CONTRIBUTORS
Will Baylis
Portfolio Manager
Naomi Bant, CFA
Portfolio Manager
Key Takeaways
- The energy transition is a multi-decade build-out of physical materials, infrastructure and engineering capabilities, driving sustained demand for metals, materials and engineering capability.
- Copper, steel, lithium, rare earths, engineering and execution capabilities are foundational to electrification, renewables, energy storage and industrial decarbonisation, and success depends on producing those materials with improving emissions intensity and strong environmental performance.
- These dynamics are reflected in the ClearBridge Sustainable Equity Strategy through overweight positions in BHP Group, BlueScope Steel, Lynas Rare Earths, IGO and Worley.
- Our active engagement is focused on operational decarbonisation, capital discipline, transparency, and delivery against stated targets seek to support long-term shareholder value creation alongside measurable progress toward a lower carbon economy.
Why Metals and Commodities Matter for Lower-Carbon Outcomes
The transition to a lower carbon global economy is not only a technology shift, but also a sustained expansion of physical infrastructure. Electrification, renewable energy, grid expansion, electric vehicles and industrial decarbonisation all require large volumes of copper, steel, lithium and rare earths, alongside the engineering capability to design, deliver and decarbonise complex assets.
While decarbonisation is often framed as a story of innovation and software, in practice, it is driven by the engineering and materials cycle. As active investors, we seek exposures across the transition value chain: the foundational materials required to build the future economy, the critical minerals enabling electrification and energy storage, and the engineering capability that turns transition ambition into delivered outcomes. We consider these exposures as sustainable when end uses enable decarbonisation and the companies demonstrate credible pathways to improve emissions intensity, environmental performance, transparency and governance.
This dynamic is evident across the key building blocks of the energy transition:
- Electrification requires copper intensive grids, motors, wiring, transformers and charging infrastructure.
- Renewables and transmission require large volumes of steel for towers, foundations and network expansion.
- Higher renewable penetration, EV adoption and resilient power systems require lithium and supporting battery supply chains.
- Efficiency gains in EVs, wind turbines and automation increasingly rely on high-performance rare earth magnets, particularly Neodymium-Praseodymium (NdPr).
- Engineering and execution capacity ultimately determines whether decarbonisation occurs at scale, translating climate ambition into real-world delivery through design, retrofit, optimisation and project execution.
Together, these forces underpin long-duration demand for the commodities and capabilities represented in our portfolios, while also raising expectations around responsible production and continuous improvement in emissions intensity.
Important Information
Franklin Templeton Australia Limited (ABN 76 004 835 849) is part of Franklin Resources, Inc., and holds an Australian Financial Services Licence (AFSL No. 240827) issued pursuant to the Corporations Act 2001. The ClearBridge Australian Equities Investment Team, a division of Franklin Templeton Australia Limited, is operationally integrated under the “ClearBridge Investments” global brand, alongside ClearBridge Investments, LLC (“CBI”), and other ClearBridge entities indirectly wholly owned by Franklin Resources, Inc. Distribution of this material is issued and approved in Australia by Franklin Templeton Australia Limited.
This publication is issued for information purposes only and does not constitute investment or financial product advice. It expresses no views as to the suitability of the services or other matters described in this document as to the individual circumstances, objectives, financial situation, or needs of any recipient. You should assess whether the information is appropriate for you and consider obtaining independent taxation, legal, financial or other professional advice before making an investment decision.
The document does not form the basis of, nor should it be relied upon in connection with, any subsequent contract or agreement. It does not constitute, and may not be used for the purpose of, an offer or invitation to subscribe for or otherwise acquire shares in any of the products mentioned.
Past performance is not a guide to future returns.
The distribution of specific products is restricted in certain jurisdictions, investors should be aware of these restrictions before requesting further specific information.
The views expressed are opinions of the portfolio managers as of the date of this document and are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. These opinions are not intended to be a forecast of future events, research, a guarantee of future results or investment advice.
Some of the information provided in this document has been compiled using data from a representative account. This account has been chosen on the basis it is an existing account managed by the investment team, within the strategy referred to in this document. Representative accounts for each strategy have been chosen on the basis that they are the longest running account for the strategy. This data has been provided as an illustration only, the figures should not be relied upon as an indication of future performance. The data provided for this account may be different to other accounts following the same strategy. The information should not be considered as comprehensive and additional information and disclosure should be sought.
The information provided should not be considered a recommendation to purchase or sell any particular strategy / fund / security. It should not be assumed that any of the securities discussed here were or will prove to be profitable. It is not known whether the stocks mentioned will feature in any future portfolios managed by the investment team. Any stock examples will represent a small part of a portfolio and are used purely to demonstrate our investment style.
The analysis of Environmental, Social and Governance (ESG) factors forms an important part of the investment process and helps inform investment decisions. The strategy/ies do not necessarily target particular sustainability outcomes.
Risk warnings - Investors should also be aware of the following risk factors which may be applicable to the strategy shown in this document.
- Investing in foreign markets introduces a risk where adverse movements in currency exchange rates could result in a decrease in the value of your investment.
- This strategy may hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the strategy’s value than if it held a larger number of investments.
- Smaller companies may be riskier and their shares may be less liquid than larger companies, meaning that their share price may be more volatile.
- The strategy may invest in derivatives (index futures) to obtain, increase or reduce exposure to underlying assets. The use of derivatives may restrict potential gains and may result in greater fluctuations of returns for the portfolio. Certain types of derivatives may become difficult to purchase or sell in such market conditions.
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