It’s been about two months since President Biden signed the Inflation Reduction Act into law and the gains accrued by clean energy stocks and exchange traded funds leading up to that event are mostly erased due to broader weakness in the growth stock complex.
However, some analysts argue that the benefits to renewable energy assets and ETFs such as the Goldman Sachs Future Planet Equity ETF (GSFP) aren’t yet fully appreciated by market participants. If that’s the case, GSFP could offer investors credible rebound potential.
“ESG funds have historically been very overweight in solar, wind, and water, and certainly as we’ve highlighted, the IRA is very supportive for solar and wind,” said Goldman Sachs analyst Brian Singer in an interview with Financial Advisor. “But it also provides more tailwinds for companies throughout the supply chain.”
That’s relevant to investors considering GSFP because the ETF isn’t a dedicated solar or wind ETF. Rather, the actively managed fund focuses on companies that are developing products, services, and technologies used in the decarbonization fight.
For long-term investors, that could be a more attractive mousetrap because decarbonization is broad, can take many forms, and is an effort with wide support, including corporations and governments. It doesn’t force investors to choose between a single concept such as solar or wind.
“Portfolio managers are making similar observations, as they comb the pages of the IRA to assess the investing opportunities and risks it creates. Most zero in on the vast supply-chain implications of the legislation. And alongside initiatives such as RePowerEU, which targets sustainable and affordable energy supplies for Europeans, such legislative changes represent considerable untapped investment potential, they note,” according to Financial Advisor.
Europe’s long-running embrace of renewable energy and decarbonization efforts are pertinent to GSFP investors because the ETF is global at the holdings level and features ample exposure to European equities. That exposure is a potential diversifier as investors wait on markets to recognize the potency of the Inflation Reduction Act.
“The climate bill “is a catalyst towards stimulating more investments across the supply chain of needed technologies to be able to move the United States and beyond, on the path towards decarbonization and net zero,” Singer said in the Financial Advisor interview.
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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.