Metals, Commodities and Engineering of the Future

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:

1. Electrification requires copper intensive grids, motors, wiring, transformers and charging infrastructure.
2. Renewables and transmission require large volumes of steel for towers, foundations and network expansion.
3. Higher renewable penetration, EV adoption and resilient power systems require lithium and supporting battery supply chains.
4. Efficiency gains in EVs, wind turbines and automation increasingly rely on high-performance rare earth magnets, particularly Neodymium-Praseodymium (NdPr).
5. 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.

Portfolio Holdings

Across several Australian equity focussed portfolios, and particularly in the ClearBridge Australian Sustainable Equity portfolio, we hold overweights in foundational materials and engineering companies that play distinct and complementary roles in the transition. Below, we outline our sustainability investment thesis and our engagement priorities for five key Australian companies.

Portfolio Perspective and Outlook

Looking ahead, the future economy will be more electrified, infrastructure intensive and materials dependent. BHP Group, BlueScope Steel, Lynas Rare Earths, IGO and Worley play complementary roles in enabling that future and reflect our pragmatic sustainability philosophy. The energy transition is fundamentally a build-out of physical materials, infrastructure and engineering capabilities, not only digital solutions, and success depends on producing those materials with improving emissions intensity and strong environmental performance. Engineering execution ultimately determines whether climate ambition is translated inro real-world outcomes.

Through active engagement with company boards and management, we seek to support long-term shareholder value creation alongside measurable progress toward a lower carbon economy. Our engagement is focused on operational decarbonisation, capital discipline, transparency, and delivery against stated targets across all holdings. We continuously reassess both sustainability and investment merit for all of our holdings. A reduction in conviction could be triggered by material slippage in decarbonisation delivery, weakening transparency or governance, or deterioration in environmental or social licence outcomes.