BNP Paribas AM: Clean energy is the best way to capitalise on the AI boom

June 17, 2026

_{This interview was originally written in Dutch. This is an English translation.}

Whereas clean energy and infrastructure were still being held back by political uncertainty and high interest rates just a few years ago, they have now become indispensable, according to Ulrik Fugmann of BNP Paribas Asset Management.

By Harry Geels

Since the start of last year, we have seen – despite political opposition from the US – a real surge in clean energy. How can this be explained?

‘In 2019 and 2020, there was a boom in renewable energy as decarbonisation became a hot topic and, at the same time, it became possible to generate it cost-effectively thanks to advancing technological innovation and economies of scale. In the years that followed, there was significant headwind from macroeconomic cyclical developments resulting from a substantial rise in goods and wage inflation, higher interest rates worldwide and supply chain disruptions following Covid. This led to a deterioration in the business case for renewable infrastructure and a difficult operating environment for manufacturers of clean energy installations. On top of this, geopolitical developments have reprioritised the decarbonisation agenda amidst strained government budgets, and both the European and US regulatory environments have become increasingly uncertain. In other words, the years between 2021 and 2024 were a perfect storm.

For about a year now, however, the story has fundamentally changed. Clean energy has become the cheapest form of energy and is, moreover, abundantly available: renewable energy projects can be connected within twelve to eighteen months, whilst new gas-fired generation often has a lead time of six years and nuclear energy easily takes fifteen years.

Despite the political backlash against ESG, the structural, underlying global trend is clearly visible: the tectonic shift from ‘molecules to electrons’, not only in Europe, but also in China and the US. Even after Trump takes office in January 2025, 98% of net energy generated in the US comes from solar and wind power, as well as energy storage. Only 2% comes from gas, and coal-fired generation has declined. Meanwhile, electricity prices continue to break records, which is one of the key political issues in the run-up to the US mid-term elections in November. The only way to solve the problem of high energy prices in the short to medium term is to build cheap clean energy capacity.

The Big Beautiful Bill, which introduced a phase-out of tax credits for clean energy, was in fact also net positive for clean energy by creating a level playing field for companies that no longer need subsidies, and accelerated clean energy projects. We are now seeing that Republicans want to reintroduce this bill to lower energy bills.

The media are often misled by US energy policy. Decisions on energy investments are usually not taken at federal level, but vary from state to state. There, a simple economic assessment is made: what does it cost and how quickly is the energy available? Trump’s rhetoric against wind turbines, peppered with slogans such as ‘drill baby drill’, is in that respect mostly words rather than deeds. China, incidentally, is doing even better, with multi-year plans featuring clear targets. They have to: China itself has too few fossil fuels and wants to be less dependent on them.’

What growth rates do you expect in the coming years?

‘We expect demand for electricity in the West to rise by 60% over the next twenty-five years, following a period of stagnation over the past two decades. To achieve this, investment in the energy grid will need to increase by around 40% over the same period. In the coming decade, investment in battery installations will even grow by 800%. Behind this push towards electrification lie various structural developments, such as the drive for energy independence, the further electrification of households and businesses, and, of course, the increasingly impactful rise of AI and the digital infrastructure that goes with it.

The difference between molecules and electrons is made abundantly clear by the war with Iran: electricity prices, aided by new records in solar and wind energy generation, have remained more stable since the invasion than oil and gas prices. Within Europe, the impact is less severe for countries with more renewable energy in their energy mix than for those with a high dependence on foreign energy supplies. In Europe, another factor is that our electricity grid is now several decades old and requires significant investment to maintain and expand. That expected 60% rise in electricity demand can only be met through clean energy. That growth will even exceed the expected economic growth over the next 25 years.’

The electrification of the economy requires a great deal of raw materials, some of which come from less stable or even corrupt countries. How do we ensure that ESG issues in the mining sector are adequately addressed?

‘We must ensure that we invest in mining and materials processing companies where ESG issues are high on the agenda. We certainly must not be naive in this regard. For example, you sometimes hear people claim that all lithium mines are bad, but significant steps are being taken to extract lithium in a more sustainable way, aiming both to minimise the impact of extraction and to safeguard growth in energy storage and electric vehicles, which drives decarbonisation.

The key point is that the mines in which we invest must, at the very least, meet minimum standards regarding biodiversity and the protection of local communities and employees, and contribute to the economic development of the countries concerned. We can then use engagement to try to raise those standards further. Of course, there will always be trade-offs, but under no circumstances should the disadvantages of mining and processing essential raw materials outweigh the benefits of the energy transition. I believe most European investors have now developed sound frameworks for this.’

