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State of the Union Speech Offers ESG Investing Cues

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For impact investors, President Joe Biden’s recent State of the Union speech provided another layer of insight into the US government’s priorities and possible future action. Although the current makeup of Congress makes legislative action more challenging, the executive branch still has the power to shift regulation and policy at home and abroad.

Here are a few key takeaways for ESG investors based on Biden’s domestic agenda.

Encouraging Domestic Production

One theme of Biden’s speech centered on increasing manufacturing in the United States. He argued that this move would not only create jobs but also ease the country’s reliance on international supply chains that have been disrupted by COVID-19 and contributed to inflation and shortages.

Biden applauded a number of companies’ recent domestic investments, including:

  • Intel’s recent $20 billion investment to produce semiconductors in Ohio.
  • GM and Ford for making multibillion-dollar investments to produce electric vehicles in the United States.

Biden used these examples to encourage Congress to pass legislation in support of domestic companies and the future of American manufacturing against foreign competition.

As part of the administration’s efforts to address climate change, Biden aims to double the size of America’s clean energy production, lowering costs for individuals buying electric vehicles as well as those investing to the improve energy efficiency of their homes.

ESG investors would be well served to take note of Biden’s stated priorities.

Supporting Health and Education

Biden offered an ambitious goal to cut the cancer death rate by 50% over the next 25 years. To this end, Biden proposed that Congress approve the creation of the Advanced Research Projects Agency for Health. This agency would take its inspiration from the Defense Advanced Research Projects Agency, which has had a role in the success of innovations such as GPS, the internet, and even COVID-19 vaccines.

The new agency would carry a mission to invest in breakthroughs for cancer as well as other serious diseases including Alzheimer’s and diabetes. A government funding push could offer a boost to a growing sector with startups such as Xilis and Ibex Medical Analytics, which use AI to improve cancer screening and treatment programs. Biden also discussed plans to improve conditions in nursing homes by solidifying the standards set by Medicare.

On education, Biden spoke about the importance of using funding from the recent infrastructure legislation to close the digital divide on broadband. His proposed legislation would also increase access to more affordable childcare and early education, spelling good news for startups in the EdTech space.

Pushing for Fairer Wages and Taxes

Biden also spoke about his desire to improve standards for workers. He addressed goals including setting a national $15 minimum wage and passing the PRO Act to make it easier for workers to unionize. He also aims to target access to paid leave, a potentially encouraging move for ESG investors concerned about improving employee welfare.

To fund his priorities, Biden argued for changing the tax system so that wealthy individuals and large corporations “start paying their fair share.” He noted that 55 Fortune 500 companies earned $40 billion in profits in 2021 yet paid no federal income tax, proposing a 15% minimum corporate tax rate as well as a minimum global tax rate meant to prevent companies from moving operations overseas to avoid taxes. He also discussed closing tax loopholes for the wealthy.

Biden’s domestic agenda is an ambitious one, and it remains to be seen how much will pass through Congress. Yet through the executive branch’s control of regulatory agencies, Biden has some power to set policies that impact the United States and the rest of the world—meaning ESG investors would be well served to take note of Biden’s stated priorities.

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