The recently enacted Inflation Reduction Act is just one example, albeit a substantial one, of the massive capital needed to propel renewable energy forward.
As investors noticed in recent weeks, multiple exchange traded funds are levered to that theme, but the group won’t generate uniform long-term returns. One of the potential standouts in the group is the Goldman Sachs Future Planet Equity ETF (GSFP).
Though it’s a valid play on the record amount of climate-related spending featured in the Inflation Reduction Act, GSFP also offers exposure to global renewable energy spending – a relevant point because this is very much a global theme.
“According to McKinsey, the world will need to invest an additional USD 3.0-3.5 trillion annually between now and 2050 to address the challenges of the energy transition. While this is a big number (equivalent to half of global corporate profits), it also brings with it significant economic opportunity and is essential to mitigating the most catastrophic impacts of climate change,” notes BNP Paribas.
Another benefit offered by GSFP is that it’s an actively managed ETF. That’s confirmation the fund can avoid controversial greenwashing while focusing on investment opportunities with strong climate credibility. Those are traits that should be overlooked at a time when scrutiny is increasing on environmental, social and governance (ESG) strategies.
“Stewardship activities, including voting at annual shareholder meetings, dialogue with companies, and public policy, have become significantly more recognized over the past few years,” adds BNP Paribas. “This has led to greater scrutiny of how asset managers are implementing stewardship: Are they supporting climate-related shareholder proposals? Maybe even filing them? Do they respond to the numerous industry consultations on the introduction of mandatory climate disclosures by companies, and if so, what do they advocate for and why?”
Getting back to climate spending and the related outlook for GSFP, it’s not a stretch to say the forecast is potentially favorable for investors willing to exercise some patience with this actively managed ETF. Data confirm as much.
“Reflective of the scale of the capital reallocation required, Glasgow’s COP26 meeting helped to galvanize national and investor level commitments to achieve net zero carbon emissions by 2050. Today, some 450 financial institutions representing USD 130 trillion in assets under management and advice have committed to the Glasgow Financial Alliance for Net Zero (GFANZ),” concludes BNP Paribas.
For more news, information, and strategy, visit the Future ETFs Channel.
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.