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Investing in Sustainable Growth: Q3 Newsletter

In the latest newsletter from the Fundamental Growth & Core Equity team, Chief Investment Officer Mike Solecki’s foreword looks at the recent investment environment and the major factors driving recent financial market performance and considers what that might mean going forward.

The two main articles in the newsletter provide insights into what the team considers when seeking investment opportunities:

Below the Radar: Three Innovation Stock Stories

The Global Innovation Strategy seeks to build a concentrated portfolio of companies at the forefront of innovation, in a diversified, risk-controlled way. We favor companies with high-quality business models, reasonable valuations, and sustainable growth driven by innovative products and solutions. More specifically, we define innovative companies as those that create new markets, disrupt existing markets, leverage the network or platform effect (as we illustrate later), and drive productivity enhancements, scientific breakthroughs and new solutions.

Inflation Reduction Act: Pathway to a Lower Carbon US Economy

The Inflation Reduction Act 2022 includes a number of substantial measures to help the US in its transition to a lower carbon economy. It is set to have a considerable impact on the climate change strategies of many industries and companies. This Act is considered to be the strongest climate action in US history and aims to address inflation by reducing national debt, healthcare costs, and energy costs over the next ten years. On the climate change front, the law encompasses provisions that touch on a mix of energies, including wind, solar, nuclear, hydrogen, oil and gas, biofuels; it also includes climate change prevention measures such as carbon capture, battery storage, clean vehicles etc. Overall, an estimated $369 billion of investment is expected in the areas of energy transition and climate change over a period of 10 years.

The IRA offers an array of incentives and tax credits to the industries which will not only help in decarbonization but will also present a great investment opportunity. The Fundamental Growth and Core (FGC) Equity team at State Street Global Advisors believes that the IRA will provide incentives for the development and maturation of technologies which are critical in mitigating climate change. By leveraging the FGC proprietary climate score cards we can identify companies that will provide the key technologies to enable the transition to a Net Zero world.

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