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Volatile markets and ever-changing news situations are drawing attention to an investment sector that promises longevity and future potential: infrastructure. Here’s how you can be there.
The war in Ukraine dominates the reports, and there are also the day-to-day effects of record inflation and fears of power shortages. For investors who want to bring some stability to their portfolios now and at the same time want to help shape the future, it may be worth taking a look at the infrastructure sector. Construction of roads and bridges, maintenance of public supply networks or water management – all this requires huge investments.
We have grown a lot in recent years. In the United States, for example, a decision on a giant infrastructure program was made only under President Joe Biden. The law provides for investments of 1.2 trillion US dollars. This aims to repair dilapidated roads and bridges over the next five years and expand local and long-range public transportation. Charging stations for electronic cars, ports and airports, as well as water supply and sanitation should also benefit from state funds.
Expansion of renewable energies as a political mandate
There is also a need to work in Europe. Climate policy considerations play a particularly important role here. The Green Deal should lead to climate neutrality in 2050. To this end, European heads of state and government agreed at the end of 2020 on a higher climate goal: by 2030, greenhouse gas emissions should be at least 55 percent below the level of emissions In 1990 – before that, only a 40 per cent cut should have been planned.
The federal government has also adapted Germany’s climate protection goals to targets at the EU level: by 2030, greenhouse gas emissions will be reduced by at least 65 percent, and by 2040 cuts are aimed at 88 percent. The Federal Climate Protection Act sets a goal of greenhouse gas neutrality by 2045.
China is still the largest producer of carbon dioxide in the world. Electricity is currently produced mainly in coal-fired power plants, which is reflected in the climate balance. However, China also wants to achieve climate neutrality by 2060.
These examples show that ambitious goals in different countries also make it necessary to completely restructure the energy supply – the future belongs to renewable energies.
Water: the supply and disposal of water is vital
Another example of a huge infrastructure sector is water supply and disposal. Marking this year’s World Water Day on 22 March, UNICEF wrote that about 2.2 billion people on Earth still do not have regular access to drinking water. About 785 million people do not have a basic supply of clean water. According to the organization, by 2040, nearly 600 million children will live in areas that do not have access to water as an adequate resource.
These are all huge numbers and governments, but also the private sector, are faced with the task of democratizing water and making it available. Likewise the issue of sewage disposal. Not only sewage treatment plants are in short supply in large parts of the world, according to UNICEF, 673 million people do not even have a toilet. This promotes the spread of diseases and poses a danger, especially to the poorer population.
But even in developed countries, water systems must be maintained or sewage systems modernized. Thus, companies that make money from this value chain operate in an environment with a long-term perspective.
Three Infrastructure Companies Make Warehouse Greener
In the field of onshore wind energy, Spanish Iberdrola As a leading company for nearly 20 years. Meanwhile, the company, which was founded in 1992, has developed the offshore wind energy sector as an additional engine of growth. “At the end of the first quarter of 2022, Iberdrola already had 1.26 GW of offshore installed capacity and 7.0 GW in development – 2.6 GW under construction – which thanks to investments of nearly €30 billion worldwide in the decade before 2027, It will run,” the group writes on its website. In the first quarter, a net profit of 1.05 billion euros was recorded, an increase of three percent compared to the same quarter last year. Increase in earnings, well-equipped project pipeline – the share price followed the positive development of the company and was able to increase.
For example, the traditional French company Veolia Environment is concerned with complex water supply and disposal as well as waste management and energy supply. Clients come from industry and commerce, but municipalities and private clients also benefit from the group’s services. Sales in 2020 amounted to 26.01 billion euros. If you want to put stock in your portfolio: The company, founded in 1853, has been disguised until now as a defensive primary investment.
British transport system operator National Grid is another investment opportunity for investors looking to explore infrastructure. Founded in 1990, the company operates electricity and gas networks in Great Britain, Australia and the USA. The national grid, for example, wants to promote the decarbonization of electricity and gas and increase the resilience of the power grid. The group sees itself well prepared for the huge task of energy transition. In 2021, sales were £14.78 billion. The stock price has been friendly over the past few months.
Conclusion: Sustainable infrastructure companies are good for your conscience and contribute innovative solutions to important future tasks. Even if no excess returns are expected: the projects in question are of a long-term nature and are likely to meet future demand. However, investors should always see such defensive and relatively non-cyclical investments as an addition to a diversified portfolio. Things that cannot be bypassed on the political agenda or the fact that major projects may be prone to failure when implemented can sometimes impair the success of such financial firms.
Smart Broker clients trade the stocks mentioned as examples for free via gettex. You are also welcome to use our free webinar on the topic of sustainable infrastructure with lots of background information on this exciting investment environment. The webinar will take place on May 10, 2022 at 7pm: Log in here!
Author: KS, editor smartbroker.de
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