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Public Equities

Keeping it “Real”—The Case for Natural Resource Equities

July 2025 – 8 min read

Natural resource equities can provide inflation protection and portfolio diversification, making them a potentially compelling investment option in environments characterized by elevated inflation, heightened geopolitical risk, and increasing energy demand.

Natural resource equities have historically provided an effective inflation hedge, while also offering diversification benefits within a broader equity portfolio. Over the last 20+ years, natural resource equities have protected against inflation better than many other fixed income and equity asset classes. Further, as a ‘real asset’, commodities can continue to provide inflation protection even when global government debt levels are elevated, and hedge against the spectre of rising fiscal deficits. Currently, short-term inflation expectations remain elevated, evident from the recent moves in U.S. Treasury yields and amplified by President Donald Trump’s expansionary fiscal policy, U.S. import tariffs, and immigration policies. Longer term, the next phase of global growth will likely be energy intensive, driven by rising power demand from artificial intelligence and data centers. This increase will lead to a structural demand for key materials including copper and aluminum, at time when investment in new supply is insufficient.

When assessing the most effective way to allocate to this asset class, it is worth noting that natural resource equities have provided a much higher return than commodity futures over time, benefiting from the underlying cash flows of the companies and avoiding the significant costs of holding the underlying commodities. Natural resource equities can also serve as an effective diversifier for global equity portfolios given the high concentration risk of the broader global equity market and the dominance of a few mega-cap technology stocks—which has led to pools of capital globally exhibiting high exposure to sector and company risks.

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Headshot of James Govan smiling at the camera.

James Govan, CFA

Investment Manager, Global Resources
Headshot of Piers Aldred smiling at the camera.

Piers Aldred, CFA

Investment Manager, Global Resources
Headshot of Phillip Nicholass smiling at the camera.

Philip Nicholass, CFA, CAIA

Client Portfolio Manager, Equities

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