The Inflation Reduction Act does more than buoy U.S. clean energy stocks – it’s also an opportunity for emerging markets firms. When it was passed last August , the IRA was intended to slash U.S. carbon emissions, and encourage domestic manufacturing of electric vehicles, solar panels and other clean energy technologies. It has already boosted American firms such as First Solar . The solar panel maker is up more than 44% this year as it builds new plants in Alabama and elsewhere in the U.S. to take advantage of incentives. But the IRA also represents an opportunity for emerging markets firms. This is especially true for companies in sectors with a leading edge in clean energy technologies, such as batteries, as the U.S. pushes toward decarbonization. “This is a win, win, win,” said Paul Desoisa, co-portfolio manager of the Global Emerging Markets strategy at Martin Currie, a specialist investment manager at Franklin Templeton. “It’s a win for the U.S. to help secure long-term energy security … It’s a win for U.S. jobs, for these facilities will generate thousands of jobs, which may have otherwise been overseas. And it’s a win for EM companies,” Desoisa said. Here are some places where emerging markets firms stand to benefit. Bear in mind, many are not U.S. listed. South Korean battery makers come out on top The IRA’s provisions address a range of clean energy technologies, including solar and wind energy, but a good chunk of the EV tax credit tackles battery manufacturing – a sector that has been dominated by Chinese firms. About 70% of the global supply of battery cells for electric vehicles comes from Beijing. However, with the IRA intended to restrict sourcing battery parts from China, the likely emerging markets winners are South Korean battery makers such as LG Chem, its battery business LG Energy Solutions, and Samsung SDI. Both are listed on the Korean Stock Exchange. To a lesser extent, SK On is also a beneficiary. These firms are already among the largest battery makers in the world, only competing with leading Chinese battery maker Contemporary Amperex Technology Co Ltd. What’s more, they’re rapidly expanding their presence in the U.S., where South Korea is a free trade partner. “In battery making, you don’t necessarily need local U.S. companies to fill in the gap [because] there needs to be an understanding of the manufacturing process, chemistries, and scale of economies to build safe batteries,” said Mubashira Bukhari Khwaja, investment director of abrdn’s global emerging markets equity team. “And the EV makers are obviously U.S. companies, so there’s Tesla and all, but the battery makers are Korean, which are filling the gap. And they don’t have much competition because even before the U.S. IRA, the only competition they had was Chinese company CATL, which now is restricted in terms of its ability to go and operate in the U.S.,” she added. For companies such as LG Chem, the IRA benefits could “significantly boost” their profitability “in the region of billions of dollars per year” as it ramps up production in the U.S., Martin Currie’s Desoisa said. Meanwhile, it’s unclear who will emerge a winner in solar energy with more companies competing for dominance, including U.S. firms like First Solar. Some possible contenders include Korea’s Hanwha Solutions, a multinational with a solar energy business Hanwha Qcells, abrdn’s Khwaja said. Among European companies, Italy’s utility Enel Group is a leader. China uncertainty, and other risks To be sure, there are risks ahead. Investors are monitoring how smoothly the IRA will roll out, and how efficiently the tax credits will be paid at the end of the year. They’re also eyeing whether Chinese firms could still stand to benefit from the IRA given their dominance in batteries and other technologies. Glovista Investments’ Carlos Asilis was bullish on China, saying it will still be a net beneficiary of the IRA. Passive investors might see a rise in China ETFs such as iShares MSCI China ETF (MCHI), and Chinese stocks could rise north of 15% over the next 12 to 18 months, he said. Investors are also monitoring what will come of Ford’s announcement in February, outlining a plan for a new battery plant in Michigan “using LFP battery cell knowledge and services” from CATL. “We’ll have to wait and see,” Desoisa said.