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: EV segment bifurcation narrows as mid-level players outperform
US EV shares have put in a mixed performance (Figure 1) this year with Tesla outperforming strongly and smaller firms such as Canoo and Arrival underperforming. More expensive capital amidst the Fed tightening cycle and continued price competition have contributed to the divergence. More recently, a group of EV makers including Rivian, Lucid, Fisker, and Polestar have outperformed even Tesla, possibly coinciding with friendlier inflation data and market expectation for an end to Fed hikes.
This week, Lucid and Fisker share prices have fallen on poor Q2 deliveries and production, respectively, exacerbated by continued price pressures. In contrast, Rivian pushed further higher after Wedbush stated confidence in the EV maker hitting or exceeding targets following Q2 production/delivery figures, supported by roll-out of electric vans. It remains to be seen whether these firms can continue to outperform in a potentially saturated EV market while they burn cash reserves. Potential concerns include reports that Ford’s inventories of electric Mach-E vehicles are growing.
China automakers (Figure 2) have generally seen less share price volatility, and returns in the past two months have been solid. This week, however, a short-lived a price pact among automakers has already come undone after the China Association of Auto Manufacturers retracted the pledge on antitrust grounds. Recent outperformer Xpeng has received mixed analyst updates with two downgrades but a positive initiation at Goldman Sachs.
Figure 1: Price indices for select US EV makers
Insight/2023/07.2023/07.13.2023_ESG%20Weekly%20Recap/01-price-indices-for-select-us-ev-makers.png?width=624&height=336&name=01-price-indices-for-select-us-ev-makers.png)
Source: FactSet, data updated through 1:15pm ET
Figure 2: Price indices for select China EV makers
Insight/2023/07.2023/07.13.2023_ESG%20Weekly%20Recap/02-price-indices-for-china-ev-makers.png?width=624&height=336&name=02-price-indices-for-china-ev-makers.png)
Source: FactSet, data updated through 1:15pm ET
Thematic performance for the week
Thematic sectors higher on the week with US-based stocks leading gains amid regional strength. US solar players higher, led by resi names, following losses last week amid downbeat analyst outlooks. SunPower among outperformers following Raymond James upgrade citing stock's excessive weakness due to high exposure to the California market. PV maker and utility-scale developer Canadian Solar seeing modest gains following UBS upgrade, noting market underappreciation of upside potential.
Australian lithium miners outperforming broader ASX amid renewed focus on demand outlook. The recent IEA critical minerals market review highlighted increased investment in the space increasing chances of achieving global energy transition. However, report warned more projects will need to come online by 2030 and not enough had been done to diversify supply. Vulcan up on negotiations to purchase land in Germany for a geothermal renewable energy and lithium extraction plant. Neometals higher after its subsidiary Novana executed a vanadium offtake agreement with Glencore.
Environment
In global climate news, COP28 president Sultan al-Jaber laid out the agenda for November's global climate meetings, calling for representatives to be “brutally honest about gaps that need to be filled,” and urging for tripling renewable energy and doubling of hydrogen production and energy savings by 2030. Governments are expected to update emissions cutting targets by September. COP28 host UAE raised its emission-reduction target to 40% from 31% and unveiled its strategy on hydrogen, EVs, and increasing renewables threefold. Sultan al-Jaber also wants to establish the climate compensation fund, which was agreed to last year. Some countries are calling for further action, namely the phase out of fossil fuels. Follows criticisms by environmentalists as UAE is hosting the event as a major oil producer, and al-Jaber is president of its national oil company.
The EU Parliament narrowly voted to approve a key part of its European Green Deal, the Nature Restoration Regulation, intending to establish ambitious climate and biodiversity targets. The bill sets binding restoration targets for specific habitats and species, aiming to cover 20% of the region's land and sea by 2030. Legislators are now negotiating on amendments for a few months before a final law can be approved.
In the US, the EPA issued a final rule for 40% phasedown of HFC refrigerants, and the Interior department announced $650M in funding to plug abandoned oil and gas wells. US carbon emissions fell 5% through the first five months of the year due to a mild winter and slower economic growth. California reached deal with truck makers on emissions rules; will stop selling gas-powered trucks in state by 2036. US lawmakers responded to media report that cables from US telecom companies, including AT&T and Verizon, contributed to toxic lead pollution.
Social & Governance
Regulatory action and litigation: A US federal judge refused to block Microsoft's Activision deal; FTC says it will appeal. UK regulators reconsidering opposition; may consider Microsoft's proposals to resolve antitrust concerns. Bank of America will pay $250M to settle claims from US CFPB and OCC related to fees, credit card abuse, and withheld rewards. Illumina fined a record $476M by EU for unapproved Grail acquisition. Amazon launched the first big tech challenge to EU's VLOP classification. UK's CMA referred Adobe's acquisition of Figma to a phase 2 investigation.
Collective action and human capital: Canada port strikes nearing deal; strikes estimated to have cost $377M/day. Royal Mail workers accepted deal to end long-running strikes. Critical mineral supply-chains face allegations of human rights and environmental abuses by Chinese companies. Canada launched probe into Nike, Dynasty Gold over alleged use of forced Uyghur labor. Hollywood actors set to join striking writers after talks with studios break down.
This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.
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