Play the Green Transition with Environmental Impact 100 – Part 2
In the first part of this article, we delved into the recent political and regulatory advancements in the US and Europe that have served as a catalyst for the global climate and environmental agenda. Specifically, we analysed the short- to medium-term effects of significant legislative acts such as the new infrastructure law, the CHIPS and Science Act and the Inflation Reduction Act (“IRA”) passed in the US in the last two years. Additionally, we examined the key provisions of REPowerEU and the EU Green Deal Industrial Plan (“GDIP”) aimed at securing the bloc’s cleantech leadership. Lastly, we presented the investment strategy of our Rize Environmental Impact 100 UCITS ETF, which, although established back in July 2021, is in perfect harmony with the incentives conferred under the IRA and the GDIP and thus is strategically positioned to benefit from the rising tide of climate-focused capital.
In this second part, we take our analysis a step further by examining a select group of companies (across various subsectors) of our Rize Environmental Impact 100 UCITS ETF that are already benefitting from provisions of the IRA and the GDIP. We highlight the specific projects and initiatives that each company has been bidding for and/or investing in as a way to demonstrate just how quickly we have moved from legislative act to practical implementation.
1. Li-Cycle (Circular Economy Solutions)
Cobalt is a vital ingredient in batteries and DRC produces a vast amount of the world’s supply. The Tenke Fungurume Mine digs out roughly 15% of the world’s cobalt supply, according to Bloomberg. Major buyers of cobalt include phone and EV manufacturers. For these companies, ties to cobalt miners are an uncomfortable truth, as the supply side is infamous for child labour and other human rights violations. Plus, there is ultimately a finite amount of cobalt that can be extracted. Some companies are already trying to side-step the problem of unethical, unsustainable mining.
Li-Cycle, a US-based lithium-ion battery recycling company, is uniquely positioned to recover critical materials like cobalt (in addition to nickel and lithium) from used batteries. By re-integrating these materials into the battery supply chain, Li-Cycle is enabling a transparent and ethical supply chain for 100% recycled cobalt. This plays an important role in diversifying the supply chain and will continue to do so in the future.
On February 27th, 2023, Li-Cycle scored a $USD 375 million loan from the US Department of Energy to build a new recycling facility. Li-Cycle was able to receive the loan due to investments secured thanks to the Inflation Reduction Act. The loan will help advance Li-Cycle’s Rochester factory in the state of New York, which is scheduled to open in late 2023. Li-Cycle says the operation will produce about 8,500 tonnes of lithium carbonate, 48,000 tonnes of nickel sulphate and 7,500 tonnes of cobalt sulphate annually through recycling spent batteries. Li-Cycle CEO Ajay Kochhar told CNBC that he believes that recycled metals could represent 50% of the global supply in 30 years. The EU has also backed recyclable batteries and in December drew up new rules setting out minimum requirements for making minerals in batteries recoverable.
2. Hannon Armstrong (Renewable Energy Generation)
Hannon Armstrong is a publicly traded, specialty finance company based in Annapolis, Maryland, USA. The company was founded in 1981 and has since become a leading investor in the sustainable infrastructure sector. The company provides debt and equity financing for sustainable infrastructure projects, including renewable energy, energy efficiency and climate change solutions.
Hannon Armstrong invested $USD 125 million in Ameresco’s operational projects in Q4 2022, taking advantage of the Investment Tax Credits and Clean Fuel credits offered by the Inflation Reduction Act. With a pipeline of $USD 4.5 billion+ grid-connected and Behind-The-Meter assets, Hannon Armstrong anticipates fully realising the benefits of the act starting in 2026.
Daniela Shapiro, Manging Director of Hannon Armstrong commented: “After decades of half measures and expiring tax credits, the U.S. finally has a comprehensive energy policy framework thanks to the IRA. This transformative new law provides stable investment environments for clean energy solutions from grid-connected renewables to behind-the-meter applications and new technologies driving the next generation of carbon-free investing. The IRA’s $USD 369 billion in climate investments provide a major tailwind for behind-the-meter climate solutions, including distributed generation, energy efficiency, electric vehicle infrastructure, clean transportation, along with many energy storage, carbon capture, and clean hydrogen projects.”
3. Johnson Controls (Energy Efficiency Solutions)
Johnson Controls is a multinational conglomerate that specialises in providing a wide range of products and services related to building efficiency, energy storage, automotive batteries and heating, ventilation and air conditioning (HVAC) systems. The company was founded in 1885 with operational headquarters in Milwaukee, Wisconsin. Johnson Controls has a global presence in over 150 countries and over 100,000 employees worldwide.
The Inflation Reduction Act is a federally funded initiative with $USD 370 billion reserved for climate and energy projects. Homeowners can take advantage of the act’s incentives to upgrade their HVAC systems to higher-efficiency equipment that reduces energy consumption and utility bills while contributing to the goal of reducing America’s carbon footprint by 40% by 2030.
Since the Inflation Reduction Act was passed in August 2022, Johnson Controls has been making residential energy efficiency more affordable and accessible for homeowners through robust financing options and rebates intended to maximise newly announced savings through the Inflation Reduction Act. The company estimates that with their higher-efficiency HVAC equipment, homeowners can reduce their heating and cooling costs by as much as 50% compared to lower-efficiency systems.
