President Biden’s Infrastructure Investment and Jobs Act was officially signed into law this week, adding billions of dollars in fuel to the growth of America’s renewable energy economy. For some companies operating in this nascent market, that surge of funding could be just the support they need to take their products mainstream.
We asked three of our Foolish contributors to pick a stock that they think will make particular headway thanks to this infusion of renewable energy money. Their choices — all leaders in specific green energy niches — were Bloom Energy (NYSE:BE), Proterra (NASDAQ:PTRA), and ChargePoint Holdings (NYSE:CHPT). Here’s why they think these companies are well-positioned to be beneficiaries of the boom in green energy investment.
The hydrogen energy play
Travis Hoium (Bloom Energy): Today, most energy storage is accomplished using lithium-ion batteries, but they have limitations. Large storage batteries are great solutions for a home, where you may need them to provide backup power for a few hours, or for a business so that it can keep operating even if there’s a short-term outage. However, they’re not as viable a solution for long-duration storage, like storing solar energy generated in the summer for use in winter months. That’s where hydrogen can come in.
Companies like Bloom Energy are building a hydrogen economy that consists mainly of electrolyzers — devices that turn electricity and water into hydrogen — and fuel cells, which use that hydrogen to generate electricity. Done right, this could be an entirely clean process, creating a non-carbon-emitting fuel that could be stored easily and transported for use in everything from buildings to container ships. But the industry is extremely young, so there’s a lot of risk.
The infrastructure package could help the hydrogen economy in a number of ways. The act earmarks $14 billion for resiliency programs and includes another $11 billion grant program for states, utilities, and other organizations to make resilience investments.
It also puts $3 billion worth of investment into “grid flexibility” and another $3 billion will go toward helping energy storage companies build out their manufacturing operations.
What’s clear is that the government is pushing investments in energy storage and clean energy technologies, and hydrogen is likely going to be one of the beneficiaries. It provides a valuable solution, its costs are coming down, and manufacturing facilities are being built in the U.S. So Bloom Energy could get a big boost from new government spending in the coming years.
A boost for buses and beyond
Howard Smith (Proterra): Commercial electric vehicle (EV) technology company Proterra has already been growing its business as the electrification of transportation moves forward. But it now has a new catalyst — the federal infrastructure act, which allocates billions of dollars in funding to accelerate the country’s transition from internal combustion vehicles to electric vehicles.
Proterra, which makes electric transit vehicles, drivetrains, and battery platforms, just reported its third-quarter financial results last week, and its revenue grew 30% year over year. In addition, its battery production almost doubled and its powered battery deliveries grew by 144% due to a 58% rise in transit bus deliveries.
Biden’s $1 trillion Infrastructure Investment and Jobs Act includes two line items particularly aligned with Proterra’s business. The bill contains $5 billion for zero- and low-emission buses and other transit vehicles that will replace much of the nation’s school bus fleet. And another $7.5 billion is geared toward building out EV charging infrastructure in the U.S.
Unlike many other newly public EV names, Proterra is not a pre-revenue start-up with plans but no products. Its guidance calls for revenue of nearly $250 million in 2021. It has already delivered more than 750 electric transit buses, and has more than 55 megawatts of charging infrastructure installed for its fleet customers.
While there will most certainly be bumps along the way, the transition to electric vehicles in the U.S. looks like it will include much more than just consumer vehicles. Proterra is in a good position to benefit not only from vehicle sales, but also from rising demand for its battery and energy platform solutions.
The stock has jumped almost 25% in the last month, boosted by investors’ optimism about how the infrastructure act will benefit the company. Along those lines, Proterra management said in its latest financial update that the act will continue to “provide additional tailwinds to the growth outlook for each of our businesses in 2022 and beyond.” Investors who want to profit from the coming growth of the EV sector may not want to miss this bus.
