After receiving approval from the US Congress, American President Joe Biden is preparing to sign a bill allocating $369 billion for climate and energy funding into law.
Investors have not been slow to climb the bandwagon and have already sunk $425.5 million into US renewable energy exchange-traded funds (ETF) in August alone, according to industry insiders. This is a huge jump from July’s figure of $112.8 million.
The Inflation Reduction Act, passed by the House last week, includes funding for manufacturing, research and development, preserving natural resources and more, including attractive individual tax incentives. The bill has the lofty ambition of helping the US cut carbon emissions between now and 2030 by about 40%.
What does this mean for me?
The surge in interest in renewables comes at a time when concerns about the slow speed of developed economies moving away from fossil fuels has returned to the spotlight following Russia’s invasion of Ukraine.
However, before investors jump in, analysts warn that renewable-energy investing is no different to investing in other assets. Analysts are warning that you should stay away from niche investments, as these often come with volatility, but instead you should focus on a diversified green portfolio.
Whichever assets you select as a green-energy investor, you will need to review your portfolio periodically to make sure you are getting the right rewards for which you hoped.