9 DECEMBER 2025
Infrastructure outlook: AI, decarbonization and policy tailwinds in 2026
ClearBridge Investments believes the outlook for infrastructure in 2026 remains robust, driven by the accelerating demand for power and data fueled by AI.
Key takeaways
- Turning challenge into opportunity: Europe’s energy security presents a challenge, but electrification and a low-cost power grid could reduce reliance on imports and boost Europe’s competitiveness.
- Renewables offer an advantage: With nearly half of its grid powered by renewables, Europe is well-positioned to meet demand, but success depends on infrastructure and policy support.
- Seeing the big picture: Rising energy demand driven by AI is creating interconnected opportunities across technology, infrastructure, and energy for investors.
Securing Europe's economic future
Europe’s capital markets are often seen as structurally challenged, but low-cost electricity could transform the region’s economic competitiveness. A mix of necessity, opportunity, and urgency is driving this shift.
As economic power consolidates around the US, China, and the EU, energy security has become a key vulnerability - especially for China and Europe. Electrification is accelerating, with global demand expected to outpace GDP growth until at least 2030. Climate change, digitalization and geopolitical pressures add urgency, although Europe’s strong renewables base - already nearly half of its electricity mix - offers an advantage.
European Union’s Electricity Generation Mix
Other Renewables*, 0.3%
Source: European Electricity Review 2025. EMBER. January 23, 2025. Unlabelled section is ‘other renewables’ at 0.3% and includes geothermal, tidal and wave generation. * Other fossil fuels include generation from oil and petroleum products, as well as manufactured gases and waste.
A resilient, low-cost power grid could boost productivity, but achieving this by 2030 depends on political alignment, infrastructure investment, and interconnectivity. Delays in the next three years could significantly slow progress. Some nations, like the Netherlands, Denmark, Spain, and Germany, are leading, while others, such as Italy and Poland, face structural hurdles.
The future energy market will likely centre on three pillars: low-cost renewables, long-term gas contracts, and a flexible spot market. Success could secure not just energy stability but a lasting economic edge.
Connecting the bigger picture
Europe’s energy security is just one of many critical issues shaping the investment landscape. At Franklin Templeton, we analyse these global shifts to help investors mitigate risks and capitalise on emerging opportunities.
One of the biggest forces at play today is the surge in energy demand - driven by AI’s rapid expansion. Powering this growth will require significant investment in infrastructure and a stable, low-cost energy supply. The challenge is not just meeting demand but doing so sustainably.
As AI transforms industries and electrification accelerates, energy security is becoming an increasingly critical factor in economic competitiveness. Understanding these trends across technology, infrastructure, and energy can help investors position for the future.
Contributors
Kim Catechis
Investment Strategist,
Franklin Templeton Institute
Karolina Kosinska, CIPM
Analyst
Franklin Templeton Institute
Featured Funds
Investment ideas
Explore three strategies managed by our specialist investment teams which can help investors benefit from growth vital to powering our future, while contributing to a cleaner and more resilient world.
Franklin Technology Fund
- Invests in both established and emerging technology leaders, identifying emerging themes and building positions in promising companies early.
- Managed by one of the world’s largest, most experienced technology teams, based in Silicon Valley.
FTGF ClearBridge Infrastructure Value Fund
- Listed exposure to true infrastructure assets, balancing more defensive regulated assets, such as water and electricity, and user-pays growth assets, such as railways and airports.
- Managed by a dedicated team of 12 infrastructure specialists, with an average investment experience of 24 years for portfolio managers.
Templeton Global Climate Change Fund
- An authentic Article 9 fund delivering genuine climate impact.
- Invests across the entire value chain where change matters most, tackling climate issues at their root cause.
Insights
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