Infrastructure is receiving some attention following the passage of related bipartisan legislation last year and as investors look for inflation-fighting assets. However, this is an investment concept that could do with some modernization. Some exchange traded funds are answering that call, including the newly minted VanEck Green Infrastructure ETF (NASDAQ: RNEW).
RNEW, which follows the Indxx US Green Infrastructure – MCAP Weighted Index, is undoubtedly a new kid on the ETF block. But the fund’s youth belies its relevance in the current environment.
Not only that, but as the infrastructure investment thesis evolves to encompass more climate-aware strategies, RNEW’s long-term prospects could become all the more alluring to investors.
“While traditional infrastructure focuses on bridges, roads, airports and the like, RNEW’s sub themes outline green fuel and energy, transportation, equipment, pollution, waste management and construction. RNEW invests in companies that derive at least 50% of their revenues from one or more of these seven sub-themes,” noted Nick Frasse, VanEck associate product manager.
By providing exposure to seven sub-themes, RNEW is exceptionally diverse relative to the category, and its diversification is truly noticeable when measured against legacy ETFs in the infrastructure realm. The sub-themes featured in RNEW are green energy, green fuel, green transportation, green infrastructure, green construction, pollution control, and waste management.
RNEW has other tailwinds. As VanEck’s Frasse points out, the green infrastructure investing movement is gaining steam due to a growing U.S. population, flailing traditional infrastructure, rising investor demand for sustainable strategies, and government spending, among other factors.
Regarding government spending, of which plenty is directed to infrastructure and renewable energy, the recently enacted Inflation Reduction Act could be a longer-ranging catalyst for the rookie ETF.
“Although infrastructure spending may often become mired in government committees, we have recently seen bills signed into law that are aimed at providing funding for green infrastructure,” added Frasse. “For example, the Inflation Reduction Act has become a catalyst for green Infrastructure companies to grow and build out this sustainable foundation. The Act incentivizes consumer demand for products such as solar panels and electric vehicles by way of tax credits and provides loans and grants for businesses incentivizing decarbonization as well as clean energy manufacturing and retooling. These programs create opportunities for investments, and investors.”
RNEW holds 47 stocks hailing from six sectors. Industrial and utilities stocks combine for 54% of the fund’s weight, while energy and tech names combine for about 30%.
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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.