The nuclear renaissance is here: where to invest

Against a shifting macroeconomic and geopolitical landscape, listed infrastructure is increasingly being recognised as a resilient asset class, offering investors a robust shield against inflation and a pathway to strong growth. The inherent strength of these assets, often characterised by their formidable moats, translates into defensive income and capital growth for investors. 

Despite the backdrop of increasing volatility, global listed infrastructure is poised to capture structural growth from some of the world's most significant themes, including decarbonisation and digitisation, particularly through advancements in AI.

The energy transition and political shifts

The recent U.S. elections have set the stage for a potential shift in the energy transition trajectory. However, a repeal of federal incentives for renewable energy is not a foregone conclusion. 

Republican states have benefitted disproportionately from investments and jobs in renewable energy leading to 18 House Republicans having signed a letter asking for the incentives to stay in place. Moreover, the momentum towards renewable energy remains strong, driven by private sector commitments and state legislation. Currently, 25 U.S. states and Washington, D.C. have established emissions or renewable electricity targets. 

Major corporations are also stepping up, with Meta aiming for net-zero emissions by 2030 and Microsoft striving to become carbon negative by the same year.

The vital role of electric utilities

Listed electric utilities in the U.S. stand to benefit significantly from this decarbonisation trend.

These companies are regulated monopolies, permitted to earn reasonable returns on their investments. While the incoming Trump presidency has cast some doubt on offshore wind projects, investments in onshore renewable energy generation continue unabated. 

Onshore wind and solar power remain economically competitive, and utilities are actively investing in generation and necessary grid upgrades. We believe that this is a multi-decade growth driver.

Digitisation has started a nuclear renaissance

Digitisation is another powerful driver of growth for electric utilities. 

One of the critical bottlenecks in AI deployment required by the technology firms is power availability. Remarkably, technology companies are now spearheading a nuclear renaissance, recognising nuclear power as a solution for round-the-clock, carbon-free electricity. 

In a notable development in September, Microsoft signed a deal with Constellation Energy (CEG-US), a portfolio holding, to restart the mothballed nuclear plant at Three Mile Island. Similarly, Meta has recently announced plans to partner on building 1 to 4 GW of new nuclear capacity, enough to power between 760,000 to three million households. These announcements underscore the strong demand outlook for nuclear energy.

Strategic advantages and future outlook

Technology companies' emphasis on speed of execution gives current nuclear generation owner-operators with excess land a strategic advantage. It is much faster to deploy on an existing site by those with proven capability. The capital-intensive nature of nuclear projects further means that only a few companies, such as portfolio holdings Constellation Energy (CEG-US), Southern Company (SO-US), Duke Energy (DUK-US) are well-positioned to undertake these growth investments.

While predicting specific catalysts and their timing is challenging, we anticipate a series of announcements throughout 2025, including further AI data centre builds and long-term nuclear power purchase agreements. 

Investing in real assets like infrastructure offers a unique advantage: they are inherently designed to meet society's growing needs. Whether it is AI or tomorrow’s application, it is likely that the world needs more power.. This makes global listed infrastructure with the companies included in the sector an ideal way to gain exposure to mega trends with a favourable risk-adjusted return, a fact that the market has yet to fully appreciate.

In conclusion, global listed infrastructure stands out as a resilient and forward-looking investment, aligned with the world's most pressing themes. As we navigate through volatile times, this asset class offers a beacon of stability and growth, ensuring that investors are well-positioned to benefit from the ongoing transformations in energy and technology markets.

Access to income and growth over the long term

We are focused on companies that own physical assets or concessions that provide essential services. These assets typically have high barriers to entry, require significant capital investment as well as generate long-dated and predictable cashflows. To learn more, visit the Resolution Capital website, or the fund profile below.

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Resolution Capital Global Listed Infrastructure Fund

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