Let’s pause for a moment to consider AI, which clearly consumes a great deal of energy and is therefore a key driver behind the electrification boom.

‘AI does indeed generate enormous demand for energy. AI data centres are more energy-intensive than traditional cloud infrastructure and are fundamentally transforming regional and national electricity markets. AI connects multiple megatrends simultaneously – such as the environment, geopolitics, innovation and demographics – and is driven and facilitated by energy.

In fact, further developments in AI and computing are currently being held back by a shortage of energy infrastructure. In the US, AI is also one of the causes of the sharp rise in electricity prices. At the same time, there are specific concerns regarding AI data centres: they require a great deal of space, there are CO₂ emissions involved – after all, we are not yet fully electrified – and there are security issues, such as the consequences of a hack or even a physical attack. In any case: AI, together with the broader electrification of the economy, is the main driving force behind global megatrends, facilitated by energy.’

Is this electrification of the economy mainly driven by private markets or by listed companies?

‘That is an interesting question. In recent years, there has been significant growth in infrastructure investment via private markets. At the same time, the underperformance of environmental and infrastructural solutions from 2021 to 2024 has meant that listed infrastructure is currently trading at a 40 per cent to 50 per cent discount compared to private infrastructure investments.

This means either that private infrastructure is too expensive, or that listed infrastructure is too cheap. Brookfield, one of the world’s largest infrastructure firms, recently announced a greater focus on listed infrastructure and an investment in a listed infrastructure company due to the attractive valuations in that sector.

We are also seeing these low valuations in the clean energy sector, despite the fact that the clean energy index rose by around 50% last year and has also got off to a good start this year. In other words, investors can currently invest in large, high-quality, listed infrastructure companies with attractive dividend yields and defensive business models, at lower valuations and, moreover, at lower costs.’

How can investors best capitalise on this trend?

‘The biggest problem is that many investors want to capitalise on the electrification trend, but at the same time do not want to stray too far from familiar global benchmarks. Of the approximately $5 trillion in ESG investments, only 0.3% is invested in clean energy. This sector is heavily underrepresented in the indices due to the size of many of these companies, which usually falls within the range of $1 to $20 billion.

Large investors sometimes have more investments in Microsoft, or even Netflix, than in clean energy. Low-carbon indices with a maximum tracking error of 2% fundamentally change little about the energy transition beyond excluding fossil fuels and prioritising companies with structurally low emissions, such as technology, telecoms, media and financial firms. Investors who genuinely wish to benefit from the clean energy theme and from companies’ infrastructure solutions, whilst also seeking to make a positive impact, will often have to accept higher tracking errors.

We have analysed many portfolios belonging to major investors. These often meet the requirements for a low carbon footprint very well, for example through allocations to financials or technology, or by excluding oil and gas companies. At the same time, they have invested very little in the actual clean energy transition, with little or no exposure to the enablers of clean energy opportunities.

Now, in particular, given the attractive valuations and expected structural growth, there is a significant opportunity to fundamentally review allocations and make a real impact. Tech companies are likely to use the bulk of their free cash flow to avoid becoming ‘dinosaurs’ in the global rat race. Anyone wishing to capitalise on the AI boom should therefore be cautious about investing in technology, which will see few winners but many losers. The ‘known knowns’ are preferable: AI requires cheap and immediately available energy – clean energy. Moreover, the MSCI Technology index is currently trading at around 6.5 times revenue, whilst clean energy is trading at around 1.5 times price-to-sales. Take your pick.’

Which strategies do you think have the most potential?

‘For investors who wish to stay close to established market indices, we have developed a range of “core diversified environmental” theme strategies that track regional MSCI benchmarks. Furthermore, our Clean Energy Solutions strategy is not tied to market benchmarks and seeks close alignment with the clean energy theme, across various technologies and throughout the global clean energy value chain. This strategy was recently awarded ‘impact’ status.

We have also recently launched a somewhat more defensive Environmental Infrastructure Income strategy, with an attractive dividend profile and a greater focus on capital preservation, including investments in digital and energy infrastructure, water and waste management. In total, we now manage approximately $2 billion across these five strategies. There is a great deal of renewed interest in this area. These strategies all qualify under SFDR Article 9 and are managed within our Environmental Strategies Group, formed in 2019 by Edward Lees and myself. This team and the strategies underpin BNP Paribas AM’s commitment to remaining a sustainable investor for a changing world.’

Read the full interview in Financial Investigator magazine.