The House of Representatives passed the Inflation Reduction Act on Friday, which now awaits President Biden’s signature to go into law. It contains the most massive climate legislation ever to be passed in the U.S. The bill addresses many topics, including corporate taxation, prescription drug reforms, and extends the Affordable Care Act funding that reduces insurance costs for millions of Americans.
Aside from the taxation aspects of the bill, the other key component was a whopping $369 billion in spending for energy and climate policies in the U.S. aimed at growing renewable energies, building out domestic supply for clean energy components, funding nuclear research, and much more.
It aims to bring down carbon emissions by about 40% by 2030 and specifically tackles methane emissions, one of the most harmful greenhouse gases. The bill also includes funding for research and development of carbon capture and clean energy technologies as well as working to curb the inequality in pollution impacts on marginalized and low-income communities.
Invest in the Companies That Could Benefit
The WisdomTree U.S. ESG Fund (RESP) uses a factor-based strategy to invest in U.S. companies with favorable environmental, social, and governance standards and practices. By utilizing an actively managed, fact-based approach, the fund seeks to provide enhanced exposure to companies with higher ratings within ESG without sacrificing performance from using an ESG screen.
RESP seeks to find companies that carry high return potential based on fundamental factors such as their value and quality, as well as technical factors like correlation and momentum. It combines this assessment with the sustainability score for each company that’s determined from independent, third-party data on the company’s ESG impact and excludes companies with exposure to tobacco, small arms, controversial weapons, and fossil fuels.
The quantitative model that the fund uses seeks to identify timing opportunities to buy or sell qualifying securities identified to have favorable ESG characteristics. The fund rebalances quarterly but because it is an actively managed fund, it can engage in more frequent trading depending on the market environment as well as investment opportunities.
Securities are weighted using a modified market-cap scale that includes the sustainability score, with those with high market cap and high sustainability weighted heaviest. Companies invested in span sectors and include technology companies that will benefit from the boost to domestic production of semiconductors and electric vehicles, and renewable and nuclear energy companies, as well as a host of others that stand to benefit such as healthcare companies.
Sector breakdown includes information technology at 29.72%, health care at 14.83%, consumer discretion at 11.89%, financials at 11.26%, and several smaller sector allocations as of 08/12/2022.
RESP carries an expense ratio of 0.28%.
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