Email us at to talk to a financial advisor today!

Email us at

Don’t Judge A Book By Its Cover

Goals of the Inflation Reduction Act

The Inflation Reduction Act of 2022 was officially signed into law by President Biden this month. While the name gives the impression that the bill is narrowly focused on inflation, in reality the bill is a complicated 730 page document of objectives and regulations covering a variety of issues. Most notably, the bill includes historic investments in energy and climate reform spanning a  ten year period. While the bill itself is long and complicated, the overall goals and methods are easily identifiable.

Broadly, the key focuses of the Inflation Reduction Act are increasing taxation and enforcement of taxation for wealthy corporations and individuals, climate and energy reform, and improving health-care programs to increase coverage and lower prices of certain drugs. The last focus is where the bill receives its namesake, to fight historical inflationary levels. However, inflation reduction measures only receive a small fraction of the allocated spending. Of the areas of spending, climate and clean energy receive the largest investment with a historic $379 billion investment. All of these key areas of focus could warrant further examination given the complexity and depth of each of the issues. However, for the sake of viewing this subject through an investment lens, we will briefly highlight the biggest areas of legislative change. We will then examine climate and clean energy reform specifically as this area receives the most funding and creates the most investment opportunities.

What does the IRA do?

The major source of funding for spending and investment in the Inflation Reduction Act comes from the tax reform aspects in the bill. The most significant of these being a minimum 15% corporate tax for enterprises with adjusted income exceeding $1 billion. According to summary documents on the tax effects of the Inflation Reduction Act, “up to 125 corporations that average nearly $9 billion in profit paid effective tax rates of 1%”. This provision alone will generate an estimated $313 billion over the life of the bill. In addition to this, the bill implements a 1% stock buyback fee or tax. In addition, the bill includes improved funding for the IRS to improve collection and increase the number of audits for individuals with annual income exceeding $400,000. These and other smaller changes are expected to generate a total of $468 billion in revenue for the bill.

The next area of focus for the Inflation Reduction Act is health care reform. The health care provisions include large investments but also generate substantial funds. Some of the key changes made include a) empowering Medicare to negotiate prices of certain medications, b) capping Medicare patients out of pocket payments to $2,000 a year, c) extending Affordable Care Act subsidies for three years, and d) establishing better controls over pharmaceutical companies’ medication price increases. These and other lesser changes made in the health care sections will save an estimated $322 billion of revenues and only require $98 billion of spending.

While the name of the Inflation Reduction Act would likely lead you to believe reducing inflation would be the main focus of the bill, many economists are skeptical that inflation will be reduced at all. According to a study from the Penn Wharton Budget Model, “the impact on inflation is statistically indistinguishable from zero” over the life of the bill. The bill is essentially designed to raise necessary funding through tax reform and healthcare savings and invest those funds into the Administration’s spending priorities in healthcare and climate reform. Any remaining funds are put towards reducing the U.S. budget deficit. While the Biden administration has claimed the Inflation Reduction Act will counter inflation through deficit reduction and fiscal policy with the 15% minimum tax rate, economists believe these methods are unlikely to have much, if any, effect. The estimated $300+ billion that will be put towards deficit reduction wouldn’t even cover the $400 billion deficit we have accumulated this year alone, not to mention the additional government deficits that will accumulate by the end of the bill’s life. Additionally, some economists disagree with the idea that deficit reduction has any effect on reducing inflation at all. Under our current system, the only real way to control inflation is through the Federal Reserve raising interest rates to control the quantity of money in the money supply. Unfortunately this is not something that can be accomplished overnight. For average Americans, most, if any, inflation reduction will be seen through slightly reduced energy prices from policy reforms and investments made in energy and climate change.

Climate and Clean Energy Reform

The largest focus of the Inflation Reduction Act is the reform and investment in our climate and energy sectors. As mentioned above, the bill allocates $387 billion of the total $485 billion of total funding for a variety of energy and climate-related improvements. This section of the Inflation Reduction Act has four core goals: 1) Lowering consumer energy costs by providing $9 billion in home energy rebate programs, ten years of consumer tax credits to make homes more energy efficient, additional tax credits for the purchase of electric vehicles, and other smaller things to lower consumer energy costs. 2) Improving American energy security and increasing domestic manufacturing by administering $30 billion in production tax credits for manufacturers creating clean energy tech. Grants and loans will also be administered to convert existing auto-manufacturers to electric vehicle production or building of new facilities as well as any other smaller incentives to increase U.S. production of clean energy technologies. 3) Decarbonize our economy by providing incentives in the form of grants, loans, and tax credits to improve our clean energy production and consumption, as well as other programs to reduce industrial emissions. 4) Investing in conservation, infrastructure, and rural development through investments in climate-smart agriculture, infrastructure projects to support rising demand for electricity and reduction in carbon emissions by roughly 40% by 2030, and other miscellaneous programs to improve conservation efforts. This historic investment in climate and clean energy improvements will likely create great investment opportunities in the next decade.