ChargePoint plays a pivotal role in the growing electric vehicle industry
Daniel Foelber (ChargePoint Holdings): Although it took Congress months to hammer out the bipartisan infrastructure act, the resulting legislation is still a big win for electric vehicle charging companies. About $7.5 billion of the roughly $1 trillion bill is earmarked toward expanding EV charging infrastructure in the U.S. ChargePoint operates one of the largest Level 2 charging networks, and it has been hard at work expanding its fast-charging capabilities. It stands to benefit from the government’s investment in infrastructure, but arguably, an even bigger catalyst will be the rapid rise of EVs.
In addition to Tesla, newer companies such as Rivian, Lucid Group, Nio, and others are hitting the scene with impressive technology. Unlike Tesla, which out of necessity built its own charging network, many of these newer players will depend on third-party charging providers like ChargePoint. In addition, most legacy automakers like Ford and General Motors are increasing their EV spending.
ChargePoint’s growth is driven by the level of demand for charging options adjacent to businesses and commercial and recreational areas. The COVID-19 pandemic stunted the company’s growth because businesses lost foot traffic, and therefore felt less of a need to attract customers with charging stations. With the economy reopening and businesses recovering, ChargePoint, too, is seeing its numbers improve. It will take time for the company to become profitable, especially as it continues to spend heavily in an effort to retain its market-leading position. However, the company’s fiscal 2022 Q2 results showed that it has turned the corner and is ready to resume the growth trajectory it was on prior to the pandemic.
Adding fuel to the energy transition
Each of these companies already had strong market trends behind them. EV sales are rising, and companies and governments are investing more in hydrogen assets. But the billions of federal dollars earmarked to support their technologies could accelerate these companies along their growth paths. That’s why we think Bloom Energy, Proterra, and ChargePoint could be among the biggest winners from the Infrastructure Investment and Jobs Act.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Trump's Media Company to Get $1 Billion in Investment From SPAC – Bloomberg
Former President Donald Trump’s media company said Digital World Acquisition Corp. has agreed to a $1 billion investment following the combination of both companies.
Trump first announced the plan to merge with the so-called blank-check firm in October that would help enable him to regain a social media presence after he was kicked off Twitter Inc. and Facebook Inc. platforms. The new enterprise will be in operation by the first quarter of 2022 and plans to start a social media company called Truth Social.
Gold Is a Green Investment. Owning it Can Be Tricky. – Barron's
Most investors don’t think of gold as a sustainable investment. Historically, it has required large amounts of water, energy and toxic chemicals to mine and refine. Mining companies have been accused of exploiting developing countries and their workers.
Yet gold bullion—as opposed to miners—is surprisingly green. Once fashioned into bars, it just sits in vaults, having virtually no carbon footprint. According to the World Gold Council, there are 201,296 metric tons of previously mined gold in storage. https://www.gold.org/goldhub/data/above-ground-stocks Gold miners increase that stock by just 1.5% a year—3,000 tons.
Two money managers,
and Sprott Asset Management, recently filed with regulators to launch the Franklin Responsibly Sourced Gold https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/rule-filings/filings/2021/SR-NYSEArca-2021-73%20Pdf.pdf and the Sprott ESG Gold https://www.sec.gov/rules/sro/nysearca/2021/34-92506.pdf exchange-traded funds.
According to its filing, the Franklin ETF will seek “to predominantly hold responsibly sourced gold bullion, defined as London Good Delivery gold bullion bars produced after January 2012 in accordance with London Bullion Market Association’s Responsible Gold Guidance.” https://www.lbma.org.uk/responsible-sourcing/guidance-documents The Sprott one seeks to buy gold from miners that meet its proprietary environmental, social and governance criteria in addition to market association approval.
Neither Sprott nor Franklin Templeton were available to speak while seeking regulatory approval.
The London bullion association’s 2012 Responsible Gold Guidance required gold to be sourced from refiners not linked to human rights abuses or armed groups, i.e., “conflict gold.” The association’s standards have evolved since then to include environmental criteria. Still, gold sourced after 2012 before those criteria were added could come from dirtier sources.
A 2021 open-letter https://www.globalwitness.org/en/press-releases/open-letter-lbma-concerns-responsible-sourcing-programme-fails-curtail-human-rights-abuse-and-illicit-gold-supply-chain/signed by five human rights groups said “downstream customers cannot have confidence that the LBMA’s Good Delivery gold is free of human rights abuses and not linked to conflict.”
