When it comes to infrastructure ETFs, such as the FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEArca: NFRA), knowing that there’s a need for increased investment is only half the battle. Getting government approval for new infrastructure projects is another element in the equation.
NFRA tries to reflect the performance of the STOXX Global Broad Infrastructure Index, which identifies equities that derive the majority of revenue from infrastructure business, providing exposure to not only infrastructure sectors, but non-traditional ones as well.
Environmental regulations often stand in the way of infrastructure projects, but a spate of recent studies suggest refreshed infrastructure can actually benefit the environment. The White House is looking to streamline the process.
“The White House has begun reviewing a plan to change the way it issues environmental permits for infrastructure projects,” according to Bloomberg. “If the proposal is finalized, it could speed up National Environmental Policy Act reviews for roads, bridges, ports, pipelines, power lines, Internet trunks, and water systems.”
More Infrastructure Spending Called For
The Organization for Economic Co-operation and Development is calling for $70 trillion needed in infrastructure spending around the world, but governments have only earmarked $45 trillion, leaving a gap of around $25 trillion that is not going to be covered. Consequently, private spending may need to step in to fill the gap.
“The Trump administration and business groups say federal permitting is too cumbersome and expensive and must be sped up to spur growth,” reports Bloomberg. “The proposed update to the rules for implementing procedures under NEPA, if it becomes final, is almost certain to be challenged in court.”
NFRA’s index focuses on long-lived assets in industries with very high barriers to entry, with at least 50% of their revenue from key sectors with a 3-month average daily trending volume of at least $1 million. The portfolio is weighted based on a free-float market cap with certain constraints to limit exposure in any one security, sub-sector, or country. Additionally, the fund is rebalanced annually.
“The Trump administration is pursuing commonsense, meaningful reforms to ensure America can build the infrastructure we need to provide for economic growth and job creation,” notes White House spokesperson.
For more information on the infrastructure sector, visit our infrastructure category.
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.