Opportunity to Invest?

Like many technological advancements in the past two decades, many renewable energy sources have gone from fringe and somewhat inefficient technologies to being extremely desirable and widely adopted. Since 2000, U.S. renewable energy sources have increased by 90%. This market has appeared to be a sound investment for many years now. With all of the incentives for advancement and increased adoption of these technologies from the Inflation Reduction Act, there has never been a more attractive time to invest in renewable and clean energy markets. For our purposes, we have our eyes on two exchange-traded funds(ETFs) in the clean energy and renewables space.

The first opportunity is iShares Global Clean Energy ETF (ticker: ICLN), one of the leading clean energy ETFs holding a portfolio of the industry’s top performing companies. Currently, ICLN holds over $5.5 billion in assets under management and is one of the most popular clean energy ETFs with an average trading volume of around 3.8 million. The second ETF we are watching is the First Trust NASDAQ Clean Edge Green Energy Index Fund (ticker: QCLN). QCLN, another of the more popular clean energy ETFs, holds over $2.35 billion in assets under management with a similar portfolio of top-performing stocks in the clean energy market but with a lower average trading volume of 309,670. Both of these opportunities have historically performed well over the long term. QCLN has been riskier, returning 22.7% per year over the last 10 years through July 31, 2022 and (8.3%) year-to-date compared to 15.9% annualized ten year return and 6.0% year-to-date for ICLN. QCLN’s 8% allocation to Tesla, Inc. (TSLA) might have something to do with its higher volatility. Given the significant investments that will be made in the clean energy and renewables market through the Inflation Reduction Act, this strong performance will likely continue.

In conclusion, the Inflation Reduction Act makes historic improvements to many different areas unrelated to current inflationary trends. Most significantly, the bill will incentivize the transition to a “greener” future as well as improve healthcare for millions of Americans by raising taxes and closing “loopholes” for certain profitable, yet low-tax corporations. The jury is still out on whether this act will successfully achieve its cover story of combatting inflation. However, fiscal policy reforms and deficit reduction efforts will at least ease the load on the Federal Reserve monetary policy somewhat.

Environmental, Social, and Governance Investing

What is ESG Investing? 

Earlier this year we introduced ESG investing to you as one of our 2022 investing themes to watch. Since then, it has continued to grow in interest not only for institutional investors but consumers as well. But what exactly is this phrase “ESG” and what does it mean as an investor? ESG stands for Environmental, Social, and Governance with the investment goal to put money to work to make the world a better place. An investment strategy geared towards ESG investing means investing in companies or funds that score well within the ESG standards set by independent research companies or groups. Investments are evaluated based on what kind of impact they have on the environment – positive or negative, how the company is improving society through its social impact, and in what ways the company’s leadership is paving the way for positive transformation organizationally through transparent and affirmative business practices. Overall, ESG investing aims to create an impact that is positive not only for the surrounding community and environment but for investor returns as well.

Rise and Growth of ESG Investing

ESG investing has grown in popularity within the last 5-10 years as more investors and shareholders are demanding companies be held accountable for their business activities and impacts on the surrounding community. Society as a whole is becoming increasingly concerned with social change and environmental impact which has trickled down to the investing world. While investment in positive change has been occurring long before the term ESG was coined, the 2015 Paris Agreement that pledged to limit global temperature increases caused societal and investor interest in the investment strategy to grow in popularity and as a method of capital allocation. The concept of ESG investing is now a mainstream theme and Morgan Stanley found that 79% of individual investors are interested in sustainable investing with millennials and younger investors showing the most interest. Growth in the sector has exploded in the past 5 years. Currently, it is estimated that there is $2.74 trillion invested in the ESG thematic globally and $357 billion invested in the U.S. This burst in interest was driven by increasing environmental concerns, the COVID-19 pandemic, and other societal issues.

Source: SustainFi

Regulation and Reporting for ESG Investing

ESG investing relies on independent research firms to provide scoring models and rating standards to evaluate companies on their ESG initiatives. Each research firm has different reporting standards but the pillars of Environmental, Social, and Governance remain. Some of the most popular reporting agencies are Bloomberg, S&P Dow Jones Indices, and MSCI, and typically their scoring follows a 100-point scale with the higher the score meaning the higher the rating. Companies in the U.S. are not presently required to report their ESG metrics. However, pressure from shareholders and other stakeholders has prompted many companies to start reporting their sustainability data.

