As originally documented in The Restoration Economy, the creation of green infrastructure is basically a restorative process, since—prior to human civilization—green (and blue) infrastructure was the only kind of infrastructure on the planet.
Since well-designed green infrastructure increases climate resilience, boosts urban quality of life and restores biodiversity, it’s little wonder that it’s probably the fastest-growing aspect of the global restoration economy these days. Such efforts work even better when they use tools that combine the goals of revitalization and resilience, such as those now being offered by the RISING PLACES initiative.
This is reflected in the news that, on October 20, 2022, VanEck announced the launch of the VanEck Green Infrastructure ETF (NASDAQ: RNEW), an equity ETF (exchange-traded fund) offering exposure to the leading companies that are poised to drive and benefit from increased investment in efforts to make U.S. infrastructure more green, resilient and sustainable.
“The state of the U.S.’s infrastructure is in need of renewal and an upgrade in order to support a growing population and the goals of environmental sustainability and climate resiliency. In fact, the American Society of Civil Engineers gave the U.S. a C- grade for its overall infrastructure in 2021, with sub-sectors including energy, hazardous waste and transit all earning D+ grades or worse,” said Michael Cohick, Director of Product Management with VanEck.
“Fortunately, government initiatives and private sector innovations are providing potential opportunities for investors to participate in this long-term trend. We’re very pleased to be launching RNEW, with its ability to effectively target sustainable infrastructure companies broadly,” he added.
RNEW seeks to track the Indxx US Green Infrastructure – MCAP Weighted Index (IUGIMWT, “the Index”) and is designed to offer exposure to a diversified portfolio of U.S. companies with revenues primarily generated from sustainable infrastructure businesses across a handful of key themes and sub-themes: environmental waste (including pollution control and waste management), building (including green constructions), and green energy and transportation (green energy and fuel, green transportation, and green infrastructure and equipment).
“Up to this point, the majority of investor focus around green infrastructure has been in what we would term the ‘traditional’ sectors, such as transportation and industry,” explained Cohick. “But there are numerous innovations taking place around green initiatives in power storage, construction, waste management and more that will drive the next iteration and evolution of U.S. infrastructure.”
To be eligible for Index inclusion, companies must generate at least 50% of their revenues from green infrastructure activities, be domiciled in the U.S. and have a market cap of at least $500 million. The portfolio weighting caps sub-themes at 30% and specific equities at 5%.
“In August 2022, the U.S. massively increased the tax incentives on domestic clean energy projects through the Inflation Reduction Act,” said Rahul Sen Sharma, Managing Partner at Indxx.
“This, combined with the allocations in the Infrastructure Investment and Jobs Act account for over half a trillion dollars in new climate action and related infrastructure project spending. We believe that this represents the start of a long-term shift towards sustained green infrastructure investment and growth here in the U.S. We are excited to partner with VanEck, to help investors target this opportunity through the listing of RNEW,” he continued.
VanEck also points to the significant commitments and investments already being made in these areas by both Federal and State governments in the U.S., with the Inflation Reduction Act alone providing $130 billion in funds to incentivize green infrastructure initiatives, including tax credits for solar and EV purchases, grants and loans for sustainable energy capital expenditures and both grants and tax credits for a wide array of decarbonization projects.
RNEW joins a set of strategies from VanEck focused on sustainable equity and fixed income exposures, including VanEck Low Carbon Energy ETF (SMOG), VanEck Green Bond ETF (GRNB), VanEck HIP Sustainable Muni ETF (SMI), VanEck Green Metals ETF (GMET), VanEck Future of Food ETF (YUMY) and the actively managed VanEck Sustainability Fund (ENVYX).
Photo of green infrastructure in Washington, DC by Storm Cunningham.