Future Returns: Capital is needed to fund carbon reduction and abatement, electric vehicles, and other types of green technology
A year after the Inflation Reduction Act was signed into law it’s a good reminder that there’s opportunity in infrastructure investments in the U.S., particularly green technology or those that profit from the transition from fossil fuels to renewable-energy sources.
“I don’t think in my career I’ve ever seen a law have a greater impact on economic development in this country,” Gregory Wetstone, chief executive officer of the American Council on Renewable Energy, a clean energy lobbying group, said in July. Within the category of energy transition, there are some infrastructure themes that may appeal more than others, either because of their promise of innovation or potential monetary returns.
“High barriers to entry and the monopolistic positioning of many infrastructure assets tend to make them less sensitive to the economic cycle,” the UBS analysts said. “In addition, they can help stabilize income generation in a multi-asset class portfolio, particularly when accounting for long-term inflation. Since 2003, infrastructure has typically performed best when global inflation has been high .
They add a shout-out for global industrial stocks, writing that the “sector’s composition has become increasingly diversified and no longer behaves like a traditional cyclical play, in our view.”
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