The association responded to these accusations with its own open letter, https://www.lbma.org.uk/articles/lbma-responds-to-ngo-open-letter-on-responsible-sourcing stating that it “recognizes the challenges that all audit programs face, and whilst no program is perfect, we remain committed to continuous improvements, and ongoing engagement with stakeholders in addressing the supply-chain risks.”
The new Sprott ETF should have a higher standard for sourcing gold because of its unique ESG criteria. But its regulatory filing acknowledges that it may not be able to find enough ESG-approved gold, so that the trust expects to hold some amount of unallocated [i.e., non-ESG approved] gold at any given point in time.”
All of which is to say these new ETFs may not be much greener than traditional bullion ones.
Yet gold’s carbon advantages are real. According to one study https://www.gold.org/goldhub/research/gold-and-climate-change-decarbonising-investment-portfolios by climate-risk analysis firm Urgentem, for a portfolio of 70% equities and 30% bonds, introducing a 10% allocation to gold (and reducing the other asset holdings by equal amounts) reduced portfolio carbon emissions intensity by 7%, while a 20% gold allocation lowered it by 17%.
“The emissions associated with holding gold are frankly a lot less than holding equities,” says Terry Heymann, CFO of gold trade-group World Gold Council.
While bullion as a low-carbon investment makes sense, Heymann posits that the mining industry is also becoming ESG-friendly, pointing to the World Gold Council’s 2019 publishing of its Responsible Gold Mining Principles https://www.gold.org/about-gold/gold-supply/responsible-gold/responsible-gold-mining-principles, which the Council’s 33 member companies—including the world’s largest miners—have all committed to following. The principles support the Paris Climate Accord’s goal of producing zero carbon emissions by 2050.
“You’re going to see a lot more use of renewables [at mines]— solar, hydro, or wind,” Heymann says. “Secondly, you’re going to see a move towards electric vehicles.” He points to miner Newmont’s (NEM) “all-electric mine” in Northern Ontario, https://mining.ca/mining-stories/goldcorp-electric/ which has a fleet of battery-powered trucks as an example of the industry’s future.
Yet miners have a long way to go to convince ESG experts. The differences between bullion and mining stocks are “night and day,” says Adam Strauss, co-manager of Appleseed (APPLX), an ESG-focused fund which has 7% of its portfolio in the
Sprott Physical Gold Trust
(PHYS). “Gold mining is a very dirty business.”
A 2020 report by the Columbia Center on Sustainable Development and the Responsible Mining Foundation called the mining industry’s efforts to achieve its sustainable development goals so far “cosmetic.” https://www.responsibleminingfoundation.org/app/uploads/RMF_CCSI_Mining_and_SDGs_EN_Sept2020.pdf Although she acknowledges individual miners differ, Perrine Toledano, the CCSI’s mining analyst, says that some miners “just cherry-pick the [sustainable goal] they want and then communicate on its positive impact.”
Could an ESG ETF tracking just the 33 World Gold Council member companies that have agreed to its principles be sustainable? Sustainalytics, one of the largest ESG ratings services, gives mixed grades to different members, calling the ESG-risk of Chinese miner Zijin Mining Group “Severe,” and rating it one of the worst companies in its entire coverage universe.
That said, those ratings could improve in time. “Every single one of our members is committed to implement the responsible gold mining principles, and I know that work is under way,” says Heymann. “We’ve got four members in China, and they’re all committed to doing this.” This March, Zijin issued a release regarding its “ESG Report to emphasize Sustainable Development,”stating it continues “to improve our ESG performance in environmental and ecological protection, human rights protection, anticorruption, responsible supply chain and community engagement.” and that it invested 1.92 billion renminbi in 2020, a 51% increase over 2019, on environmental protection.
“Having some sort of [ESG] guidance is very positive,” Sustaianlytics mining analyst Dana Sasarean says about the Council’s principles. “If the world requires gold, I think it’s important to make sure that this gold is produced in the most responsible way. But there are challenges.”
