50 Shades of Green

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Happy Thursday, FWIW readers!

The economic news keeps pouring in (unemployment down, jobs added up more than expected, and the first signs of moderating inflation in quite a while), yet our attention this week turns to Washington. Unless you’ve been off the grid on vacay (our OOO messages lead us to believe many of you deserve 🎉 as you unplug), no doubt you’ve heard that the US Senate did a pretty big thing last Sunday. In a 51-50 vote, senators passed the Inflation Reduction Act (aka the “climate bill,” and not to be confused with your Roth IRA), which is expected to clear the House of Representatives on Friday and then zip off for the President’s signature.

Overall, it should help cut greenhouse gas emissions by about 40% from 2005 levels by 2030. A win for clean energy is a win for the environment, but what does this bill — whether you prioritize sustainability or not — mean for FWIW investors?

Here’s a few of the key areas for investors to keep an eye on:

• Renewable energy developers are rejoicing due to the expansion of tax credits for wind, solar, and energy storage, as well as the opening of some coastal waters for offshore wind development. If you’re thinking it’s time to increase your exposure to renewables, we have some suggestions of ways to learn more about wind and solar opportunities.
• Electric vehicles (EV) adoption might get a boost from tax credits, but sticker price caps and domestic manufacturing requirements mean the credits don’t apply to most cars on the market today. Industry analysts say Tesla should benefit, as should mainstream car brands with more affordable models, like Toyota, Volkswagen AG, GM, and Ford. The bottom line: do your research to understand which companies are well-poised to capture market share—with or without tax credits.
• While the jury’s out on which carmakers will benefit, companies making EV batteries, or mining/refining critical minerals in the US, will see a boost. (Yes, we have a primer on how to research companies and funds focused on EV batteries, too.)
• Carbon capture companies will get their moment to shine thanks to tax credits that make large-scale commercial projects more feasible.
• Manufacturers of heat pumps and energy efficient appliances might see increased demand as consumers seek to take advantage of home improvement tax credits.
• Developers of big ticket energy projects (think hydrogen and diversifying nuclear capabilities) and companies that can supply lower carbon products to the US government are very excited about the expansion of the Department of Energy’s Loan Programs.

Clearly, there’s a lot to unpack (we didn’t even talk about the corporate minimum tax or health care adjustments also included in the bill) and we’ve barely scratched the climate “gold rush” surface here. We’ll surely revisit once the bill becomes law and we start to see the impacts. For now, check out what else is happening in the investing world this week.

News you can use

• Sustainable aviation fuel (SAF) is taking flight in August with lots of new partnerships. Alaska Airlines signed a deal for 185 million gallons with biofuel maker Gevo, whose stock is up over 40% in the last month. Lufthansa and Shell are talking 594 million gallons. On the innovation side, public solar energy firm Heliogen and Dimensional Energy plan to create SAF out of thin air, and Boeing is building an R&D center in Japan. SAF currently meets just 0.5% of global jet fuel needs.
  
• Buckle up and grab some popcorn, because the meme stocks have returned. Shares in companies like Bed Bath & Beyond, GameStop, and AMC have been inexplicably soaring this week as they trend on Reddit and elsewhere on social media. No one knows how long it will last (or who will get hurt this time), but the ride has restarted just weeks after headlines declared it was over.
  
• For the first time in history, every company in the S&P 500 index has at least one racially or ethnically diverse director, reports CNN. This is obviously not enough, but it is a significant milestone as the movement continues. This week also marked the deadline for most Nasdaq-listed companies to make board-level diversity data public. By this time next year, they will have to have at least one diverse director or explain why they don’t.