Stock picks for companies to benefit from the IRA: BofA

President Biden signed the Inflation Reduction Act into law on August 16, 2022. In the almost-year since the historic climate bill was passed, 270 new clean energy projects have been announced with investments totaling $130 billion, according to a tally from Bank of America.

Companies that build clean technology and their suppliers will be big winners as energy infrastructure goes through the transition from depending on fossil fuels to decarbonized sources of energy, a recent BofA research note said.

In that research note, BofA identified stocks that stand to benefit from the IRA, organized by themes. The list includes only stocks that BofA has rated as “buy,” and this list includes only those that have a climate tie-in. (The IRA also included some reforms to prescription drugs, but stocks related to those provisions are excluded here.) Some stocks cross multiple sectors, so are listed more than once.

The Inflation Reduction Act provides production and investment tax credits for electricity generation and capital investments made in renewable projects. These companies manufacture parts that are used in renewable power construction, like wind blades or the semiconductors used in solar panels, or are in businesses related to the operation and management of these renewable power systems.

The IRA includes $5 billion in loans for building and improving transmission grid infrastructure, which is needed to continue to deploy clean energy. These companies are either utility grid operators, or create software or parts for operating the electric grid.

The IRA includes tax credits for electric vehicles and provisions designed to boost the production of batteries that go in electric vehicles and the raw materials that go into those batteries. These companies make electric vehicles or component parts for those electric vehicles and their charging infrastructure.

Electric vehicles and renewable energy generation both need specific raw materials. The IRA includes provisions that support production of both electric vehicles and renewable energy sources and also of steel which is used in the production of wind and solar production.

Livent Corp.: Chemical materials company
MP Materials: Metals and mining company
Nucor Corp.: Metals and mining company
Sigma Lithium: Metals and mining company

The IRA includes provisions to improve the energy efficiency of residential and commercial buildings and these companies provide either energy efficiency equipment or technology to improve the operation of those energy efficiency systems.

The IRA includes $19.5 billion for agriculture conservation programs, $5 billion for forest management and restoration and provisions designed to support underserved farmers and landowners. These companies have programs designed to help farmers sequester carbon in the soil or forest management technology.

Nutrien Ltd: Chemicals company
Weyehaeuser: Real estate company