US Senate passes 'game-changing' $369bn climate investment package

Channels: Investment, Policy, Renewables

Companies: deVere, KBI Global Investors

People: Chuck Schumer, Joe Biden, Nigel Green, Geoff Blake

The US Senate has passed the flagship economic package of President Joe Biden which includes $369 billion dedicated to climate and clean energy investment, in a development one investor described as “shifting the world’s largest economy forever towards a greener future”.

The Inflation Reduction Bill – which also includes new healthcare packages and tax rules – marginally passed through Senate by 51 votes to 50. One financial advisory firm described the vote as a “game changer” for sustainable investors.

President Biden said the bill “makes the largest investment ever in combatting the existential crisis of climate change. It addresses the climate crisis and strengthens our energy security, creating jobs manufacturing solar panels, wind turbines, and electric vehicles in America with American workers.”

The bill still needs to pass in the House of Representatives to become law, but house speaker Nancy Pelosi said the Democrat-majority house will “move swiftly to send this bill to the President’s desk” to become law.

Among some of the key climate measures in the bill are $27 billion committed to a ‘green bank’, $20 billion for cutting emissions in the agriculture sector, and $30 billion for ‘clean energy’ projects – including nuclear, geothermal and battery projects – which replaces the existing wind and solar tax credits scheme.

The bill also introduces a $900 per tonne penalty for all methane emissions above the federal limit, a penalty which will rise to $1,500 per tonne from 2026. A tax credit for carbon capture and storage (CCS) has been raised to $85 per tonne from $50 per tonne. It also provides a $7,500 tax credit to consumers buying new electric vehicles, as well as a $4,000 tax credit for those purchasing a used EV.

KBI Global Investors business development and client service head Geoff Blake told Environmental Finance it was a “very important piece of legislation” which will be “meaningfully positive” to the ESG strategies at the €13 billion ($13.2 billion) asset manager – including its $560 million global energy transition strategy and $1.5 billion sustainable infrastructure fund.

“We actually increased our US clean energy exposure earlier on in the year, on the basis that some of these things might come through,” Blake said. “We hold stocks in the portfolio that would make residential solar panels, so these companies will be significantly helped by [the legislation].”

At the market open on Monday, several US-listed 'clean' technology firms saw significant share price jumps following the Senate vote over the weekend - including Tesla, Hannon Armstrong and Sunrun.

Nigel Green – chief executive at financial advisory firm deVere, which has more than $12 billion in assets under advisement – said the bill was a “game changer” that “will give even greater confidence to traditionally cautious institutional investors” to build exposure to environmental, social and governance (ESG) investing.

“Global ESG assets are on track to exceed $53 trillion by 2025, representing more than a third of all assets under management (AUM),” he said, “Now, due to the momentum that will be created from this landmark bill, we expect ESG assets to take an even greater proportion of the $140.5 trillion in projected total AUM.”

Green said the bill will “shift the world’s largest economy forever towards a greener future” and means that ESG investments cannot be “dismissed as woke or whimsical” anymore.

“In fact, I believe that every investment portfolio should have exposure to ESG if the investor is serious about building long-term wealth,” he said.

Swiss financial services giant UBS said in a note: “We see the announcement as a sizable step forward in terms of funding initiatives and moving the US forward on the fight against climate change (aim to put the US on the path towards 40% emissions reductions by 2030).”

Democratic Party Senate majority leader Chuck Schumer described the bill as the “boldest climate package in US history” which will see the US government “finally acting on climate”.

Ahren Lester, Thomas Cox