A variety of reporting frameworks exist such as the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI) but there is no standardized reporting regulation globally. This discontinuity has caused speculation about reporting standards and an MIT study found that there is only a 60% correlation in ratings among different ESG reporting regimes. A conflict also exists on how much weight is placed on the individual factors within the diverse ESG standards. For example, Tesla and Exxon Mobil both received an “average” rating by MSCI even though some may argue that Tesla’s business model is much more sustainable while Exxon is an oil and gas company whose carbon based products are a major contributor to climate change. Exxon has much higher ratings for worker treatment and safety than Tesla does which raises its ESG ratings. As an individual investor, you have to decide which letter in the ESG acronym is the most important to you.

Investing in ESG

As in any investment strategy, you need to ask yourself what your investment goals and purposes are and consider your risk and return profile. The same goes for choosing an ESG investing strategy. Think about which issues within the ESG framework you are the most concerned with. For many investors, current economic concerns may drive their portfolio allocation decisions. Rising energy costs and fossil fuel concerns have many people looking to alternative energy sources to invest in. Solar, wind, and geothermal energy have all caught the attention of investors and consumers as oil and natural gas prices have been on the rise throughout much of 2022, making the switch to alternative energy more competitive across various applications. An alternative energy ETF that has been gaining investor attention is the iShares Global Clean Energy ETF (TICKER: ICLN). With $4.8 billion assets under management, it is one of the largest alternative energy ETFs with holdings in multiple solar, wind, and energy technology companies. It has a AAA rating in ESG standards from MSCI which is the highest rating given. Another ESG ETF we have been watching is ALPS Advisors’ Clean Energy ETF (TICKER: ACES) that has $658 of assets under management. ACES has a more diverse allocation of companies involved in solar, wind, energy management and storage, bioenergy, hydrogen/geothermal, electric vehicles, and fuel cell technology. Another fund with a diverse ESG themed allocation is Northern Trust Corporation’s ESG index fund (TICKER: ESG). It has diverse holdings in major large-cap stocks investing in technology, health care, energy, and industrials. Microsoft is its largest single company holding which has a AAA rating by MSCI for ESG standards.

Source: Getty Images

Future of ESG

Investors and markets of today are much more varied and dynamic than they were 50 years ago. Investors today are generally more passionate about making a positive impact on their communities and allocating capital with purpose to ensure its being put to work for the greater good of society, the planet, and future generations. Broadridge Financial Solutions predicts that investments in ESG will reach $30 trillion by 2030. Not only are investors demanding more sustainable investment options, but they also want better corporate transparency and the application of uniformed standards to hold companies accountable. It is expected that the U.S. Securities and Exchange Commission will issue more rigorous ESG reporting guidance and regulations for corporate disclosures on carbon emissions and environmental sustainability. While investors are interested in driving change, they also want to maintain strong portfolio returns. This doesn’t appear to have been an issue for ESG Themed Funds historically. Morningstar research found that ESG funds produce a good return on equity with lower volatility when compared to traditional funds. Environmental, Social, and Governance investing is here to stay and with the help of technology, data management, and uniform reporting, today’s investors will be more empowered to invest with purpose and include ESG holdings in their portfolios that are aligned with their investment preferences. For more information of ESG themed investments, please visit us at

Through the Looking Glass – Investment Themes to Watch in 2022

The world has been riding the COVID-19 rollercoaster for the past two years. Similar to Alice’s adventures in Through the Looking Glass, the twists and turns of the pandemic have been reflected in our everyday life and the investment world. Financial markets have experienced extreme highs and lows as the market digested economic data and expectations about COVID-19 cases and incoming variants. Even the map of S&P 500 levels mimics a roller coaster you might see at your favorite theme park. Despite the economic and social volatility over the past two years, the S&P 500 returned more than 26% in 2021.

Graph of S&P 500 levels January 2020 – December 2021

So where will Alice go next in the looking glass? Specifically, what should investors be reflecting on as we look towards 2022? With this in mind, we have identified a few opportunities as well as some things to watch in the investing world in the upcoming year. More details will be provided on these topics in the upcoming months however investors should be aware of these opportunities and market risks as we start the year.



