of energy markets is creating opportunity across both the traditional and alternative energy value chain

Investing in the overall energy picture

We believe superior outcomes can be achieved by combining traditional forms of energy, such as crude oil and natural gas, with alternatives, such as wind and solar. Most investment strategies currently invest in just one form of energy or the other, despite increased levels of volatility and varied performance profiles.

Since 2014, these two sectors have performed inversely (traditional up / alternative down and vice versa) in 6 of 10 periods. History shows that combining the two can potentially smooth volatility and create superior risk-adjusted returns.

Traditional and alternative energy returns routinely diverge

Blending traditional with alternative gives full access to the energy value chain

At August 31, 2023. Source: Morningstar.
Data quoted represents past performance, which is no guarantee of future results.