The Clean Energy Transition Is Creating Opportunities to Invest in Infrastructure | Kanebridge News
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The Clean Energy Transition Is Creating Opportunities to Invest in Infrastructure

By ANDREA RIQUIER
Wed, Aug 30, 2023 8:41amGrey Clock 3 min

A year after the Inflation Reduction Act (IRA) was signed into law it’s a good reminder that there’s opportunity in infrastructure investments in the U.S., particularly green technology or those that profit from the transition from fossil fuels to renewable-energy sources.

“This is a really good time to be investing in the sector,” says Michael McGown, head of North American infrastructure private markets at Mercer Alternatives. “There is a real need to transition away from carbon, and the fact that the U.S. government has gotten behind this makes it a win.”

Yes, there is some political pushback against the law—and there are still those who want to rely on fossil fuels and other traditional forms of energy production. But many experts point to the IRA’s transformative potential, and its impact on energy-transition spending in particular, as a good opportunity for savvy investors.

“I don’t think in my career I’ve ever seen a law have a greater impact on economic development in this country,” Gregory Wetstone, chief executive officer of the American Council on Renewable Energy, a clean energy lobbying group, said in July.

Wall Street agrees. Calling themselves “positive” on greentech opportunities, analysts at UBS wrote in July that they forecast US$40 trillion to US$50 trillion of global energy-transition investments in the years 2021–30, in support of net-zero efforts.

“We also expect to see technological developments and a broad-based move to global electrified vehicles (i.e., battery-electric vehicles and plug-in hybrid electric vehicles),” the UBS team wrote in a note. “Such sales may account for a 30% share of the global market by 2025 and a 60%–70% share by 2030, in our view.”

Within the category of energy transition, there are some infrastructure themes that may appeal more than others, either because of their promise of innovation or potential monetary returns.

Mercer’s McGowan points to investments in carbon reduction and abatement, those dedicated to decommissioning old power plants to replace them with renewable or hybrid technologies, and investing in ammonia, which is often used to transport clean hydrogen.

More cutting-edge technologies are likely to offer investors better total returns, says Steven Novakovic, director of curriculum for the Chartered Alternative Investment Analyst Association. In contrast, the more mature, stable, user-fee oriented investments are less return-oriented, but better bets for income investors.

“Generating, moving, or storing energy tends to be income-oriented,” Novakovic says.

Importantly, even though energy infrastructure may be capital-intensive, higher and rising interest rates aren’t likely to be a negative for the sector.

“High barriers to entry and the monopolistic positioning of many infrastructure assets tend to make them less sensitive to the economic cycle,” the UBS analysts said. “In addition, they can help stabilise income generation in a multi-asset class portfolio, particularly when accounting for long-term inflation. Since 2003, infrastructure has typically performed best when global inflation has been high (based on Cambridge Associates Infrastructure Index data).”

With interest rates higher across the board, some investors may simply choose to stick with safer fixed-income assets, Novakovic says. But, he says, “Ultimately infrastructure still has a diversifying effect for portfolios.”

Where to Invest

What are the best ways for investors to access the sector? Qualified investors, or those with at least a few million to spend, can put money directly into private-market plays, such as private-equity funds or even venture-capital funds, which are likely to pay the most in total returns.

There are, of course, typical concerns with private-market strategies, the UBS team said: “illiquidity, longer lockup periods, leverage, concentration risks, and limited control and transparency of underlying holdings. While risks can’t be fully eliminated, it is possible to mitigate them through strong due diligence and strict manager selection.”

They add a shout-out for global industrial stocks, writing that the “sector’s composition has become increasingly diversified and no longer behaves like a traditional cyclical play, in our view.”

In a July note to clients, J.P. Morgan Private Bank analysts wrote about the opportunities in the semiconductor industry driven by the IRA in addition to last year’s CHIPS and Science Act. Semiconductors, for instance, can be used in the process of decarbonisation, particularly for powering “smart” electric grids and other forms of infrastructure

“The semiconductor industry is poised for growth as chips penetrate the clean energy value chain: in photovoltaic solar cells, wind turbines, EVs, batteries, charging stations, and power grids,” the note said.

CHIPS alone allocates more than US$50 billion to subsidise domestic manufacturing of advanced semiconductors. “These government incentives, combined with the wide variety of uses for semiconductors, have pushed companies to ramp up supply,” J.P. Morgan said.

For investors who want to access a basket of energy-transition stocks, several exchange-traded funds may fit the bill. The Global X Lithium & Battery Tech ETF (ticker: LIT) “invests in the full lithium cycle, from mining and refining the metal, through battery production,” according to fund documents, while the Sprott Energy Transition Materials ETF (SETM) says it, “provides pure-play access to a range of critical minerals necessary for the global clean-energy transition.”

And for those who prefer bonds, or just want a more tax-efficient strategy, many municipalities are also issuing debt to fund cleaner energy. In June, the California Community Choice Financing Authority sold nearly US$1 billion in bonds to finance the acquisition of clean energy—including geothermal and solar-plus-storage—by the Clean Power Alliance of Southern California. The projects could affect as many as 3 million residents.



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AACCI’s Strategic Vision for Enhancing Australia-Arab Trade Relations

The Australian Arab Chamber of Commerce & Industry (AACCI) is fostering robust trade relations between Australia and Arab countries.

Mon, May 20, 2024 5 min

In an era where global trade and international relationships are more crucial than ever, the Australia Arab Chamber of Commerce & Industry (AACCI) serves as a bridge, for cooperation and growth between Australia and the Arab nations. Led by its Chairman, Mr. Mohamed Hage, the AACCI has taken on projects aimed at strengthening relationships and fostering development across borders.

