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Knock-on effects of U.S. legislation in Europe

The 2022 passage of the Inflation Reduction Act, or IRA, has lit the way for European governments to provide incentives for green initiatives, which should serve as a source of growth for certain industrial companies, contends Fidelity’s Niamh Brodie-Machura.

For context, she points out that the IRA allocates roughly $369 billion to energy security and climate change over the next 10 years, while also stipulating that any jobs related to this spending have to be on U.S. soil.

“I firmly believe these funding programs will help push the European Union to pass its own green legislation, for three primary reasons,“ states Brodie-Machura, who has co-managed Fidelity® Sustainable International Equity Fund (FSYRX), alongside Bill Kennedy, since its inception in February 2022.

First, the EU has historically led the U.S. in meeting climate-change goals, and it certainly doesn’t want to lose that leadership position, asserts Brodie-Machura.

Second, she articulates that EU governments—like so many others around the world capitalizing on the benefits of onshoring—want to keep jobs within their own borders.

Third, Brodie-Machura points to the war in Ukraine, which has underscored the critical need for the EU to promptly lessen its reliance on Russian-supplied commodities.

With that in mind, she also notes that in March, European lawmakers set targets to further reduce the region’s energy consumption by 2030. Plus, by that same deadline, the EU committed to sourcing 42% of its energy from renewable sources, including wind and solar.

The fund is a diversified international equity strategy that seeks long-term capital growth by investing primarily in non-U.S. stocks that the co-managers believe have proven or are improving sustainability practices based on an evaluation of such companies' environmental, social, and governance profiles.

“I would highlight that the IRA provides meaningful tax incentives to encourage oil and gas companies to pump their carbon back into spent oil wells, a process known as carbon sequestration that is accelerating in the U.S.,” explains Brodie-Machura.

To capitalize on this, the fund has favored French industrial gas company Air Liquide (AIQUY), which has large plants in the U.S. that produce the equipment needed for carbon sequestration.

She also cites Germany-based Siemens (SIEGY), a firm that has a long-established presence in the U.S.

“As the world goes greener, I expect Siemens’ business to see increased demand for the capital equipment and technology it provides to make manufacturing plants more energy efficient,” says Brodie-Machura.

Another potential beneficiary of the IRA is Danish turbine maker Vestas Wind Systems (VWDRY), given its leadership position in the global wind market, according to Brodie-Machura.

For specific fund information, including full holdings, please click on the fund trading symbol above. Securities mentioned were notable fund holdings as of September 30.

Niamh Brodie-Machura
Niamh Brodie-Machura
Portfolio Manager

Niamh Brodie-Machura is managing director of research in the Equity division and co-head of equity sustainable investing at Fidelity Investments.

In this role, located in Fidelity’s London office, Ms. Brodie-Machura is responsible for managing Fidelity’s Londonbased analysts and associates. In addition to managing the London equity research team, Ms. Brodie-Machura acts as co-head of equity sustainable investing, helping to direct Fidelity’s global sustainable investing research and product development. Additionally, Ms. Brodie-Machura co-manages Fidelity Sustainable International Equity Fund, Fidelity Enduring Opportunities Fund, Fidelity Disruptive Automation ETF, Fidelity Disruptive Communications ETF, Fidelity Disruptive Finance ETF, Fidelity Disruptive Medicine ETF, Fidelity Disruptive Technology ETF, and Fidelity Disruptors ETF.

Prior to assuming her current role, she managed the European financial services sleeve of Fidelity International Equity Central Fund. Additionally, she was an equity research analyst covering European banks.

Prior to joining Fidelity in 2011, Ms. Brodie-Machura was an equity analyst at Pioneer Investments in Dublin, Ireland, from 2004 to 2010. Previously, she was an equity analyst at Merrion Stockbrokers from 2000 to 2004 and a research analyst at Tilman Asset Management from 1997 to 1999. She has been in the financial industry since 1997.

Ms. Brodie-Machura earned her bachelor of arts degree in economics from Trinity College in Dublin, Ireland. Additionally, she earned her master of science degree in investment and treasury from Dublin City University, where she graduated with first class honors.

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