Climate Resolutions Lose Support and Other ESG News This Week

FactSet StreetAccount publishes regular company-level and summary-style ESG news. Below is our recap of key ESG developments and insights over the past week.

Chart of the Week: Support for Climate Resolutions Declines at Oil and Gas Majors

Over the last three years, support for environmental-related shareholder proposals has declined at oil and gas majors (Figure 1). Exxon and Chevron shareholders on Wednesday overwhelmingly voted against climate-related proposals, despite backing of institutional investors, while TotalEnergies and Shell shareholders also rejected shareholder proposals. During an annual general meeting season beset by protests, lack of support has been attributed to anti-ESG sentiment in the US and on-going economic disruptions, including the war in Ukraine and inflationary forces. In other industries, Glencore shareholders rejected more disclosure on thermal coal despite backing by major proxy advisors. ISS backed a proposal at Toyota to strengthen disclosure of climate lobbying.

Figure 1: Support for Climate-Related Shareholder Resolutions at Select Oil Companies, % of Total Votes

Source: FactSet

Market

Thematic sectors are mixed on the week with US names broadly outperforming global peers. Chinese solar names leading declines, extending YTD losses. This comes as the world's largest solar manufacturer Longi Green Energy cut wafer prices by as much as 31%, citing new factories ramping up production. The company recently warned aggressive expansion in the sector could result in excess capacity, potentially forcing more than half of manufacturers out of business. India demand may receive support as the government is reportedly considering halving import taxes on solar panels in a bid to make up for a domestic shortfall, expected to benefit Tata Power and Adani Green Energy.

Cybersecurity results in focus as CrowdStrike and Okta fell on macro concerns despite both beating analyst expectations. This comes after Palo Alto posted strong results last week, boasting resilient demand despite a challenging economic environment.

EVs lower on the week, losses led by Chinese manufacturers as demand concerns driven by Xpeng's disappointing earnings last week (which prompted several downgrades) continue to weigh on the sector. Nio and Xpeng both lower today on disappointing May deliveries. US names also broadly lower though Faraday leading few gainers on launch of the $309K FF 91 EV. Tesla also modestly higher after CEO Musk made his first visit to China in three years aimed at boosting regional sales. Smaller EV makers continue to struggle with capital with Lucid sliding this week on a $3B equity raise.

Wind stocks performing well outside of China; American Superconductor Corp higher on Q4 revenue beat and bullish outlook. Suzlon Energy swung to profit in Q4 after a net debt reduction. Integrated Wind Solutions higher on narrower-than-expected losses.

Charging infrastructure had another strong week with ChargePoint higher ahead of publishing Q1 results later today; follows analyst upgrade calling the stock a "best-in-class" EV charging name. Elsewhere, Ford struck a deal with Tesla for use of the EV-maker's North American supercharger network.

Environment

In the US, the debt limit deal struck between Biden and McCarthy will approve West Virginia's Mountain Valley natural gas pipeline as well as shortening environmental review periods for projects. Environmental groups are protesting the moves. State Farm has stopped all new home insurance sales in California amid rapid growth to wildfire exposure. The Supreme Court ruled in favor of an Idaho couple who wants to build a house near a lake; the ruling weakens the Clean Water Act and could remove protections from 50% of currently classified wetlands. The Department of the Interior advanced power line projects in Nevada, facilitating renewable energy. The EU struck a deal to combat overfishing by improving traceability and revising the sanctioning system; approves fishing subsidies focused on sustainability. UK's energy regulator is investigating Drax's compliance with reporting requirements relating to renewables obligation. Japan to require overseas flights to use 10% SAF.

Globally, scientists noted the Earth is in the danger zone for the vast majority of its major systems including air and water quality. The CDP has urged over 1,600 high-emitting firms including ExxonMobil, Glencore, Caterpillar to disclose environmental data. UNEP plastic treaty talks are underway with many nations supporting circularity goals. Current blueprint calls for 80% plastic waste reduction by 2040. Petrochemical industry calling for greater recycling over reduced production. Nine global insurers have now quit the Net Zero Insurance Alliance amid growing ESG pushback and politicization.

Social & Governance

Notable climate-related litigation and regulatory action for the week: A Delta customer filed a proposed class-action lawsuit in Federal Court in California, alleging claims it is a "carbon neutral airline" are misleading and constitute greenwashing. Four UK water companies faced fines totaling £94M for hundreds of sewage spills from 2018-22. Volkswagen and its Audi brand agreed to a $85M settlement in Texas over its diesel emissions scandal. Rolls-Royce and BAE are subject to criminal complaints in India over alleged corruption in historic deals for fighter jets.

Worker's rights and equality: FedEx reached a tentative deal with pilots, avoiding a potential strike. Amazon workers planned walkouts on Wednesday, 31-May, in protest of job cuts, return to office mandates, and climate progress. UK rail services face disruption this week as the first of three 24-hour strikes began. The UN expressed concern about lack of representation of women in China's top leadership despite improvement elsewhere in the country. NYC halted deposits at Capital One and KeyBank for failure to demonstrate efforts to combat discrimination.

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