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New retirement planning rule gets it right: Sustainable investing is here to stay – The Hill
To be sure, the previous administration went out of its way to prevent private retirement plans from taking ESG (environmental, social or governance) factors into consideration for investment decisions. But now that the Biden administration finalized the new rule this past week, plans will be able to select socially and environmentally responsible investments without fear of unfair regulatory interference. More importantly, it recognizes that a lack of positive ESG factors can increase an investment’s risk and threaten its future viability. This is a major step in the right direction.
Over the last 25 years, there has been a regulatory back-and-forth over the U.S. Department of Labor’s (DOL) guidance on the Employee Retirement Income Security Act of 1974 (ERISA). Under Democratic administrations, the DOL has looked favorably at ESG considerations like sustainability and equality and has not seen them as inconsistent with ERISA’s dual fiduciary and loyalty duties. And it stands to reason: ESG deficiencies can represent major risks involving an investment’s long-term growth, legal liability and public perception.
Predictably, the previous administration’s DOL released a regulation that imposed new standards on ESG usage by ERISA plans simply to shield investments that are demonstrably irresponsible when it comes to ESG factors. But a new Biden administration DOL rule released Oct 13, rightfully ends this “ping-pong” between administrations, to remove any doubt of what’s been clear all along: ESG factors are meaningful, material investment criteria.
Plan sponsors now have clear guidance to support integrating sustainable investing strategies into defined contribution plan design — namely, to rely on a well-documented, prudent process that emphasizes materiality, diversification, risk and return in evaluating the duty of care, while relying on “prudent experts” as needed.
Given sustainable investing is trending relatively recently in the U.S. Defined Contribution (DC) plan marketplace, DC plan-specific regulatory guidance and case law has been limited.
The Defined Contribution Institutional Investment Association (DCIIA) and the Intentional Endowments Network (IEN) have both recently released guides for integrating more ESG options in retirements plans. We define “sustainable investing” as an investment philosophy that seeks to generate financial value by incorporating environmental, social and governance values. This umbrella term includes multiple approaches, such as integrating ESG factors into a fund, as well as funds that incorporate macro ESG-themes. Portfolios are considered sustainable when decision-makers weigh the impact of ESG factors along with other traditional financial metrics in portfolio construction and investment management processes.
Sustainability challenges represent urgent, material risks and opportunities for investors. Just in the past few years, climate impacts have wreaked havoc, destroying lives and costing businesses, governments and investors hundreds of billions of dollars. Extreme inequality and racial injustice, laid bare by the pandemic, have driven social unrest and changed the landscape for corporate governance and stakeholder engagement. These intersectional issues of climate change and social equity are critical factors for fiduciaries to consider in the investment process. They increase both portfolio risk and the systemic risk.
As communities and governments around the world grapple with these issues, we are experiencing a transformational shift. People are demanding a “just transition” to a low-carbon economy that reduces greenhouse gas emissions while protecting workers and vulnerable communities and addresses inequality and injustice in the process.
Further, the scale of sustainable investment commitments, especially in the higher education space, is growing and impacting the market. Several endowments have moved on fossil fuel divestment and fossil fuel free investing (including recent announcements from Harvard, Boston University, MacArthur Foundation), Net Zero Portfolio commitments (Harvard, Stanford, Penn, Arizona State, Michigan) and racial equity (University of California, University of Chicago, Warren Wilson College). Now it is time for retirement plans to keep pace and include strong ESG options.
As Bill McKibben recently noted, “These divestments are so large that they’re starting to have deep effects on the ability of the fossil fuel industry to expand.”
It is time for regulation to catch up with reality. With the new ERISA rule in place, the legal framework for how retirement plans can finally analyze risk and value in ways that makes sense for all stakeholders as the market transforms to meet the social, environmental and even existential challenges we face today. And, as important, it allows employees to invest their values to help bring about a world that can support these institutions over the long term, and leaves no one behind.
Georges Dyer is co-founder and executive director of the Crane Institute of Sustainability, and leads its flagship initiative, the Intentional Endowments Network (IEN).
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