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Posted on Apr 22nd, 2022

The Path to Renewable Energy


Jeremy Lin, CFA

Portfolio Manager

A few months ago, you’d never expect “nuclear” and “green energy” would be used in the same sentence.

Then Russia invaded Ukraine, and everything changed.

Governments around the world woke up and realized they can no longer fund a country that continues to invade and annex sovereign nations. But when that country is a large exporter of oil and natural gas, things can get a bit murky.

The end-goal remains a complete transition to renewable energy, but we need to look at a bridging solution that both keeps the lights on and moves away from carbon-heavy fossil fuels – while also removing dependence on bad players. Let’s look at what that solution looks like.

Key Takeaways

  • Energy security concerns have quickly come back to the forefront for the European Union.
  • The EU failed with their energy policy that moved away from nuclear.
  • Energy transition has shifted towards near-term policies that favour natural gas and nuclear.
  • A holistic approach to sustainable investing includes renewable and energy security.

Energy Security Explained

Energy security encompasses the basic idea of a relatively cheap and stable energy supply for a country’s foreseeable future. This involves safeguarding access to resources and the development and deployment of energy-related technologies – like nuclear power or LNG import terminals.

Uneven or lagging distribution of energy supplies in a country leads to significant vulnerabilities, which is exactly what we’re seeing now. Before it invaded Ukraine, Russia supplied Europe with 25% of its oil and 40% of its natural gas.1 This reliance now forces many European nations to essentially fund an aggressive country – both during and after its illegal annexation of Crimea and now again during its invasion of Ukraine. In fact, Europe’s dependence on natural gas imports has actually increased since Crimea’s annexation.

Europe's dependency on natural gas has steadily increased

Failed EU Policies

There’s no denying that Europe’s failed energy policies caused an overdependence on a country like Russia. Take the knee-jerk reaction to the Fukushima disaster. An overreaction moved countries like Germany and France away from nuclear energy, but it’s a virtually carbon-free energy source. The type of energy source we need to look towards to substantially cut down on fossil fuel reliance. This knee-jerk reaction also came with no roadmap of what a post-nuclear-powered country would look like, causing Germany to burn massive amounts of coal over the past decade. Not just coal, though, but also lignite – a brown, combustible, sedimentary rock that is one-third more emissions than coal and three times as much as natural gas.2

This lack of a roadmap also turned Germany into Russia’s largest natural gas consumer,3 a key vulnerability that gives more leverage to the authoritarian government.

Share of energy sources in gross German power production in 2021

Energy Transition Shift

The EU Taxonomy is a green classification system aimed to help investors make sustainable choices. When it was first implemented almost two years ago, nuclear energy and natural gas were left out because they needed further assessment. But after the EU Joint Research Centre reviewed, they concluded that the technologies are sustainable4 and moved to include it in the Taxonomy – so long as they meet specific targets.5 Whether or not you think that’s controversial, it’s much needed. It’s also important to note that these inclusions will allow countries like Poland, who still rely heavily on coal,6 to benefit from the incentives and move to an energy source that is much cleaner than coal.

Nuclear energy also involves significantly fewer carbon emissions, though it admittedly has its own separate safety concerns and regulations for proper disposal of its waste. Still, Belgium has since reversed their plan to phase out all nuclear generation by 2025, deciding to extend the lives of two nuclear power reactors by ten years.7 And French President Emmanuel Macron has also recently announced a renaissance for the French nuclear industry, with plans to build as many as 14 new reactors. “What our country needs, and the conditions are there, is the rebirth of France’s nuclear industry,” said Macron.8


Critics of the proposed inclusion of natural gas and nuclear energy argue that this is nothing more than greenwashing – a public relations spin that deceptively persuades the public that an organization’s products and policies are environmentally friendly – but the issue is not so black and white. The plan is a means to an end. A temporary bridge that will help countries to wean themselves from fossil fuels as they begin to increase their renewables capability.

Critics also ignore the fact that this new classification will have strict limits on what qualifies. For example, natural gas generation is under a CO2 limit with an added requirement of switching to low-carbon gas by 2035.9 Nuclear, on the other hand, can only be in countries with clear plans and funding for how they dispose of the nuclear waste.

“I fully accept that gas is a fossil fuel – we’re not blind to this – but it’s much better than the continuing use of dirty coal. Equally, nuclear is carbon free,” said EU Financial Services Commissioner Mairead McGuinness,10arguing that the proposal also deals with the toxic waste disposal and further requires that its nuclear sources cause no significant harm to the environment.

Investing for the Future

Last year, we launched the Purpose Energy Transition Fund (CLMT) because we believe the transition to a greener tomorrow won’t happen overnight. And the conflict in Ukraine has really affirmed our thesis.

The road to full energy decarbonization is paved with low-carbon transition fuel. That’s why we invest in low-carbon fossil fuels and not just renewables. Governments and investors around the world are waking up to the harsh reality that hitting net-zero is impossible without the proper raw materials required. Low-carbon fossil fuel producers, companies investing in local supply chains, and renewables that can generate energy will be the winners in the new world for decades to come.

By addressing the difficulty of today’s energy needs, we’ll help expedite the road to net-zero.

1. “Ukraine war: How reliant is the world on Russia for oil and gas?,” BBC:

2. “Brown coal wins a reprieve in Germany’s transition to a green future,” The Guardian:

3. “Germany is The Biggest Consumer of Russian Natural Gas,” Statista:

4. “A guide to the EU’s ‘green’ taxonomy – and nuclear’s place in it,” World Nuclear News:

5. “EU proposes rules to label some gas and nuclear investments as green,” Reuters:

6. “Vast Polish coal mine infuriates the neighbours,” BBC News:

7. “Extended operation of two Belgian reactors approved,” World Nuclear News:

8. “France’s Macron goes nuclear,” NuclearNewswire:

9. “EU proposes rules to label some gas and nuclear investments as green,” Reuters:

10.  EU Commissioner McGuinness defends gas, nuclear in green investment guidance,” Politico:

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