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Multiple structural forces are converging: AI-driven electricity demand, the electrification of transport, industry, heating, and other applications, and the integration of distributed renewable generation into a grid designed for a different era. On top of those forces, high and volatile fossil fuel prices because of the Iran War may further accelerate electrification. European electric vehicle (EV) sales jumped 51% in March 2026, and China’s “new three” exports (solar, batteries, and EVs) rose 70% year-over-year, according to Ember and Chinese customs data.

The combination of demand pressures is significant. Hyperscalers are racing to build AI compute capacity, and new data centers require more power and often new transmission connections as well. Electrification is adding load from EVs, heat pumps, and industrial processes, while the shift to distributed, intermittent renewable generation requires storage, load balancing, demand response, and smart grid technologies that the existing system was not designed to accommodate.

The numbers are stark.

Similarly, 40% of European distribution grids are more than 40 years old. According to the International Energy Agency, while investment in renewables has doubled since 2010, grid capex has remained largely flat, creating a choke point for electrons in developed economies. Order backlogs for transformers, cables, and switchgear are growing, and lead times for large power transformers now span three to five years in North America and Europe.

The opportunity spans asset classes. In public equities, large industrial companies supplying grid equipment—including transformers, cables, and switchgear—have seen significant re-ratings. The more attractive opportunities are likely to be companies with multi-year order backlogs and demonstrable pricing power, rather than those primarily riding the thematic wave on sentiment. Private infrastructure funds can offer exposure to grid assets with long-duration, inflation-linked cash flows. Growth equity and venture capital can provide access to grid-enhancing technologies, including demand response platforms, energy storage software, and grid optimization tools, increasingly enabled by AI. What distinguishes strong managers in this space is the combination of engineering expertise, understanding of industry-specific sales cycles, and the ability to navigate highly localized regulatory complexities.

The context is different in many low- and middle-income countries, where the challenge is often not modernizing an aging grid but expanding energy access for the first time. Solar costs have fallen more than 90% since 2010, and the combination of rooftop solar, mini-grids, and battery storage now offers a faster, cheaper, and more resilient path to electrification than extending the traditional grid. This is the energy leapfrog, analogous to how mobile phones bypassed fixed-line telecommunications across many emerging markets. Here, the opportunity set is more distinct and often centers on distributed energy, last-mile distribution platforms, productive-use appliance financing, and the digital infrastructure—including metering, payments, and demand forecasting—that makes distributed energy commercially viable at scale.

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Tariffs are one reason the economics are shifting. When duties raise the cost of virgin steel, aluminum, or plastics, the reuse of materials becomes more competitive. Recycling, remanufacturing, and recovery can reduce reliance on imported goods that may be disrupted by trade disputes, export controls, or freight bottlenecks.

AI is increasing demand for critical minerals and rare earth elements used in the infrastructure that powers data centers. Companies that build circular systems through recovery of end-of-life batteries, electronics, and industrial equipment can reduce sourcing inputs from geographically concentrated and politically sensitive regions. This lowers exposure to external shocks and improves long-term supply resilience. Additionally, waste-to-energy systems are finding new demand with the growth in site-specific energy needs.

Plastic offers one of the clearest near-term business cases. Virgin plastic production is tied to fossil fuel feedstocks with oil price spikes quickly flowing into resin costs. Recycled plastic is not immune to volatility, but it is less dependent on virgin hydrocarbon extraction, which makes recycled content supply chains economically more attractive in times of oil price volatility.

The broader inflationary environment adds to the investment case. Newly extracted inputs are significantly exposed to inflation in energy, transport, labor, and trade. Using recycled inputs, extending product life, and recovering components can function as direct margin protection when prices rise.

Regulation is reinforcing the economic opportunity within the circular economy, and recycled content mandates are creating demand floors for secondary materials.

That number will rise incrementally to 60% by 2028. The EU’s packaging rules are also tightening recycled content requirements. With regulatory compliance for recycled content increasing in a growing number of jurisdictions, a first-mover advantage is emerging for companies that secure feedstock.

Translating the circular economy investment thesis into portfolio action requires a deliberate approach across asset classes. Many institutional portfolios already have meaningful exposure to sectors where circularity is becoming a competitive differentiator, including industrials, materials, consumer staples, technology hardware, and logistics. Investors should better understand how managers are evaluating companies’ waste reduction and reuse strategies. Companies genuinely innovating on circularity—rather than merely reporting on it—may exhibit lower input cost sensitivity and more durable margins over time. Private equity and growth equity managers with dedicated circularity mandates offer access to advanced recycling platforms and the software systems that make reverse supply chains commercially competitive. Real assets managers with operational expertise in supply chain logistics are well positioned to develop and own the physical infrastructure required to support circularity at scale.

Circularity is increasingly competing on price, resilience, and operational relevance. In a more disrupted world, the circular economy is becoming a more practical business and investment consideration.

