Energy Transition in Emerging Markets and Developing Economies

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Insights from the eighth instalment of the Energy Matters, People & Money event networking series.



Event Speakers

Paddy Padmanathan Paddy Padmanathan, Former CEO of ACWA Power 
Pierre Etienne Franc Mikael KarlssonActis Partner and Chief Investment Officer


Russell Reynolds Associates recently hosted the eighth instalment of the Energy Matters, People & Money networking series. The event brought a community of industrialists and investors together from across the energy transition value chain, to debate how investors and business leaders should understand the emerging markets frontier.

We surveyed our attendees (60 percent energy investors, 40 percent energy industrialists):

Energy Matters


Energy Matters


Energy Matters


Energy Matters


Summarizing the discussion

$275 trillion of capital spending between 2021 and 2050 is needed for the net-zero transition, which roughly equates to $1 billion every hour of the day, seven days a week. This clearly presents enormous investment opportunities for many, so why focus on emerging markets and developing economies (EM&DEs)?

  • Key to the global transition. Achieving net-zero by 2050 requires substantial investment in EM&DEs, which currently account for over one third of global emissions. These economies will need around $2 trillion annually and approximately 80 percent of this required investment will need to come from the private sector. Without it, put simply, the global energy transition will not be successful. Investors can tap into this long-term investment theme and make a pivotal contribution to the global energy transition.

  • Strong economic growth rates. These are stimulating significant demand for new infrastructure and equipment. Infrastructure is currently the fastest growing asset class with a market cap in excess of $1 trillion, of which 85-90 percent is dedicated for EM&DEs. Coupled with the current CAPEX shortages in these economies, there are wide ranging opportunities with less active competition than typical advanced markets.

  • Superior rates of return. Supportive regulatory interventions and contractual frameworks also allow investors to pick up long-term projects with the benefit of inflation protected capital.

  • Advancing clean energy in EM&DEs is cost-effective. The average cost of reducing emissions in these economies is estimated to be half the level in advanced economies. Decarbonizing energy, with a focus on power generation, is an efficient pathway to keeping these economies on track for net-zero.

  • Leapfrogging technologies. EM&DEs have massive renewable flows which equate to more than 100x of their overall energy demand. These economies have the potential to decarbonize much faster than advanced markets have been able to. For example, 88 percent of the growth in electricity demand between 2019 and 2040 is expected to come from EM&DEs. Some economies, such as India, have already leapfrogged their electricity supply and connected nearly all households to electricity through a mass renewable energy rollout.

  • A development imperative for a just transition. The international community has a moral obligation to support EM&DE development as the basis for achieving other, adjacent sustainable development goals. The move to green energy will save millions of lives, reduce energy dependency and drive mass local job creation.


But not all emerging markets are created equal, so where are the opportunities?

Outlook: Positive

  • Big Middles
    • E.g., members of the G20s such as Brazil, India, Mexico, and Korea. These economies are ahead of the developed world in tackling inflation, and many are already beginning to reduce interest rates which supports economic growth.

  • Supply Chain Heroes
    • E.g., Thailand, Malaysia, and the Philippines

Outlook: Stable

  • Global Influencers
    • E.g., China, the US, and Japan.
  • Small and Stable
    • E.g., Bulgaria and Romania. These countries tend to be heavy influenced by the global influencers.

  • Global Resource Winners
    • E.g., GCC countries in addition to natural resource intensive economies e.g., Chile, Peru, South Africa, and Indonesia

Outlook: Negative

  • Structurally Challenged
    • E.g., some African economies with fundamental macroeconomic challenges such as high debt levels and pronounced currency/FX risks


Challenges and Considerations

  • Nominal financing costs are up to seven times higher than in the advanced markets, such as the United States and Europe, with even higher levels in riskier segments. This points to a high bar for projects to raise debt finance and offer sufficient returns on equity.

  • De-risking is key to mobilize private capital. Policies which strengthen macroeconomic fundamentals and improve governance structures are key to attracting private investment – especially in markets and sectors at preliminary stages of readiness – or in situations where the risks are hard to mitigate. Investors must also temper their expectations for high returns and balance this against the ability to fully de-risk investments, thus creating more investable dollars in the long-term.

  • Talent shortages, especially in early-stage co-development capabilities. Experienced leaders who can co-develop projects on the ground are in short supply, in part due to the difficulty for this group to originate early-stage development projects. Demand for experienced EM&DE energy transition leadership is fiercely competitive.


Please get in touch if you would like to discuss these investment themes in more detail, and/or attend the next event in the Energy Matters series on the 21st of November. It will be focused on exploring the role of the integrated energy companies in the energy transition.

We will be joined by Huibert Vigeveno, (Downstream, Renewables & Energy Solutions Director and ExCom member at Shell), who is shaping the company’s decarbonization strategy across power and green molecules.





Chris Nicholson; a Partner in the firm’s Global Industrial & Natural Resource Practice, covering the Energy markets.

Abigail Skerrett; a member of the firm’s Global Industrial & Natural Resource Practice and co-lead of the Global Energy Transition Practice.

Shola Brown; a member of the firm’s Global Industrial & Natural Resource Practice.


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