With climate-related spending slated to accelerate around the world, investors want to get in on the action and they have plenty of choices for related positioning. Some of those options are refined and focused while others are broad and offer depth. Among exchange traded funds, the Invesco ESG NASDAQ Next Gen 100 ETF (QQJG) could offer a best-of-both-worlds approach. As its name implies, QQJG is an environmental, social, and governance (ESG) ETF, providing exposure to ESG themes beyond sustainability.
That said, the fund is more than adequately positioned to take advantage of climate-related spending initiatives such as the Inflation Reduction Act. President Biden signed that legislation into law last year. However, there’s more to the global climate spending story.
“When Congress passed and the president signed into law the Inflation Reduction Act last year, they may have started a race among global governments to spend new money in an attempt to cut carbon output dramatically. Consider the European Union, where our economists and strategists are flagging that they expect, later this month, there will be an announcement of a major allocation of government funds to mirror the nearly $370 billion allocated by the U.S. toward its own energy transition,” noted Michael Zezas, Head of Global Thematic and Public Policy Research for Morgan Stanley.
That geographic diversity is meaningful to investors because some domestic companies, including some QQJG components, generate sales in both the U.S. and abroad. That’s relevant because, in addition to the U.S., regions such as Europe are forecast to spend big on clean tech, solar, wind, and related fare in the coming years.
“In the EU, the story is more nuanced as we await details on what a final version of the European Commission’s Green Deal Industrial Plan is, a process that could take us into the summer or beyond. Streamlining regulations to encourage private funding and expand the network for trade partners on green tech equipment is expected to be in focus. So the near-term macro impacts are murky, but at a sector level, such a policy should present opportunities in utilities, capital goods, materials, and construction,” added Zezas.
QQJG follows the Nasdaq Next Generation 100 ESG Index and is home to 95 stocks. Of that group, several, such as First Solar (NASDAQ: FSLR), are direct renewable energy plays. Several others are indirect plays but with direct clean tech and green exposure.
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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.
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