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Potential public and private markets opportunities span platforms, services, talent-focused enterprises, and financing solutions tied to workforce development and skilled labor businesses.

The displacement is already visible. In 2025, US employers cited AI as a factor in nearly 55,000 job cuts. More broadly, the World Economic Forum projects that technology disruption, geoeconomic fragmentation, and the energy transition could affect 22% of jobs by 2030, creating 170 million new roles while displacing 92 million. The effects are uneven: among workers ages 22 to 25 in AI-exposed occupations, employment has fallen 6% since late 2022, and employment for the youngest software developers remains roughly 20% below its late-2022 peak. Workers will need to adapt and build highly valued skill sets, both technological and cognitive, to thrive in today’s economy.

At the same time, labor shortages in skilled trades are intensifying. The United States needs roughly 500,000 construction workers and 80,000 electricians each year, along with tens of thousands of plumbers, pipefitters, and HVAC technicians. Demand is rising further as AI infrastructure, the energy transition, and climate adaptation require more physical buildout than the current labor pipeline can supply.

For investors, this creates several potential areas of opportunity across public and private markets:

• Platform and Technology Plays, including learning management systems (LMS), adaptive content platforms, enterprise LMS, and apprenticeship management software that enable enterprises implement workforce development programs
• Services and Consulting Plays, such as enterprise re-skilling programs, workforce transformation consulting, and employer-facing trades staffing and training platforms
• Talent-Forward Enterprises, including large global organizations that are approaching talent development as a mission-critical strategy to build competitive advantage
• Employee Ownership Transition Capital, like private credit financing for employee stock ownership plans (ESOPs) and employee ownership trusts (EOTs) conversions, particularly in businesses dominated by skilled labor

Retention is also a part of the scarcity story. AI innovation risks concentrated value creation at the top of the skills distribution, raising questions around who captures that value. This is not just a social issue; it is a talent strategy question. Employee ownership—through structures such as ESOPs, EOTs, and worker cooperatives—is emerging as a powerful and underutilized innovation for retaining skilled workers across both digital and trades pathways.

There is a small but growing number of private equity and credit strategies dedicated to employee ownership that investors should lean into. Some companies transitioning to employee-owned offer lower-middle-market exposure through often inflation-resilient, real-economy businesses, while aligning tax-advantaged financial returns with worker wealth creation. ESOP companies also tend to pay higher wages, offer more retirement benefits, and show stronger engagement and retention than comparable non-ESOP companies. The same “silver tsunami” of retiring business owners creating the employee ownership investment opportunity is concentrated in construction, electrical, plumbing, and HVAC contracting, which are industries where skilled small- and mid-sized contractors dominate, the businesses are often profitable and growing, and the transition-capital gap is acute.

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The business case begins with continuity. Water scarcity has been linked to weaker economic growth and higher inflation. Because water is expensive to move relative to its value, local treatment, recycling, storage, and efficient allocation can often generate better long-term returns than securing additional supply.

Trade and geopolitical conflict reinforce the value of secure water resources. Regions that can offer dependable water access may be better positioned to attract manufacturing, food production, and digital infrastructure, which can help insulate from tariff fluctuations and reduce dependence on other jurisdictions. Geopolitical conflict adds another layer of risk and value. The Strait of Hormuz is not just an energy choke point; it is a reminder that water infrastructure can be strategically vulnerable, particularly in desalination-dependent economies in the Gulf region. More broadly, governments are increasingly treating water as a strategic resource rather than only a utility issue.

The AI buildout has heightened the urgency of this theme. Large data centers can consume enormous amounts of water for cooling. In the United States, an average 100-megawatt data center consumes water equivalent to roughly 6,500 households.

The AI companies that use recycled-water infrastructure may benefit from better positioning with regulators and communities.

Inflation strengthens the investment case further. Water has been underpriced in many regions for years, but utilities and regulators are facing rising costs tied to aging infrastructure, tighter standards, and climate adaptation efforts. This points toward structurally higher water costs over time, especially in stressed basins. Companies that invest early in water efficiency are locking in lower operating costs before the full impacts of repricing.

The investable opportunity spans public and private markets with business models that: reduce water use through analytics, metering, leak detection, and water-efficient industrial systems; reuse water through advanced treatment, recycling, and closed-loop infrastructure; replace fresh water demand through desalination and brackish-water; or deliver water more effectively through utility concessions and water-as-a-service models.

Investors should consider water to be a portfolio issue and stress test holdings for water intensity and resilience. Managers should demonstrate how they incorporate water-related risk factors into investment decisions. This applies to both equities and credit. According to Moody’s, nearly $2 trillion in corporate debt is highly exposed to water management issues. The common thread is simple: businesses that secure supply, improve productivity, and reduce exposure to future price shocks may become more valuable as water scarcity becomes more visible. Managers proactive in managing risk and leaning into companies that provide water solutions should be well positioned.

