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: EVs and energy storage themes increase year-to-date gains
With Q2 completed, we take a look at returns for thematic segments over the past three months. In general, trends from the first quarter have continued with energy storage and EVs outperforming. Energy storage and lithium names benefited as carmakers pushed to procure battery supply, lithium prices stabilized following last year’s declines, and companies signed agreements such as Enovix’s deal with the US Army. EVs were again led by Tesla and Chinese automakers, though Rivian has joined the gainers. Share prices for smaller carmakers continue to struggle. Despite rollout of supportive policies globally, both renewables and hydrogen were lower with the latter among the worst thematic segments. In broad markets, small caps remained a laggard while large cap technology led the broad market higher. Resilient economic growth and diminished regional banking concerns have pushed two-year Treasury yields near a new cycle high.
Figure 1: 3m returns and 52-week range for selected indices, ETFs, and company shares
Insight/2023/07.2023/07.06.2023_ESG%20Weekly%20Recap/01-3m-returns-and-52-week-range-for-selected-indices-etfs-and-company-shares.png?width=624&height=647&name=01-3m-returns-and-52-week-range-for-selected-indices-etfs-and-company-shares.png)
Source: FactSet, data as of 12:49pm on 6-Jul-23
Thematic performance for the week
Thematic sectors mostly lower on the week with UK water firms among underperformers. Morgan Stanley lowered targets for Severn Trent and Pennon Group, highlighting intensifying pressure on the UK water sector amid headlines of Thames Water's potential collapse and increased scrutiny surrounding environmental performance and infrastructure investment.
US solar under pressure amid downbeat analyst outlooks. B Riley's Christopher Souther sees the US residential market declining ~10% this year before rising modestly in 2024. Susquehanna's Biju Perincheril sees more headwinds for the sector, noting softer demand in the US driven by system activation delays as well as lower electricity prices.
Transition materials mixed WTD, though miners sliding today amid expectations for a decline in lithium prices. Spot prices in China's domestic market fell last week, attributed to weak demand and buyer caution. Morgan Stanley forecast falling lithium prices for the rest of the year on a growing supply base and softer demand. The Australian government expects a dramatic drop-off in lithium contract value next year amid surging output. Australian lithium miners received several notable downgrades this week, including IGO and Liontown at Citi, and Pilbara and Allkem at Bank of America. Despite news of increased output, automakers continue to push for direct deals with mining companies to secure lithium access.
EV makers continue to outperform amid signs of resilient EV demand and further standardization of charging equipment. Chinese EV makers Nio, Li, Xpeng, and BYD moved higher on surging June deliveries. Elsewhere, Tesla's Q2 deliveries beat estimates, signaling controversial price cuts paid off. Meanwhile, more automakers look to adopt Tesla's North American charging standard. Ahead of a pledge between Tesla and Chinese rivals to rein in a months-long price war, Tesla cut prices in China and Japan. Rivian trading higher WTD on stronger-than-expected production numbers and announced European rollout of its electric delivery vans for Amazon. In contrast, less established players continue to struggle building scale.
Environment
In global news, the head of the UN called for net zero GHG emissions from the maritime industry as high-level talks began in London for new carbon reduction targets. China and Australia spoke out against stringent targets. Elsewhere, the Net Zero Insurance Alliance scrapped requirements for GHG targets following member exodus.
The US has cautiously endorsed the study of potential benefits and risks of geoengineering to slow global warming. A new $1B DoE initiative will work to ensure green hydrogen demand. The EU is set to withdraw from the Energy Charter Treaty over climate concerns, while elsewhere adopting a new soil health monitoring law and outlining steps to reduce food and textile waste. The rail industry warned that proposed restrictions on forever chemicals will lower output of trains and railway equipment. The UK announced tighter emissions allowances for energy-intensive sectors for 2024. In other news, the environmental minister resigned, citing lack of interest from PM Sunak. Elsewhere, the UK refuted reports that it is dropping $14.6B in climate funding to developing countries.
Social & Governance
UPS facing possibility of one of largest strikes in US history after Teamsters rejected the latest package offering, and UPS reportedly walked away from negotiations. UPS Teamsters voted last June to authorize a strike in the event an agreement cannot be reached by current contract expiration on 31-July. Spirit AeroSystems union workers accepted a new contract, ending a week-long strike at its Kansas plant. A California lawsuit alleges Disney systematically underpaid women. The US Supreme Court sharply limited the use of affirmative action in university admittance decisions; ruling is expected to stoke wave of challenges to corporate diversity policies.
Big tech faces increasing regulatory action in Europe. A European court ruled antitrust authorities overseeing big tech are entitled to assess privacy breaches; Google, Amazon, Meta, Apple, Microsoft say they qualify as 'gatekeepers' under new EU tech rules while TikTok disputes the label. Microsoft faces an EU antitrust probe over Teams-Slack dispute after remedy discussion falls short while Apple to fend off EU antitrust concerns linked to Spotify complaints. EU antitrust regulators set 7-Aug decision deadline for Adobe's $20B Figma acquisition. Illumina faces a record fine from EU after $8B acquisition of start-up Grail without approval.
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.
Post Comment