This exclusive interview explores the initiatives implemented by the AACCI to expand its presence and influence in the region including the significant establishment of a new operational hub in Dubai. We also delve into how the Chamber embraces education through training and research, its participation in major international exhibitions, and its active support for both large corporations and small businesses.

Looking towards tomorrow, Mr. Mohamed shares his vision for broadening AACCI’s reach emphasizing the importance of the on-ground operations and cultural understanding in building business connections.

-Could you elaborate on the Australia Arab Chamber of Commerce & Industry, including its objectives and main areas of focus?

The Australia Arab Chamber of Commerce & Industry (AACCI) plays a fundamental role, in promoting business partnerships and trade between Australia and the 22 Arab countries. As a member of the Union of Arab Chambers affiliated with the Arab League, AACCI focuses on strengthening trade and investment ties, across these countries.

To nurture these connections effectively AACCI has outlined four objectives: facilitating trade and investment activities, certifying documents, educating stakeholders, and offering marketing assistance.

Our initiatives are designed not only to empower trade and investment endeavors but to also ensure engagement with specific sectors that drive these activities. With an understanding of the characteristics, strengths and preferences of each country, AACCI prides itself on its specialized knowledge customized to suit the distinct business environments of these nations.

– As the AACCI approaches its 50th anniversary, what have been some of the key milestones and achievements?

I believe one of AACCI’s accomplishments is the opportunities it has opened up for numerous Australian companies to access markets, in the region. Moreover, the strong bilateral trade relationship that has developed between Australia and the 22 Arab nations over the five decades has led to trade transactions amounting to billions of dollars.

This extensive trade covers industries such as food and beverages, luxury hotels and many more services. Each successive generation, within AACCI has built upon the foundation laid by its predecessors enriching their knowledge base and expanding their range of services.

– How does the AACCI leverage its diverse leadership team to enhance trade and investment opportunities between Australia and the Arab region?

Since taking on the role of chairman, my main focus has been on expanding our presence in the region. This led to the idea of opening an office in Dubai, which symbolizes our dedication to deepening our engagement in that area. We have successfully secured the license to open our first office in Dubai after 50 years, which will serve as a gateway to the GCC and North Africa.

I strongly believe that building two-way trade and investment ties requires more than a degree of business connectivity; it demands having local representatives present in each region. With trends emphasizing strategies the value of face-to-face engagements cannot be overstated.

Setting up offices in the region is essential for the Chamber to truly serve as a link and support system for business activities. Ultimately this expansion will bring benefits to our members and partners by providing them with access, to dynamic markets and diverse prospects.

– Can you discuss the significance of AACCI’s role in cultural and business exchanges between the two regions?

The importance of understanding cultures in our operations cannot be overstated. To address this, we have included a training platform within the Chamber to strengthen our cultural awareness initiatives. This new program offers our members access to modules on our website focusing on global business practices.

Furthermore, we have set up a Center of Excellence specifically dedicated to researching areas like food security and cultural awareness. These research endeavors are essential for promoting knowledge between the two regions.

By combining the resources of the Center of Excellence, our training resources, and the forthcoming local office in Dubai, we’re providing cultural awareness not only in the region but also in Australia. This approach ensures that our members are well equipped and knowledgeable boosting their effectiveness and involvement, in markets.

– What is the objective of your on-ground presence at conferences and events?

Participating in conferences and on ground events is very important for increasing awareness in industries like construction where knowledge of opportunities in the Arab world may not be widespread. When we see projects such as NEOM or notice the construction boom happening in the region it becomes important for organizations like the Chamber of Commerce to highlight these prospects. By taking part in large scale expos such as the Sydney Build Expo we position ourselves at the forefront of these advancements.

Our presence at these events enables interaction giving entrepreneurs a chance to visit our booth engage in discussions and learn more about the region in an approachable and personalized manner. This plays a role in simplifying the process and making opportunities concrete.

– With such a diverse membership base, how does AACCI tailor its services to meet the needs of both large corporations and small startups?

When it comes to discussing business it’s important to grasp how influence and vision come into play. Businesses looking to expand are often motivated by a desire to achieve something whether they are big companies or small enterprises. Small businesses typically aim to raise their brands profile while larger corporations seek recognition and market dominance.

Standing out in this area can be tough mainly because the key driving force is the passion to showcase the brand and products on a platform. This determination serves as a motivator for entrepreneurs.

At the Chamber we make a point of recognizing the needs of both big and small players by understanding each members individual situation. We ensure that every member is well informed about the opportunities and risks that come with expanding. For small businesses, this means being aware of the financial demands, while large businesses are advised on the necessity of both financial and emotional resilience.

– How does AACCI plan to expand or evolve its services in the coming years to further support its members?

The importance of having resources on the ground cannot be emphasized enough. Having local staff is key to establishing connections with the communities we serve. Without a presence in the area staying updated on events and activities becomes quite challenging.

This is why, as I’ve mentioned before, we have established an office in Dubai, staffed with personnel dedicated to supporting our members. This local office will help us effectively bridge the gap between Australia and the Arab world. And our members will benefit from insights and assistance from someone who truly knows the landscape.

In Australia we have equipped offices throughout the country staffed by individuals who play a significant role in our operations. This strong domestic network complements our efforts ensuring that we provide support to our members both locally and globally. This strategic approach is crucial, for nurturing business relationships and fostering continental understanding.

 

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