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It was a tough half of the year for the green industry. According to the Institute of International Finance, ESG funds saw inflows halve in Q1 2022 amidst geopolitical tension and the energy crisis. ESG Q1 fund flows of $75 billion were at their lowest level in seven quarters. IIF data also showed that flows into ESG bonds were also down sharply in Q1, dropping to $14 billion from $27 billion.
The good news is that the fight against climate change is not over yet. Last week U.S. Senator Joe Manchin announced sudden support for Biden’s $739 billion “green bill.” The initiative is supposed to help the United States to reduce carbon emissions by about 40% by 2030. The funding is supposed to come from raising the corporate tax rate to 15% on corporations that make more than $1 billion a year.
The bill is set to provide $369 billion over a decade for climate change strategies, including investments in renewable energy production and tax credits for consumers to buy new or used electric cars. It also includes a $60 billion tax credit for clean energy production and a $30 billion tax credit for wind and solar energy production. In addition, there is a 10-year consumer tax credit for renewable energy investments.
The second part of the bill is directed at reducing the cost of prescription drugs. It is estimated that this initiative would save the federal government about $288 billion over a 10-year budget period. The bad news is that price controls could reduce biopharmaceutical industry revenues by $2.9 trillion through 2039 and threaten a sector that generates more than $1 trillion in economic activity annually. On top of that, the U.S. risks losing competitiveness to countries such as India and China.
Last but not least, President Biden needs the support of all 50 Democratic senators, as well as the deciding vote of Vice President Kamala Harris, to get the bill through the Senate and into the House. The Chips and Science (CHIP-plus) Act is the point at which climate, medical, and taxation issues will move forward.
