Russia’s invasion of Ukraine, followed by an escalating exchange of sanctions with the West, has ratcheted up volatility in the energy markets. We continue to monitor how this highly fluid situation is evolving. Instead of trying to predict the exact outcome of what might occur based on developments that are very hard to forecast, we are focusing on two areas:
- Where we see likely changes based on what has already occurred and
- Our rigorous analysis of long‑term fundamentals and deep understanding of individual companies, which continue to drive our investment approach.
Following the data and focusing on what the world might look like after a crisis can help us to avoid overreacting to short‑term volatility and aid in identifying potential longer-term opportunities.
Despite the lack of clarity surrounding the Ukraine‑Russia war and its ramifications, we believe that Russia’s actions thus far likely have shifted the calculus for energy policy, with supply security concerns significantly elevated and becoming more intertwined with environmental considerations. Governments may seek to accelerate efforts to wean their economies off fossil fuels but, at the same time, may show more pragmatism around diversifying the legacy sources of baseload power, especially to the extent that eurozone member states strive to reduce their reliance on Russian natural gas. Given the uncertainty surrounding these transitions, we tend to gravitate toward high‑quality companies whose growth stories, in our estimation, could benefit from these trends but do not entirely depend upon them.
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