A Q&A with investors

The Inflation Reduction Act

We asked three of the leading portfolio managers on some key questions about the Inflation Reduction Act – what the law means for the industry, the economy and investors.

Key points


Policy certainty

The law creates more certainty around fundamental policy incentives, and has injected momentum and optimism for sustainable assets investors.


Domestic demand

Incentives to buy from U.S. suppliers may accelerate the trend of U.S. manufacturing being more involved in producing materials for projects.


Virtuous cycle

The law has the potential to create a virtuous cycle across many industries, bringing down costs and increasing demand -- effectively increasing the market for renewable investments.

Below is an excerpt from the full report on The Inflation Reduction Act that was published in August 2022.

What’s the biggest takeaway?

David Giordano: This law creates a long runway for U.S. energy transition investments. It creates more certainty around the fundamental policy incentives, which can be significant value drivers for these assets.

Pieter Houlleberghs: For investors like us in sustainable assets, the law injected optimism and momentum -- it's a strong kickstart that will allow other technologies to replicate what we've seen in solar and wind over the last 10-15 years in terms of wider adoption and lower costs.

Does the law create more opportunities in equity or credit?

David Giordano: It’s probably both, but I think the bigger opportunity is on the equity side, given the funding stability of the tax credits in the early years. And there’s a need for so much new development. We've been in a bit of a stalled pattern around the development of new assets in the U.S. because we've been in this limbo state -- we had increasing capital costs with supply chain constraints and the broader inflation issues. So overall, in the short- and medium-term, I think it's probably a bigger play on the equity side.

What will the law do for the U.S. sustainable tech industry?

Pieter Houlleberghs: Half or more of the opportunities we see globally are in the U.S. and Canada -- it’s been a hotbed for innovation, with leadership from startup entrepreneurs and investors. The new legislation is a strong show of government support, which together with what we’re seeing from investors and business leaders suggests the U.S. will maintain a leadership role in the industry.

David Giordano: The bill incentivizes companies to buy from U.S. suppliers. And we've seen in other markets there’s been a very swift implementation by large equipment suppliers to meet domestic-content requirements.

A breakdown of the IRA’s climate-related spending, in US$ billion

On more projects, even if it's not fully domestic manufacturing, there will be U.S. assembly plants involved to allow for a more diversified supply chain. We've already seen some of the big players looking to build out capacity to manufacture turbine blades and assemble solar cells and things like that. So some of it was already happening, and the law will accelerate that trend.

How will the law help develop new types of transition and net zero technologies?

Pieter Houlleberghs: The incentives in the law could drive a virtuous cycle across newer technologies and markets: It will encourage more adoption, which drives down costs, which drives up adoption, which then further drives down costs -- which is what we as investors look for. The multiplier effect of the incentives in the bill means that the market for attractive green investments effectively just got bigger.

What will be the broader impact of the law?

David Giordano: I think the bill will make the sustainable energy industry more tangible. People will see more manufacturing and assembly plants in their communities; up and down the east coast from Massachusetts to Virginia there’s going to be more offshore wind; you'll see more solar arrays, electric vehicles, and charging stations in the Midwest; and more sustainable projects in places like Arizona and New Mexico.

Mark Florian: You want energy to be cleaner, and also relatively cheap and available 24/7. And that should ultimately be a benefit to all U.S. consumers.

At a glance: The IRA’s big investments

billion US dollars

for the Greenhouse Gas Reduction Fund to support state and local investment in green technology

billion US dollars

in loans and grants to help rural communities deploy clean energy

billion US dollars

in rebates for high-efficiency electric appliances and whole-home energy efficiency renovations

billion US dollars

to support decarbonization at high-emitting industries

billion plus US dollars

to build and upgrade the electric grid and related infrastructure

billion US dollars

to purchase electric mail trucks for U.S. Postal Service

billion US dollars

in grants for domestic production of clean vehicles

Download the full paper

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Mark Florian
Head of BlackRock Diversified Infrastructure Funds
David Giordano
Head of BlackRock Climate Infrastructure
Pieter Houlleberghs
Managing Director, Decarbonization Investing