Thu, Sep 1, 2022

U.S. Infrastructure Investment and Jobs Act: Improving ESG Returns

In a recent Harvard Business Review article, “An Inconvenient Truth About ESG Investing,“ the author noted that with $2.7 trillion flowing into environmental, social and governance (ESG) funds through December 31, 2021, ESG portfolios are not outperforming non-ESG funds.1 One theory is that ESG-focused companies sacrifice financial returns for societal benefits.2 With the passage of the Infrastructure Investment and Jobs Act of 2021 (IIJA), companies have an opportunity to tap into new federal incentives to offset the costs of their ESG investments and increase returns.3

According to the White House, the IIJA is the largest investment to address sustainability in U.S. history.4 The IIJA provides $1.2 trillion for infrastructure with $550 billion of new spending initiatives, with almost 30% or $159 billion dedicated to environmental initiatives. Kroll has estimated the following allocations:

Federal agencies are starting to implement the IIJA, so now is the time to prepare your company to tap those funds. As an example of the new spending, Congress provided $20 billion to create a new Office of Clean Energy Demonstrations (OCED) at the U.S. Department of Energy.5 The mission of the OCED is to prove the effectiveness of new, clean energy technologies in real-world scenarios “to pave the way for widespread adoption and deployment.”6 The new office has identified 10 demonstration initiatives with total funding of $21 billion and more than 70% available to the private sector:

OCED Demonstration Initiatives

Program

Funding

Private Sector Funding?

Stage

Advanced Reactor Demonstration Program

$2,500,000,000

Yes

FOA

Carbon Capture Large-Scale Pilot Projects

$937,000,000

Yes

RFI

Carbon Capture Demonstration Projects Program

$2,500,000,000

Yes

RFI

Clean Energy Demonstration Program on Current and Former Mine Land

$500,000,000

TBD

2023

Energy Improvement in Rural and Remote Areas

$1,000,000,000

No

Q3 2022

Energy Storage Demonstration and Pilot Grants

$355,000,000

Yes

Q3 2022


Industrial Emissions Demonstration Projects

$500,000,000

Yes

Q4 2022


Long Duration Demonstration Initiative and Join Program

$150,000,000

Yes

Q3 2022


Program Upgrading Our Electric Grid and Ensuring Reliability and Resiliency

$5,000,000,000

No

NOI

Regional Clean Hydrogen Hubs

$8,000,000,000

Yes

Q2 2022

 

$21,442,000,000

 

 

With much more funding packed into the IIJA, Kroll has summarized individual programs, providing descriptions, recipients and eligible uses of each. You may access the Bipartisan Infrastructure Investment and Jobs Act Guide here.

To further discuss your company’s eligibility for specific programs and the application process and strategies, please contact Kroll Tax Services’ Site Selection and Incentives Advisory team.

Sources
1.See “An Inconvenient Truth About ESG Investing,” Sanjai Bhagat, March 31, 2022, found at: www.hbr.org/2022/03/an-inconvenient-truth-about-esg-investing.
2.Id.
3.Infrastructure Investment & Jobs Act of 2021, Public Law No: 117-58.
4.See “Biden’s Infrastructure Law: Energy & Sustainability Implications,” National Law Review, January 5, 2022, found at: https://www.natlawreview.com/article/biden-s-infrastructure-law-energy-sustainability-implications
5.See “DOE Establishes New Office of Clean Energy Demonstrations Under the Bipartisan Infrastructure Law …”, December 21, 2021, found at: https://www.energy.gov/articles/doe-establishes-new-office-clean-energy-demonstrations-under-bipartisan-infrastructure-law.
6.Id.

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