Hydrogen Plans Develop 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: Hydrogen Names Underperform Amidst Strong Policy Supports

Some hydrogen names are staging a bit of comeback this week as small cap stocks outperform and the Biden administration released its Clean Hydrogen Strategy and Roadmap. Japan also announced plans to invest $150B in hydrogen development over the next decade. Larger players Plug Power and Bloom Energy among the weekly gainers. However, earnings results continue to be challenged. Fusion Fuel Green is well lower on wider-than-expected quarterly losses. Hyzon Motors giving back significant weekly gains after reporting Q1 losses today; follows deal with Performance Food Group for fuel cells and FCEV upfitting. The hydrogen segment has underperformed other ESG thematic segments over the past year (Figure 1) as most of its emerging companies are still printing losses (Figure 2) and have been punished during the Fed hiking cycle. It remains to be seen if the Fed is finished raising rates (with the next meeting coming on Wednesday) and if this will remove a headwind for the space.

Figure 1: Indexed Prices for Select ETFs and Indices for the Past Year

Source: FactSet

Figure 2: Price Changes and Metrics for Select Hydrogen Companies

Source: FactSet, as of June 8, 11:45 am ET

Thematic performance

Thematic sectors higher on the week with US names broadly outperforming European and APAC peers. Small caps outperforming this week following mega-cap leadership in preceding months, benefitting thematic sectors. Circular fashion names higher on big gains from The RealReal, a strong YTD outperformer. Rent the Runway also higher WTD though sliding Thursday after light Q2 guidance despite better-than-expected Q1 results.

Chinese EV-makers leading gains in the sector this week following reports Premier Li Qiang is considering extending a tax exemption for budget EVs. The country's commerce ministry also announced plans to promote EV adoption and to introduce more incentives. US players also higher on company news; Tesla's website showed new entry-level Model 3 and Model Y eligible for full IRA $7,500 tax credit. Lucid announced a push into China, planning to sell imported cars while considering local production. Faraday Future continues to outperform following launch of FF 91. Less established names (Arrival, micromobility.com, Blue Bird) continue to slide as they look to raise capital.

Cybersecurity names mostly softer this week on disappointing earnings from SentinelOne; management cut FY guidance and announced layoffs, spurring a host of analyst downgrades. Okta also lower after highlighting macroeconomic headwinds last week. In contrast, ZeroFox ahead on Q1 revenue beat and improved FY guidance.

Solar underperforming across markets; US names lower despite record Q1 installations driven by easing import gridlocks. Chinese developers extending FY losses as they continue to slide amid fears of a price war after LONGi Green Energy cut wafer prices last week.

Environment

The US debt ceiling agreement included approval of the controversial Mountain Valley natural gas pipeline as Senate vote failed to remove the clause. The White House announced $2.6B toward coastal climate resilience while the Dept. of Energy updated its hydrogen energy road map designed to reduce US emissions 10% by 2050.

The EU Parliament voted to require companies to introduce climate transition plans and human rights due diligence; next steps are discussions with European Council and European Commission. A coalition of lawmakers is trying to save proposed biodiversity protections. The EU pledged, along with COP28 leadership, to support the tripling of renewables and doubling of energy efficiency by 2030. Germany also an investigation into fraudulent biofuels from China. UK advertising regulator cracked down on fossil fuel greenwashing and banned misleading ads from Shell, Repsol, Petronas; the former warned this could slow green transition.

Global carbon dioxide levels have surged in the past year while the IPCC chair warned over-reliance on CCUS tech will jeopardize climate goals. Meanwhile, China opened the world’s largest coal-linked CCUS facility. Brazil unveiled anti-deforestation laws though the plan’s small increase in conservation units frustrated environmentalists; May brought 10% reduction in forest clearing. IATA airline group called for further cooperation from governments and plane makers to meet lofty 2050 net zero target. UN delegates at plastic pollution talks agreed to draft initial treaty this year.

Social & Governance

Regulatory developments and litigation: US regulators are tightening rules for large banks and could raise capital requirements as much as 20%. The US Federal Railroad Administration to conduct safety assessments of all major US railroads following Norfolk Southern derailment in February. Microsoft to pay $20M to settle FTC charges of collecting children's data without parental consent. Chemours, DuPont, and Corteva reached a $1.19B settlement agreement for PFAS contamination. JetBlue agreed to sell Spirit Airlines’ LaGuardia operations to Frontier to pave the way for US merger approval. NYC sued Hyundai and Kia over vehicle thefts. The UK’s Financial Reporting Council submitted a proposal for consultation to revise the country’s Corporate Governance Code intended to strengthen internal controls.

In labor action, the Hollywood writer’s strike continues. In other news, a tentative deal was reached with the directors’ union including wage increases and AI guardrails. Separately an actor’s guild voted to authorize a strike if no contract agreement is reached. A cyber-attack on British Airways, Boots, and the BBC could threaten to expose sensitive employee data. In social news, Australia to hike its minimum wage by 5.75%.

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