4. Stantec (Pollution Control)
Stantec is a multinational professional engineering firm. Stantec’s services are divided into several key business sectors, including buildings, water, transportation, energy and resources. In the buildings sector, Stantec provides architecture, engineering and interior design services for a variety of commercial, institutional and residential projects. In the water sector, the company offers services in water resources engineering, water treatment and distribution and wastewater treatment and management. In the transportation sector, Stantec provides planning, design and engineering services for roads, highways, airports and transit systems. The company also provides services in the areas of renewables and resources.
Stantec is benefitting from major project wins and healthy end-market demand driven by increased infrastructure investments that can be tied to the Infrastructure Investment and Job Act, CHIPS and Science Act and Inflation Reduction Act. This includes investments in aging infrastructure, reshoring of domestic production and supporting projects in climate change. For example, in Q4 2022, Stantec won the IRA-supported Qcell project, a $USD 2.5 billion investment in solar power energy transition. The project aims to address the growing need for renewable energy and reshoring of domestic production to mitigate supply chain risk.
5. Fluence Energy (Energy Efficiency Solutions)
Battery storage technology provider Fluence Energy officially launched in 2017 as a JV between US-based AES Corporation and Germany’s Siemens, two companies already staking a claim to be future energy storage pioneers. Recently, Peter Silveira, VP of manufacturing at Fluence Energy, noted that the IRA should accelerate current efforts to move battery cell production nearer to the US.
US President Biden signed the IRA into law on August 16th, 2022, offering tax incentives for companies to produce energy storage components in the US. In addition, the act provides an Investment Tax Credit for standalone storage projects, which can reduce equipment capital costs by 30% or more. The credit is considered the most significant part of the IRA for the energy storage sector.
Peter Silveira further noted: “This common-sense measure recognises that whether energy storage is co-located or deployed at a separate location, the power system benefits either way in the form of reliability, efficiency and reducing emissions. [The IRA] will help incentivise accelerate storage deployment. Diversification has always been part of our strategy and the IRA provisions will also strengthen that strategy by providing more options for Fluence [Energy] by increasing the number of parties interested in manufacturing in the US. So, I think [the IRA] is a win-win for not only the customer but for us as well and even our competitors in the space.”
In September 2022, Fluence Energy established a contract manufacturing facility in Utah to cater to the US market. The facility began shipping Fluence Cubes, the building blocks of the company’s Gridstack, Sunstack, and Edgestack energy storage products, in October 2022. The Cubes use LFP-280LC battery modules from CATL in China. Initially, the facility’s production capacity will be 75 Cubes per week, with plans to increase to 150 Cubes per week. By launching the facility, Fluence Energy seeks to expand its production beyond Asia, better serve US customers and overcome supply chain constraints.
On February 17th, 2023, Andrew Gilligan, the director of commercial storage at Fluence Energy, announced that Fluence Energy and partner TransnetBW are developing a 250MW Netzbooster project in Germany. The energy storage system will be located in Kupferzell. The project is designed to reduce operating costs of Germany’s transmission system by decreasing the number of required preventive measures in system operation, increasing the use of the electricity grid and reducing the need for traditional alternating current network reinforcement and expansion.
6. Aurubis (Circular Economy Solutions)
Aurubis is a leading global provider of non-ferrous metals and one of the largest copper recyclers in the world. The company is headquartered in Hamburg, Germany and operates production sites in the EU and the US.
In January 2023, top metal producers called on the EU to follow the White House’s lead in rolling out financial support to help the bloc keep control of critical raw materials of the green transition. Eurometaux – which represents major European producers, including Aurubis – urged the EU to take inspiration from President Biden’s IRA which includes billions of dollars in subsidies to spur domestic investment. Specifically, Eurometaux proposed measures to fast-track solar and wind projects and introduce tax credits to support strategic metals production. Eurometaux also called for measures to address high electricity prices, which have led to sharp cutbacks in metals production. Eurometaux said the industry would otherwise struggle as energy scarcity continued in future years.
In response, on February 1st, 2023, the EU released its communication for “A Green Deal Industrial Plan for the Net Zero Age” i.e., the EU Green Deal Industrial Plan. The communication is based on four pillars: (1) a predictable and simplified regulatory environment; (2) faster access to sufficient funding; (3) skills; and (4) open trade for resilient supply chains. As part of the second pillar, the EU also announced the Critical Raw Materials Act, which aims to secure critical raw material security in the EU.
On January 30th, 2023, i.e., a day before the EU GDIP was officially rolled out, Germany’s Aurubis, one of the world’s largest copper recyclers (and with a long history of working to secure German government interests/objectives), and Chile’s Codelco, the world’s largest copper producer, signed a memorandum of understanding in support of the German-Chilean Raw Materials Partnership. The new partnership, established in Santiago de Chile in presence of Gabriel Boric, President of Chile, and Olaf Scholz, Chancellor of Germany on January 29th, 2023, targets intensifying cooperation in the fields of mining, development, trade with raw materials and the circular economy. The agreement also contains an accord that stipulates a concerted effort to promote the Copper Mark, the gold standard for sustainability and supply chain integrity in the copper industry. The Copper Mark’s responsible production criteria are derived from 32 internationally recognised, leading sustainability standards.
