As part of EdenTree’s H2 Outlook 2026, Tommy Kristoffersen, Deputy CIO and manager of the EdenTree Green Impact Infrastructure Fund looks at green infrastructure.
After a strong start to the year for listed green infrastructure, we believe the key factors remain in place for a continued recovery in the second half.
The central long-term thesis for the sector remains intact, underpinned by an energy transition that requires vast long-term investment.
The sector also continues to offer an attractive combination of tangible assets, inflation-linked income and structural growth.
Recent performance for the sector, and our own fund, has been encouraging, and we believe further rerating is warranted from here, supporting the case for patience after a long period of disappointing market performance from fundamentally high-quality assets.
We believe that one of the most significant drivers of that rerating is likely to be the rapid buildout of AI infrastructure.
While interest rates and asset valuations of course remain important, as do geopolitics and energy prices, we believe AI infrastructure is a new force capable of changing the shape of long-term power demand.
Data centres require a large, reliable, and clean supply of electricity, and within the context of an arms race to build capacity ahead of competitors, speed of deployment is also vital.
Gas turbine manufacturing supply chains are straining under the demand for new gas generation and lead times are becoming longer.
For hyperscalers with net zero commitments, renewable energy generation, combined with battery energy storage, is increasingly becoming a strategic necessity.
This is particularly relevant for green infrastructure assets exposed to markets where data centre demand and corporate power purchase agreements are already important features of the electricity market.
Greencoat Renewables, the biggest holding in our portfolio, is particularly well placed in this regard. We have spent considerable time examining potential investments that could provide even more direct AI infrastructure exposure, but we believe valuation and process discipline remain of primary importance.
Many of the candidates in this part of the market operate with technology that is not yet sufficiently proven, not yet generating secure income streams, or is priced for a consensus growth story that leaves an insufficient margin of safety for investors.
With these trends in mind, our priority for the second half is to remain disciplined, allowing for the recovery in listed infrastructure valuations to continue while retaining the flexibility to add new opportunities where we identify quality assets at reasonable valuations.
Where public market discounts to the value of underlying assets remain stubbornly wide, we continue to see private market buyers stepping in.
We believe green infrastructure remains well positioned to continue to generate positive environmental impact while capturing the financial upside from what seems to be a not just a durable, but an improving clean energy demand tailwind.
Main image: green, infrastructure, danist-soh-dqXiw7nCb9Q-unsplash