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Trade conflicts are forcing companies to reconfigure supply chains around security and regional resilience rather than pure efficiency. Companies that have already diversified suppliers, lowered dependence on unstable inputs, and positioned production in locations better suited to a changing climate will be best positioned to gain competitive advantage. In that sense, resilience can become a source of continuity and, in some cases, pricing power.

Adaptation converges with value creation in agricultural production. Industrial farming models remain more exposed to weather variability and fertilizer costs, which have spiked recently with disruptions in the Middle East. Regenerative and climate-adaptive agricultural systems improve soil health and moisture retention, stabilizing production and reducing dependence on synthetic inputs. Economies with more resilience embedded in their agriculture and other productive systems may be less exposed to recurring cost surges and repeated rebuilding expenses from extreme weather events.

The scale is already large enough to matter.

The financing gap is not only a policy issue; it may also signal that private capital has not priced in future demand. However, the cost of inaction continues to escalate as damaged infrastructure creates disrupted service and repair needs, crop failures reduce supply, disrupted logistics increase delayed freight, and energy volatility feeds through to industrial inputs. Insurance markets are the clearest early warning system. Premium increases and selective coverage withdrawal in climate-exposed regions suggest that physical risk is beginning to reprice faster than many investors and corporate planning models.

The investment opportunity spans both pure-play resilience providers and resilience-integrated incumbents. Climate analytics, flood-control systems, cooling technologies, resilient materials, and early warning platforms offer direct exposure as demand broadens. Well-positioned infrastructure operators, building materials companies, and essential service providers offer a second route: steadier cash flows supported by better adaptation of core assets and operations.

Physical climate risk will continue to create additional operational risks across sectors. Recognizing the leaders and laggards in adaptation and resilience may become a more important part of portfolio risk management.

Five Scarcities. Many Intersections.

The conditions have changed. Each of these scarcities was visible years ago, but economic, regulatory, and geopolitical developments are making them even more urgent and investable. The world has been:

For all of these interconnected themes, the investability is scalable across public and private markets. Investors would benefit from assessing existing risk exposures, engaging managers, and investing proactively in a growing set of solutions.

Investors who lean into these themes today would enhance long-term portfolio resilience in a world where both scarcity and disruption are abundant.

Index Disclosure

MSCI All Country World Index (ACWI)
The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 24 emerging markets (EM) countries. With 2,558 constituents, the index covers approximately 85% of the global investable equity opportunity set. DM countries include Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. EM countries include Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, the Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey, and the United Arab Emirates.

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Their discussion spans both the need to upgrade existing infrastructure including roads, rail and airports and the investment opportunity in the infrastructure of tomorrow, from EV charging and microgrids to waste and water systems.

Josh explains that sustainable real assets can serve a range of portfolio objectives. For some investors, core infrastructure and operational assets such as solar plants can provide steady, income-generating exposure. For others, assets like agriculture and timber can offer diversification alongside public equities and fixed income. And for clients seeking more growth-oriented or impact-driven opportunities, backing newer technologies and greenfield projects may offer greater upside, albeit with higher risk.

Anne also discusses how manager selection is evolving, with energy security, AI and geopolitics reshaping the investment landscape. Together, they reflect on a maturing opportunity set that increasingly allows investors to align portfolio construction with both financial goals and broader sustainability priorities.

Watch the video below to hear Josh and Anne’s insights on investment opportunities within sustainable real assets:

Sustainable and impact investing at Cambridge Associates focuses on helping clients invest in ways that support positive social and environmental outcomes alongside financial returns. Sustainable Investing in Focus is designed to make these topics accessible to everyone by explaining key concepts in a clear and simple way. By sharing practical examples and insights, the series helps viewers understand how sustainable investing works, why it matters and how it’s changing.

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A combination of environmental, economic, and political factors is driving that momentum. As demand rises for finite resources, including those essential to technologies such as electric vehicles and batteries, the case for using materials more efficiently and keeping them in circulation for longer is becoming clearer. Supply chain disruptions in recent years have added to that urgency, underscoring the value of resilience, localization, and resource efficiency.

Momentum is also being supported by regulation and corporate action. Policy changes in several markets are encouraging producers to take greater responsibility for waste, packaging, and recycled content, while many companies are strengthening sustainability commitments that align with more circular business practices.

The episode also explores how circularity intersects with broader impact priorities. In addition to complementing climate-focused strategies by helping reduce emissions linked to raw material extraction and the production of goods, circular economy approaches may also contribute to biodiversity and nature-related investing by reducing pollution and pressure on natural systems.

Watch the video below to hear Ratana and Alice’s insights on investment opportunities within the circular economy.

Sustainable and impact investing at Cambridge Associates focuses on helping clients invest in ways that support positive social and environmental outcomes alongside financial returns. Sustainable Investing in Focus is designed to make these topics accessible to everyone by explaining key concepts in a clear and simple way. By sharing practical examples and insights, the series helps viewers understand how sustainable investing works, why it matters and how it’s changing.

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