Opportunities within U.S. green infrastructure

The United States is in the process of revamping its infrastructure with the US$550 billion in new spending approved in 2021
This provides substantial tailwinds across the U.S. infrastructure value chain, including construction and engineering services, materials providers, equipment manufacturers and owners and operators of infrastructure
Ongoing changes in energy, mobility and digitalization are introducing new dynamics in the infrastructure sector. Upgrades with environmental sustainability and climate resilience in mind create potential new opportunities for investors

Unprecedented levels of federal spending on infrastructure

Proposals to increase spending on infrastructure has been a common thread in post-pandemic recovery strategies in the developed world, including the European Union, Japan, and Canada. The United States is arguably at the forefront, with the historical Infrastructure Investment and Jobs Act (IIJA) signed into law in November 2021. The US$1.2 trillion bill contains an estimated US$550 billion in new spending above baseline levels. This significant increase in spending has the potential to create multiple opportunities for investors^[1].

Governments often look favorably on infrastructure investments, as they have the potential to stimulate economic growth activity and create jobs. A key concept associated with infrastructure spending that compares favorably to other types of government spending is the multiplier effect -- each dollar of government spending has the potential to generate more than one dollar of economic activity.

"A key concept associated with infrastructure spending that compares favorably to other types of government spending is the multiplier effect -- each dollar of government spending has the potential to generate more than one dollar of economic activity."

The IIJA spending spans across every sector of infrastructure, including roads, bridges, public transit, airports and broadband. The bill also includes funding for electric vehicle (EV) charging stations, water infrastructure and resilience projects to address climate change^[2].

The Inflation Reduction Act (IRA) signed into law in 2022 provides further support to infrastructure investments in the areas of clean energy, transportation and the environment through tax incentives, grants and loans.

For the clean energy sector, the IRA and the IIJA together provide up to US$370 billion in federal funding over the next five to ten years^[3].

Infrastructure investments are targeting clean energy transition, reduction of emissions and climate resilience

Important objectives of the new government spending on infrastructure is the creation of so called “sustainable” or “green” infrastructure and integration of environmental sustainability and climate resilience considerations into existing infrastructure. There is a wide range of subthemes that investors could identify as opportunities, including renewable energy, green fuels, electrification of mobility sector, environmental services and pollution control.

There is a broad range of industries and companies that stand to benefit from the increase in infrastructure investments in the United States, including those involved in the production of raw materials, heavy equipment, engineering, and construction.