The much-ballyhooed Inflation Reduction Act is now law, and related headlines are having positive impacts on clean energy stocks and exchange traded funds.
Take the case of the SPDR Kensho Clean Power ETF (CNRG). That ETF is on a scorching pace, up more than 21% over the past month — a run confirming its leverage to the Inflation Reduction Act. CNRG’s recent bullishness is credible and rooted in sound logic.
“The US Senate has passed the Inflation Reduction Act, the largest investment in clean energy ever, at $370 billion,” noted Matthew Bartolini, head of SPDR Americas Research. “The act is likely to foster innovation, development, and growth within clean power generation and sustainable infrastructure.”
CNRG, which tracks the S&P Kensho Clean Power Index, holds 46 stocks. That might sound like a small roster, but the fact is that CNRG is broad relative to other funds in this category, indicating that it has ample leverage to multiple spending streams in the Inflation Reduction Act.
“The majority of the package focuses on incentives for adoption of renewable energy in homes, along with the acceleration of US manufacturing of solar panels, wind turbines, batteries, and the construction of clean technology manufacturing plants,” added Bartolini. “This significant government spending is intended to help the US keep its commitment to reach a net-zero emissions target by 2050. It seeks to reduce emissions in every sector of the economy, from electricity production, transportation, and industrial manufacturing to buildings and agriculture.”
That commentary is relevant to investors considering the $354 million CNRG because several of the fund’s components are dedicated solar companies. Additionally, several other holdings in the ETFs have direct exposure to wind turbines, batteries, and other clean energy concepts.
Of course, it’s common for the clean and renewable energy investment conversation to often focus on companies with disruptive and innovative traits. Fortunately, some CNRG components fit that bill. Consider the likes of Tesla (NASDAQ:TSLA) and Sunrun (NASDAQ:RUN), among others.
“Firms leading the way with innovations in renewable energy generation and clean technologies should be positioned to benefit from this initiative and its investment. The Inflation Reduction Act has allotted four times more for energy efficiency than was included in the 2009 Recovery Act,” concluded Bartolini.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.