The Ukraine War: Major Disruptions Creating New Investment Opportunities

The war in Ukraine has caused immense suffering, but is also leading to disruptions that are reshaping industries and economies globally. For investors, these disruptions are creating potential opportunities across sectors. This summary looks at the 12 major disruptions highlighted in the original McKinsey article, focusing on the openings they present for investment.

Essentials Becoming Unaffordable

• Sharply higher energy and food prices are making basic essentials unaffordable for lower-income consumers globally. Over 60% of households in developing countries are at risk of poverty due to inflation.
• Invest in low-cost essential products and services tailored to the base of the pyramid in developing countries. Opportunities in budget food brands, shared solar power, affordable housing, and preventative health.
• Support social safety net programs through impact investing funds. This provides capital to organizations expanding access to essentials.

Energy Security Taking Priority

• Europe gets 40% of its natural gas from Russia. Reducing this dependence requires major investments in new gas supply chains.
• Liquefied natural gas (LNG) value chain investment needed - production, liquefaction, shipping and regasification. Opportunities across North America, the Middle East, and Africa.
• Invest in next-generation biofuels, synthetic fuels, and substitute feedstocks to replace Russian oil and gas.
• Fund emerging renewables like green hydrogen, floating wind, and solar to accelerate energy transition.
• Efficiency tech investments can help reduce demand across power, heating, industry and transport.

Food Security on the Agenda

• With Russia and Ukraine major grain and fertilizer suppliers, food costs have spiked globally. This requires boosting production elsewhere.
• Invest in increased grain, oilseed and protein crop cultivation in Canada, Australia, Latin America, and Africa.
• Fund precision agriculture technologies like robotics, AI, and sensors to improve yields.
• Invest in food traceability, hydroponics, and alternative proteins to strengthen food systems.
• Cold chain logistics investments are needed globally to reduce post-harvest loss and food waste.

Race for Critical Materials

• With restricted access to Russian commodities, opportunities exist in the mining and processing of minerals like nickel, lithium, and cobalt for EV batteries.
• Invest in recycling technologies to recover scarce metals from electronics and building waste.
• Fund innovation in material science to develop alternatives to rare earths and strategic metals.
• Invest in carbon fiber, composite materials, and ceramics to reduce dependence on steel and aluminum.

Supply Chain Reshaping

• Dual sourcing, increased inventory and nearshoring require major supply chain investment. This allows for reducing over-reliance on single geographies.
• Fund technologies providing end-to-end supply chain visibility across journeys, border crossings, and warehouses.
• Invest in resilient supplier networks in friendly nearshore locales.
• Warehouse automation, 3D printing, and IoT offer localized production opportunities.

Technology Standards Splitting

• With technology platforms dividing, alternatives to Big Tech's standards are gaining traction, especially across emerging markets.
• Fund technologies tailored to these markets - in payments, identity, communications, and content consumption.
• Invest in blockchain, open source, and interoperability to connect fragmented systems.
• Support regulation and corporate governance frameworks strengthening data sovereignty.

Unpredictable Financial Effects

• Though resilient so far, banks face recession risks. However, lending needs remain strong.
• Invest in fintechs strengthening bank risk analytics, scenario modelling, and rapid credit decisions.
• As rates rise, fund low-cost digital banking solutions helping consumers save.
• Invest in alternative credit scoring approaches expanding access for the underbanked.
• Support development of crypto compliance, fraud prevention and risk management tools.

Modellin

• Increased defense budgets in NATO countries will drive investment in military hardware and R&D.
• Invest in cybersecurity, drones, robotics, directed energy, hypersonics, AI, semiconductors, and communications.
• Also fund innovative materials like composites, nanomaterials, and metamaterials for defense use.
• Invest in infrastructure like warship yards, spaceports, and missile defense needed to deliver new capabilities.

Humanitarian Aid

• The refugee crisis sparked by the Ukraine invasion is the largest in Europe since WWII, with over 5.6 million Ukrainians fleeing to neighboring countries. This is creating an urgent need for aid funding and infrastructure.
• Investments are required in temporary housing, medical facilities, food distribution networks, and cash assistance programs to support the basic needs of refugees. Opportunities exist across the humanitarian aid ecosystem.
• Poland is hosting over 3 million refugees, presenting specific infrastructure investment needs in transportation, healthcare, education, and employment integration.
• Invest in refugee-focused tech like digital ID systems, remittances, and connectivity to support displaced populations over the long term.

Cyber Threat Increasing

• With cyber attacks rising, critical infrastructure and enterprises require strengthened protection.
• Invest in endpoint security, identifying threats, and resilience against ransomware.
• Fund tools predicting attack origins and patterns through network analytics.
• Invest in securing hardware supply chains against tampering and backdoors.
• Support cybersecurity training and global coordination efforts.

Corporate Activism Expanding

• Business activism in response to social issues is rising quickly, accelerated by Ukraine war actions.
• Invest in ethical brands with credibility on issues like climate justice, racial equity, and human rights.
• Fund corporate governance and geopolitical risk advisory services that align business and society.
• Support technologies like clean tech, inclusive finance, and sustainable supply chains that deliver positive social outcomes.

Volatility Rising

• The economic shockwaves from the war have sharply increased market volatility across equities, currencies, debt and commodities.
• Invest in instruments stabilizing returns during volatility like structured notes, certain ETFs, and hedge funds.
• Fund technologies enabling real-time risk simulation and scenario modelling.
• Invest in innovative risk transfer mechanisms.
• Support the development of transparent, liquid derivatives markets.

The disruptions from the Ukraine war span humanitarian needs, critical resources, technology platforms, financial systems and more. This expanded analysis illuminates specific areas within each domain for potential investment. Targeting these opportunities can enable investors to fund promising solutions while catalyzing positive change.

What Do You Do Next

If you don't have time for extensive research, here are some quicker steps to get started learning about the opportunities:

• Read research reports from banks, consultancies and government agencies highlighting major trends and growth projections across impacted sectors. Reports often condense huge amounts of data into top-level findings.
• Have short interviews or informal conversations with a few industry experts, investors and entrepreneurs to get their perspectives on where the biggest needs and potential value are.
• Attend industry conferences, seminars and events to hear perspectives from different players in disrupted sectors, and network with potential partners.
• Search news articles and niche publications covering each area to find mentions of innovative startups, new technologies, policy developments and funding.
• Use investment databases to scan for companies receiving venture funding in relevant domains, signalling investor interest.
• Review pitches and websites of a few startups in each area to gauge the kinds of solutions emerging.
• Take stock of major M&A deals and corporate partnerships in each sector to see where incumbents are investing.
• Identify a few accelerators, forums or networks focused on each opportunity area as sources of ongoing intelligence.

While not exhaustive, these steps can provide a meaningful overview of the prospects and players across opportunities in a relatively short time. You can then determine high-potential areas to analyze further and eventually pilot investments in.