While off to a rocky start and with still a long way to go, the push for net-zero emissions from governments and asset managers has begun.
The Inflation Reduction Act’s $370 billion in emissions reduction funding, the CHIPS and Science Act’s $70 billion in zero-carbon technology research funding, and the Infrastructure Investment and Jobs Act’s $95 billion in grid and electric vehicle charging funding collectively make up the largest nationwide decarbonization investment in history.
Meanwhile, the Net Zero Asset Managers initiative managed to round up $66 trillion in assets under management to commit to net zero in less than two years. Meanwhile, the international sustainable investor network Principles for Responsible Investment grew its signatory base by more than 1,000 during the same time period, bringing its AUM to more than $120 trillion. Asset managers globally are expected to increase their ESG-related AUM to $33.9 trillion by 2026, up from $18.4 trillion in 2021.
But there’s still a long way to go. While independent analyses of the IRA, CHIPS, and IIJA bills find that they could cut U.S. emissions to roughly 40% below 2005 levels by 2030, it’s still not enough to hit the U.S.’s Nationally Determined Contribution to the Paris Agreement of 50%–52% below 2005 levels by 2030, according to Forbes.
Plus, research from McKinsey & Co. has estimated that about 50% of capital expenditures required to meet net-zero emissions are related to infrastructure assets. This accounts for some of our highest-emitting industries, including power, transportation, and buildings. This puts the owners, operators, and investors of these assets in a unique position to facilitate the net-zero transition.
Investors wanting to invest in this growing megatrend of renewable energy may want to consider the actively managed Neuberger Berman Carbon Transition & Infrastructure ETF (NYSE Arca: NBCT). Launched in April, NBCT seeks to invest in companies that are focused on or are transitioning their businesses to focus on one or more of the following themes:
- Low-carbon resources: issuers focused on producing renewable energy, such as solar, wind, geothermal, and green hydrogen, and the related storage and transport of these energies.
- Electrification: issuers that help enable the replacement of technologies that use higher carbon-emitting fuels with those that use low-carbon resources as a source of energy, including those that support smart grid and electric vehicle charging solutions, as well as electricity transmission and distribution that helps expand usage of low-carbon solutions.
- Carbon reduction solutions: issuers that directly facilitate the carbon reduction goals of infrastructure owners, including innovative raw materials, industrial gases, engineering and construction service providers, environmental services providers, and environmental technology providers.
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