One of the greatest market concerns early on in 2022 is rising inflation levels. From food in the grocery stores to gas at the station, the price of everything is going up. The U.S. Labor Department recently reported that consumer prices rose 7% in December 2021 from the price level in December 2020. This comes after November 2021 consumer prices rose 6.8%.  A Wall Street Journal survey showed that respondents believe inflation levels will come down gradually in 2022 as a Federal Reserve interest rate hike is expected in early 2022 in response to inflation well above its 2% target and a low unemployment rate of 3.9%. Survey respondents also are projecting economic growth to slow in 2022 to a 3.3% increase in GDP which is significantly lower than their October expectations of 4.2%. As a result of these economic drivers, investors are flocking to real assets such as farmland, commodities, and precious metals.  Commodities, including energy, and precious metals are the top-performing sectors so far in 2022. Nationally, farmland experienced a 7% increase in values in 2021, and agricultural commodities and farmland are projected to continue rising in 2022. If you are interested in investing in farmland coupled with tax benefits, learn more on Promised Land’s website.

Wall Street Journal Survey Report

The Next Gold Rush


The rise in inflation expectations also has some investors seeking protection in physical assets such as Gold. Gold is another asset that has been known to offer investors inflation hedging potential however the volatility in the COVID-19 pandemic caused great volatility in the gold market in 2022. Based on our Q4 data, gold was down close to 4% year to date in 2021 but was up 5% in the fourth quarter of 2022, demonstrating increased interest in the asset class with rising inflation concerns. Some investors think gold will start to shine in 2022 as the market digests negative real yields in the face of potential runaway inflation numbers. Analysts from Australian Bank, ANZ, expect gold prices to rally in the first half of 2022 but will come back down later in the year after the expected interest rate hike from the Federal Reserve. Meanwhile, another historical catalyst for gold, geopolitical risks, are on the rise in Ukraine and Russia, Taiwan and China, and domestically due to COVID-19 policies.  While the jury is still out on whether the next gold rush will emerge, it is an investment theme we are keeping our eye on going into 2022.

Image from the Gold Rush of 1849. Will we see history repeating itself in 2022?


While the economic results of the COVID-19 pandemic have some investors looking backward to seek inflation protection, others are wondering if a cryptocurrency investment has a portfolio role in the investing looking glass. Crypto has had a varied history and is known to be one of the most volatile assets.  However, its use as an alternative store of value and currency (“digital gold”) has been attractive for some investors seeking shelter from potential Federal Reserve money printing and other monetary policies supportive of risk assets. The cryptocurrency market has started 2022 on poor footing with Bitcoin falling more than 7%  on January 21st. This comes after global concerns from emerging regulations on cryptocurrencies in Russia, one of the largest crypto-mining markets. Will this rocky start send Bitcoin tumbling down into a digital mineshaft? Goldman Sachs remains optimistic about Bitcoin’s potential, citing that it thinks the price could double in the next five years, stealing some of gold’s luster in the process. The crypto story will continue to unfold in 2022 and we will be keeping watch with “laser eyes.”

Environmental, Social, and Governance (ESG) Investing

Every day, more and more investors want their investments to not only grow in profitability but also spark positive change in the world around them. The demand for environmental, social, and governance (ESG) investing grew substantially in 2020 with a record 140% increase in investment funds going towards ESG investments. In 2021, investor demand grew further with companies across the planet trying to meet investor preferences through sustainable business practices and policy actions to reduce their carbon footprint. Northern Trust Corporation’s ESG index fund (Ticker: ESG) which invests in large-cap companies promoting sustainability and social governance is up more than 14% from January 2021 to January 2022, with its outlook looking strong. Its $186 million assets under management include a diverse mix of industries such as technology, health care, and renewable energy. As young millennial investors enter the stock market, many believe impact investing will be at the forefront of their minds and their pocketbooks. ESG investing is paving the way for new roads in the market such as carbon investing, green bonds, and clean energy development. We plan to discuss this topic further in the coming months and provide opportunities to put your dollars to work for a more sustainable planet.

Grow your wallet and your planet with ESG Investing

The Looking Glass

“It’s a great huge game of chess that’s being played – all over the world- if this is the world at all you know” – Lewis Carroll in Through the Looking Glass. These words of Carroll from more than 150 years ago still hold in life, especially in the geopolitical and investing realms. From inflation and interest rate concerns to safe-haven capital flows to gold and ethically directed demand for ESG investments, investors must actively survey the chessboard and potentially modify the strategy to win the game. 2022 is sure to challenge us tactically with blockades, decoying, and double attacks. Servant Financial will use a stable, yet flexible looking glass by investing your capital with integrity, compassion, and experience. Follow us as we reflect on these and other topics in the coming year.