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.
Global lithium prices (brown line) have continued their slide which began in mid-November and has intensified the past two months. At $30K per ton, lithium prices are now down to levels last seen in 21Q4. Analysts have cited softer demand for China EVs along with larger inventories of vehicles. Shares of select lithium producers are now well off their highs and are for the most part below levels seen at the end of 2021.
Figure 1: Lithium prices and select producer share prices (indexed)
Sources: Investing.com, FactSet
Thematic sectors higher on the week with some bounce back from last week's underperformance among small caps and thematics. Circular economy names outperforming on the week; thredUp and Loop Industries leading gainers. Energy storage outperforming with big gains for the week; attention on China's advanced progress on developing sodium batteries to compete with lithium and CATL's dominance in the sector. Transition material miners and producers reversing last week's losses despite falling lithium prices amid weaker China demand. Solar and wind names higher, with US names outperforming European and Asian counterparts. Exception is hydrogen segment, which failed to keep step with other thematic sectors and is continuing in its relative weakness. This week's underperformers include Nikola and Hyzon Motors.
EVs outperforming on the week, notably Lucid and Polestar, though reaction to EPA proposed tailpipe emissions regulations intended to spur EV production has been muted. It is noteworthy that charging names, particularly ChargePoint, diverged. Tesla did not seem to readily benefit from the EPA announcement, which is in public comment period and may face legal challenges prior to implementation; the automaker announced additional US price cuts this week. Supportive EV stories for the week, however, include Mercedes's Q1 sales growth, boosted in part by EV sales, and Hyundai's commitment of $18B for EV production, while Toyota set a 1.5M EV sales target by 2026.
The US EPA released its proposed regulations of light- and medium-duty vehicle tailpipe carbon and GHG emissions that would limit emissions to 82 grams/mile, on average, across a company's production by model year 2032, representing a 56% reduction from the 2026 target, avoiding ~7.3B of carbon dioxide emissions through 2055. Currently, Tesla is reportedly the only automaker that could meet the standards. The rules are now subject to an open comment period prior to formal adoption.
Emissions standards for heavy duty vehicles were also proposed, which are projected to avoid 1.8B tons of carbon dioxide through 2055. The rules, intended to accelerate EV adoption and sales, are neutral on the technology used to achieve the standards, and do not mandate a threshold of EV production; however, the EPA projects EVs could account for 67% of new vehicle sales in 2032.
The EPA forecasts a $1.6T benefit from the rules due to reduced health risks that are typically aggravated by pollution. Critics, however, suggest the EPA is overlooking the higher short-term costs, as well on-going supply chain issues and lack of reliable charging infrastructure that may hinder EV adoption.
Related, the DOE is considering lowering estimated fuel efficiency ratings for EVs which have not been updated in two decades. The intended effect is to cause automakers to also focus more on fuel efficiency in traditional vehicles.
Elsewhere, G-7 nations disagree on phasing out coal power by 2030, in signal of inaction ahead of COP28. The UK unveiled a plan for cleaner water while and advocacy group showed Ofwat has only issued one fine in 30 years for sewage spills. Germany to close the last of its nuclear power plants this week. India extended transmission fee waiver for green hydrogen plants and Sinopec to build China west-to-east green hydrogen transmission pipeline.
Social and Governance
Shareholders pressure corporates on climate ahead of annual general meetings as UK fund manager LGIM signaled it will support shareholder resolutions at JPMorgan. Citi to phase out fossil fuel financing. Investor activists and environmental groups filed shareholder proposals at Japanese banks for climate action disclosures, while TotalEnergies faces similar shareholder pressure to do more to cut emissions by 2030.
Regulatory actions for the week include the revelation French regulators are likely to open antitrust investigation into Apple over changes to app tracking policies. Shareholders of Fox Corp sued Murdoch and directors over the media conglomerate’s 2020 election coverage. India startups called for an antitrust probe of Google for an in-app billing fee. Chipotle sued Sweetgreen over copyright infringement. China regulators proposed security reviews on AI products prior to their release.
Collective worker action and child labor in focus as Tyson workers went on strike ahead of the closure of Arkansas chicken plant while Biden administration urged US meat processors to examine hiring practices to ensure no use of child labor. UK health leaders warned the junior doctor's strike will be "most disruptive in NHS history" and Norway wealth fund employee sues for workplace gender discrimination.
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