The Nasdaq ESG Solutions and Crux collaboration spotlights the importance of transferable tax credits in enabling companies to manage their tax liabilities and the opportunity to supercharge sustainability goals.
At Nasdaq ESG Solutions, we are always looking for innovative ways to help our clients advance their sustainability goals while unlocking new sources of value. Our collaboration with Crux, a sustainable finance technology company, is intended to help clients take advantage of transferable tax credit transactions offered through the Inflation Reduction Act (IRA).
What is the Inflation Reduction Act of 2022 (IRA) and how does it benefit corporates?
The IRA offers funding, programs, and incentives to accelerate the deployment of clean energy projects (solar, geothermal, wind, energy storage, microgrids, etc.) and climate resilience to move towards a clean energy economy. The law’s transferability provision allows, for the first time, clean energy developers and manufacturers to sell their tax credits to third parties for cash.
By introducing this market mechanism, the IRA expands access to capital for corporates that develop qualifying clean energy infrastructure, innovative technologies, and advanced manufacturing and reduces federal tax bills for corporate buyers of these tax credits.
Why is this important?
Transferability presents an opportunity for companies across different industries and sizes to support the energy transition while generating a positive return on investment.
For example, companies with federal tax liability can use transferable tax credits to reduce their federal tax bill and unlock additional value, which they can choose to use to accelerate sustainability goals or invest in new initiatives. At the same time, companies that produce renewable energy or advanced manufacturing products eligible for transferable tax credits may be able to access more flexible forms of financing, driving greater market participation and accelerating deployment of clean technologies.
How can Nasdaq ESG Solutions and Crux help corporates navigate this new market?
The Nasdaq ESG Solutions business aims to deliver scaled positive impact across corporates, investors, and financial institutions and their employees, customers, and suppliers. Nasdaq ESG Solutions’ work across the corporate and investment communities uniquely positions us to support clients as they strive to achieve their sustainability objectives.
Launched in January 2023, Crux’s goal is to change the way clean energy and decarbonization projects are financed in the United States, starting with transactions for the transferable clean energy tax credits. Through our collaboration, Nasdaq ESG Solutions clients have the opportunity to realize cost savings and advance their sustainability objectives through access to Crux’s platform, which features the largest network of clean energy project developers and manufacturers. Our clients will also benefit from Crux’s insights on the dynamic, rapidly growing transferable tax credit market.
In July, Crux released its 2024 Mid-Year Market Intelligence Report based on data from $6.8 billion in tax credit transfers. The report highlights several trends:
- Strong market growth: The transferable tax credit market continues to grow rapidly and is forecasted to reach $20-25B by year end, which is more than double the size of 2023.
- Clear pricing drivers: Average 2024 pricing is trending higher than 2023, with transaction size and use of insurance as key drivers.
- Buyer interest in forward-commitments: Transferable tax credit buyers are beginning to look at 2025 opportunities. 25% of 2024 reported deals included a forward component with future year tax credits.
Crux’s report also underscores the breadth of the market that is now accessible to companies with varying federal tax profiles and different stages of tax credit purchase maturities. With more than $12 billion of credits available today, Crux and Nasdaq ESG Solutions are well-positioned to help clients and their legal and tax advisors new to the market explore how transferable tax credits may be available to enhance clients’ sustainability strategies and reduce federal tax liability.
We’re working together with Crux because they operate the industry’s central platform, which means we think that they are poised to play an outsized role in making the market for transferable tax credits more liquid, transparent, and efficient. Their combination of market data, platform power, the extensiveness of their network, and their experienced team—together with the strategic insights of Nasdaq ESG Advisory—can help clients interested in accelerating their sustainability goals and making a positive impact on the environment.
Companies seeking further information on leveraging transferable tax credits to support their sustainability goals can get in touch with Nasdaq ESG Solutions here.
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