7. Meyer Burger (Renewable Energy Equipment Manufacturers)
Meyer Burger is a Swiss company that specialises in the manufacturing of equipment and technology for the production of solar cells and solar modules. Founded in 1953, the company has been operational in the solar industry for over 60 years.
On February 8th, 2023, Meyer Burger signed a supply agreement with NorSun, a Norwegian producer of high-efficiency monocrystalline silicon wafers. Accordingly, Meyer Burger is strengthening the resilience of its supply chains as it expands its solar cell and module production to 3GW of annual capacity by 2024. With the support of the EU Green Deal Industrial Plan, Meyer Burger and NorSun have a strong intention to continue building the European solar value chain.
Gunter Erfurt, CEO of Meyer Burger commented: “The agreement with NorSun is an important step in strengthening the independence of European supply chains. Further growth at Meyer Burger continues to meet sustainability standards in the future – in technological, social, environmental and economic terms.” The increased use of solar wafers from European production further reduces the CO2 footprint of the high-performance solar modules as environmentally friendly and cost-effective electricity primarily from hydropower is used for the energy-intensive production of the wafers.
 Bloomberg, “A $1.5 Billion Hoard of Copper and Cobalt Is Piling Up in Congo”, February 2023. Available at: https://www.bloomberg.com/news/articles/2023-02-27/a-1-5-billion-hoard-of-copper-and-cobalt-is-piling-up-in-congo
 Li-Cycle, “Cobalt: the DRC and the Role of Lithium-ion Battery Recycling”, April 2018. Available at: https://li-cycle.com/blog/cobalt-the-drc-and-the-role-of-lithium-ion-battery-recycling/
 Financial Post, “Li-Cycle stock jumps 10% after announcing conditional $375-million loan from the U.S. government”, February 2023. Available at: https://financialpost.com/commodities/energy/renewables/li-cycle-battery-minerals-plant-loan
 Nasdaq, “A Huge Stockpile of Cobalt Looms Over The Market”, February 2023. Available at: https://www.nasdaq.com/articles/a-huge-stockpile-of-cobalt-looms-over-the-market
 Forbes, “2023 Energy Predictions: IRA Spurs Clean Energy Boom, Electric Trucks Accelerate, Battery Demand Surges, EPA Cuts Power Sector Pollution”, February 2023. Available at: https://www.forbes.com/sites/energyinnovation/2023/01/09/2023-energy-predictions-ira-spurs-clean-energy-tribal-renewables-surge-electric-trucks-accelerate-battery-demand-grows-epa-cuts-power-sector-pollution/?sh=36ff550f39fc
 Johnson Controls, “Podcast Reviews HVAC Tax Credits Included in Inflation Reduction Act”, 2023. Available at: https://www.johnsoncontrols.com/insights/2022/in-the-news/hvac-tax-incentives-podcast
 Global Newswire, “Qcells invests $2.5 billion in solar power manufacturing facility from the Gray/Stantec design-build team”, February 2023. Available at: https://www.globenewswire.com/news-release/2023/02/14/2607433/0/en/Qcells-invests-2-5-billion-in-solar-power-manufacturing-facility-from-the-Gray-Stantec-design-build-team.html
 Energy Storage News, “Inflation Reduction Act: Fluence expects US battery cell production onshoring to accelerate”, August 2022. Available at: https://www.energy-storage.news/inflation-reduction-act-fluence-expects-us-battery-cell-production-onshoring-to-accelerate/
 Energy Storage News, “Fluence opening new contract manufacturing facility in Utah to serve US market”, August 2022. Available at: https://www.energy-storage.news/fluence-opening-new-contract-manufacturing-facility-in-utah-to-serve-us-market/
 PV Magazine USA, “Energy storage as a transmission system asset”, February 2023. Available at: https://pv-magazine-usa.com/2023/02/17/energy-storage-as-a-transmission-system-asset/
 Mining.com, “EU metals industry urges aid to rival US green energy package”, January 2023. Available at: https://www.mining.com/web/eu-metals-industry-urges-aid-to-rival-us-green-energy-package/
 Aurubis, “Aurubis and Codelco sign an agreement to cooperate on a more sustainable and responsible copper value chain”, January 2023. Available at: https://www.aurubis.com/en/media/press-releases/press-releases-2023/aurubis-and-codelco-sign-an-agreement-to-cooperate-on-a-more-sustainable-and-responsible-copper-value-chain
 Meyer Burger, “Company History & Milestones”, 2023. Available at: https://www.meyerburger.com/en/company/company-history-milestones
 Meyer Burger, “Meyer Burger and NorSun conclude contract for long-term supply of solar silicon wafers made in Europe”, February 2023. Available at: https://www.meyerburger.com/en/newsroom/artikel/meyer-burger-and-norsun-conclude-contract-for-long-term-supply-of-solar-silicon-wafers-made-in-europe