Energy Transition as a Credit Differentiator: Why Alignment Shapes Ratings

In times of volatile markets and conflicting headlines, long-term structural trends offer a more reliable compass for investors. Ferdinand Dalhuisen, Managing Director Private Assets at Oddo BHF Asset Management, argues that one such trend is impossible to ignore: “The energy transition has emerged as one of the most significant trends of the past decade, as well as one of the most compelling investment themes for the future,” he writes in a recent market commentary.

Dalhuisen emphasizes that the acceleration of the energy transition is not just an environmental imperative but also a matter of financial resilience. The decisive factor, he notes, lies in the mobilization of private equity capital: “The outlook for predominantly institutional investors is favorable, as the energy transition has accelerated over the past four years due to three main factors.”

Among these drivers, the cost competitiveness of renewables stands out. Photovoltaic and wind power have become the cheapest sources of electricity, thanks to technological progress and economies of scale. “This has made renewable energy the preferred technology for investors and developers of energy projects. With 90% of the volume, they now represent the majority of planned grid connection projects in the United States,” Dalhuisen points out. Added to this is the sharp rise in electricity demand, fueled by electrification and the boom in artificial intelligence, which can only be sustainably met with renewables due to their shorter development timelines.

For credit markets, this trend has far-reaching implications. Assets tied to fossil fuels increasingly face transition risks. As Dalhuisen stresses: “With the situation deteriorating, the pressure to accelerate the energy transition increases. This burdens assets that stand in the way of decarbonization. Those who are part of the value chain of the energy transition, however, benefit.” For issuers, this means that credit ratings could come under pressure if business models are misaligned with decarbonization pathways. Conversely, companies embedded in renewable infrastructure and energy efficiency could see their credit profiles strengthen as demand and policy support grow.

The investment opportunities, according to Dalhuisen, are broad. “This includes the development of solar and wind farms, battery storage networks, new transmission lines, grid modernization, as well as biogas plants, environmentally friendly data centers, and charging station networks for electric vehicles,” he explains. Complementary services such as operations and maintenance, consulting, and software also stand to gain.

Ultimately, Dalhuisen positions the energy transition as not only a growth theme but also a defensive strategy in the current environment. Its ability to hedge portfolios against climate-related risks and policy shifts makes it relevant for both equity and credit investors. For ratings, the message is clear: issuers aligned with this megatrend may enjoy stronger resilience and access to capital, while laggards risk downgrades as transition pressures mount.