Policymakers, corporate leaders, and investors are increasingly aligned in recognising climate change as a defining issue of our time. It’s not just policy support that is mobilising massive investments in clean technologies, it’s also corporate net-zero targets – and often simple economic realities – that are accelerating demand for climate change solutions. This makes a compelling investment opportunity in companies that provide these solutions.

But rather than focusing solely on high-profile opportunities such as renewable energy or electric vehicles (EVs), investors should also consider the enabling infrastructure and technologies that underpin the net-zero transition.

Outlined below are four hidden heroes that are enabling this transition to occur: energy efficiency enablers, infrastructure supporting electrification, companies enabling a more circular economy and those involved in efficient computing and artificial intelligence.

Of course, there have been and will continue to be many bumps along the way. But the long-term direction towards decarbonisation remains clear. Long-term investors, who position early and go beyond the obvious, will be well placed for the next phase of growth as the world accelerates toward a low-carbon future.

Energy efficiency: an effective emissions tool

While the climate change mitigation spotlight often falls on renewable energy and EVs, part of the solution lies in less publicised, yet still important, areas such as energy efficiency and the technologies that enable it.

Businesses focused on optimising how energy is consumed, stored, and managed are beginning to stand out as more attractive long-term opportunities.

There are also opportunities emerging with innovative firms working in software, automation, industrial hardware, and advanced data analytics that offer high-impact, scalable solutions for reducing energy waste across sectors ranging from manufacturing and logistics to construction and real estate.

Today, energy efficiency is one of the most potent and proven strategies for reducing carbon emissions. In the United States, for example, energy efficiency initiatives contributed more to emissions reduction between 2010 and 2022 than renewable energy deployments¹. Yet despite its effectiveness, investing in companies offering energy efficiency solutions receives less attention.

Unlike energy production, efficiency solutions reduce demand altogether, cutting both costs and emissions in the process. As a result, energy efficiency solutions represent one of the most financially attractive areas of investment for heavy emitters.

At its core, energy efficiency is about achieving more with less, optimising energy usage without compromising productivity or performance. Solutions in this space include industrial automation systems, state-of-the-art insulation, smart heating and cooling systems and software tools that provide real-time visibility and control over energy use.

Governments and corporations aiming to meet decarbonisation targets are increasingly adopting energy efficiency technologies because they offer one of the most cost-effective pathways to emissions reduction. Many of these solutions come with short payback periods and can be rapidly deployed across different industries and geographies.

For example, Irish building insulation company Kingspan says that the insulated systems they sold in 2024 will help avoid the equivalent of 172m tonnes of carbon dioxide over their lifetime. This is the equivalent of around 40% of Australia’s annual emissions, based on the latest data to June 2024.

Electrical infrastructure: supporting the transition

As renewable energy becomes a larger share of the energy mix, the supporting infrastructure must evolve in line with it. The existing power grid must be reengineered to accommodate the variable output of solar and wind, the rise of decentralised generation, and the broad electrification of transportation and heating.

This transformation requires substantial upgrades across a range of technologies, including energy storage solutions, smart grid software platforms, transformers, and modern transmission and distribution lines. While these components may not capture the public imagination like solar farms or EVs, they are essential to supporting the move away from things like transport and heating being reliant on fossil fuels.

In addition to renewables, nuclear power is receiving renewed attention as part of the transition. As a low-carbon baseload energy source, nuclear is increasingly viewed as a necessary complement to intermittent renewables. Some of the world’s largest technology companies are now signing long-term agreements with nuclear providers to meet the surging electricity demands of data processing, AI training, and cloud computing while at the same time helping them towards their ambitious climate change targets.

The companies building and operating these critical infrastructure components, whether through energy storage, grid optimisation, or power distribution, play a central role in enabling the net-zero future. Innovations such as long-duration batteries, high-voltage direct current (HVDC) lines, and microgrids demonstrate the progress being made in making energy systems more intelligent and adaptable.

Circular economy: reducing waste and reusing materials

Reducing waste is also becoming a focus for investors.

The concept of a circular economy is revolutionising how industries manage resources. Rather than relying on extractive, linear models of production and consumption, the circular approach focuses on reducing waste, increasing recycling, and creating more sustainable manufacturing systems.

Plastics, industrial waste, and water scarcity present some of the biggest environmental challenges today. Companies involved in waste management, advanced recycling, and water treatment solutions are experiencing a rising demand, particularly as corporate and government policies promote higher sustainability standards in packaging and industrial processes.

Simultaneously, regulatory frameworks are encouraging companies to adopt more sustainable practices, particularly in areas such as plastic waste reduction, landfill diversion and responsible industrial waste incineration.

Innovation in sustainable materials is progressing rapidly. Emerging products such as low-carbon cement, bio-based plastics, and synthetic fuels hold the potential to decarbonise some of the most emissions-intensive industries, including construction, chemicals, and aviation.

AI and energy: both a challenge and a solution

The rapid adoption of artificial intelligence (AI) is reshaping global energy consumption. AI workloads are significantly more power-intensive than traditional computing, and as businesses deploy AI at scale, data centre electricity demand is set to surge.

In 2022, before the lift-off in AI-related data centre infrastructure spending, it was estimated that 2.5% of US electricity consumption was for data centres. It’s been estimated that that proportion could triple by the end of the decade.

But rather than slowing decarbonisation efforts, AI could increase the urgency of the energy transition, forcing companies to scale clean energy investment and grid infrastructure faster than previously expected. This is exactly what we have seen, with companies like Microsoft and Amazon not only remaining among the biggest corporate participants in renewable power purchase agreements but also both signing innovative deals on nuclear energy.

This creates what is known as the “AI paradox”: AI technologies have the potential to drive higher energy consumption, yet they also offer powerful tools to manage and reduce that consumption. Indeed, AI is playing a role in energy efficiency and grid optimisation. Machine learning models are being used to improve electricity demand forecasting, enhance battery storage performance, and increase the efficiency of industrial and building energy systems.

While AI is accelerating the need for clean power, it is also pushing companies to use power more efficiently.

Companies that are developing energy-efficient AI chips, data centre cooling technologies, and intelligent infrastructure stand to benefit from rising demand – effectively to ensure that the potential tripling of energy use by these technologies does not occur. These firms operate at the confluence of two powerful trends, digital transformation and climate transition, and are poised to play a pivotal role in shaping a more sustainable technological future.

As AI becomes embedded across industries, innovation in energy-efficient computing infrastructure will be crucial. This includes everything from semiconductor design and edge computing to renewable-powered data centres and smarter workload distribution models.

Climate change as a structural investment theme

At Munro Partners, we view climate change mitigation not just as an environmental challenge but as a fundamental structural shift that will shape global markets for decades. Our Climate Area of Interest focuses on identifying and investing in companies that are enabling others to reduce their emissions. These include firms delivering energy efficiency, circular economy integration, and electrical infrastructure.

We believe that by looking beyond the obvious to these hidden heroes of decarbonisation, investors will find enabling technologies both vital to meeting global climate targets and compelling long-term investment opportunities.

 

By Mike Harut, Responsible Investment Manager, Munro Partners

 

 

¹ Munro Partners and industry research 2024.