The Inflation Reduction Act will offer a number of incentives to promote clean energy, including the increased use of electric vehicles. As such, this should spur demand for lithium and boost mining activity.
“[The IRA] is a net positive in that the legislation the Biden administration has signed into law will go a long way towards accelerating the build-out of a more regionalized EV supply chain,” said Chris Berry, energy metals strategist and president of U.S. consultancy House Mountain Partners.
“While the legislation doesn’t address permitting timelines (something that will be addressed later this year), there is now a great deal of clarity around what consumers and companies can do to take advantage of the new law.”
One exchange traded fund (ETF) to consider following the passage of the act is the Global X Lithium & Battery Tech ETF (LIT). LIT seeks to provide investment results that correspond generally to the price and yield performance of the Solactive Global Lithium Index, which is designed to measure the broad-based equity market performance of global companies involved in the lithium industry.
LIT highlights:
- High growth potential: Lithium battery technology is essential to the rise of electric vehicles (EVs), renewable energy storage, and mobile devices.
- Advancing clean technologies: EVs produce zero direct emissions, meaning that broader adoption could result in reduced greenhouse gas emissions and improved urban air quality.
- Unconstrained approach: LIT invests in companies throughout the lithium cycle, including mining, refinement, and battery production, cutting across traditional sector and geographic definitions.
An Electric Vehicle (EV) Option
With increased demand for electric vehicles (EV) in the wake of the act, another fund to consider is the Global X Autonomous & Electric Vehicles ETF (DRIV). DRIV seeks to invest in companies involved in the development of autonomous vehicle technology, electric vehicles, and EV components and materials, including companies involved in the development of autonomous vehicle software and hardware, as well as companies that produce EVs, EV components such as lithium batteries, and critical EV materials such as lithium and cobalt.
DRIV seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Autonomous & Electric Vehicles Index.
DRIV highlights:
- High growth potential: While global EV registrations increased by more than 40% in 2020, EVs still accounted for less than 5% of new cars sold, highlighting substantial room for further adoption.
- Advancing clean technologies: EVs produce zero direct emissions, meaning that broader adoption could result in reduced greenhouse gas emissions and improved urban air quality. Further advances in autonomous driving could also enhance roadway safety.
- Unconstrained approach: This theme is bigger than any single company. DRIV invests accordingly, with global exposure across multiple sectors and industries.
For more news, information, and strategy, visit the Thematic Investing Channel.