FactSet StreetAccount publishes regular company-level and summary-style ESG news. Below is our recap of key developments and insights over the past week.
ESG themes have largely underperformed as the broad market (S&P 500, white line) has turned lower since the end of July. Solar (yellow line), hydrogen (green line), and EVs (grey line) have lagged amidst a host of issues, including higher Treasury yields. This week, wind names (purple line) have come under pressure amid concerns over rising costs and turbine quality issues. Orsted is extending losses following its announcement of US portfolio impairment risk last week. Santander downgraded the stock this week, and Moody's downgraded its outlook to negative. CEO Nipper said the company is prepared to walk away from US projects and asked the White House to guarantee subsidies. Equinor, Engie, and EDP Renováveis echoed the concerns. Vestas and TPI Composites saw an underweight initiation and downward PT revision respectively. Bucking the trend are cybersecurity shares (blue line) which have outperformed on strong demand and earnings results, discussed below.
Figure 1: Price indices since 31-Jul for select thematic ETFs
Source: FactSet, prices as of 11:50am ET
Thematic sectors lower on the week with wind names seeing continued losses amid concerns over rising costs and turbine quality issues. Cybersecurity stocks, however, continue to outperform thematics on strong Q2 earnings highlighting resilient demand. SentinelOne beat expectations and guided FY24 ahead. ZeroFox also beat and guided Q3 ahead of consensus. CyberArk also saw a positive analyst initiation highlighting resilience in the company’s new business trends.
Global solar names weaker despite reports of surging capacity additions; US is set to install 32 GW this year, a 52% increase on 2022. In China, panel makers' ambitious investment plans are causing concern among analysts with capacity already exceeding demand. LONGi Green Energy's chair warned of slowing growth rates in coming years due to grid constraints.
EV makers and charging names declining amid mixed demand signals. Chinese manufacturers Nio and Xpeng both lower despite reporting strong August deliveries. Polestar also lower after Q2 earnings miss last week and subsequent analyst downgrade citing weaker demand. ChargePoint down following widening Q2 losses and disappointing guidance. Tesla slightly firmer this week following last Thursday's release of an updated Model 3 sedan in China and Europe; company also facing a Dept. of Justice probe into possible misuse of company funds and reports of potential delayed production at Mexico factory. Zhejiang Leapmotor also higher WTD following reports of discussions with JSW Group for EV tech licensing, a buy initiation at Guosen, and unveiling of new C10 SUV.
The Africa Climate Summit wrapped up with the Nairobi Declaration, a proposal for new global taxes to fund climate action. During the summit, COP28 host UAE announced $450M in carbon credit commitment and Germany will complete $65M debt swap with Kenya. Meanwhile, COP28 president warned the world is losing its race to meet climate goals; critics noted the country’s national oil firm spends $1B/month on fossil fuels. The G20 announced a goal to triple renewables capacity by 2030 and for carbon capture to reduce emissions from fossil fuels. The group’s $20B energy transition financing for Indonesia missed a deadline, spurring uncertainty over similar deals in Vietnam and India. Global voluntary carbon credit markets shrunk for the first time in seven years amid reputational and efficacy concerns.
In the US, insurance companies excluded natural disaster protections and raised premiums in the wake of increasing occurrences. The Biden administration delayed guidance for aviation fuel subsidies until December. Department of Interior announced cancellation of oil and gas leases in Alaskan federal wildlife refuge. In Europe, draft document revealed EU countries will push for global agreement for fossil fuel phase out at COP28. Only three companies meet the criteria for inclusion in the EU natural gas taxonomy: EnBW Energie Baden Wurttemberg, CIECH, and Polenergia. Stellantis stated 24 of its European engine types can run on e-fuels without modification.
China coal company Shenhua Energy will build more fossil fuel power plants despite carbon neutral pledge for 2025 as the country’s coal power grew per capita more than any G20 country from 2015-2022. The same report showed Australia as highest CO2 emitter in the G20 as it considers extending operating life of nation’s largest coal fired power plant.
The EU identified “gatekeepers” under recently implemented Digital Markets Act: Alphabet, Apple, Amazon, Microsoft, Meta, and ByteDance. The tech giants have six months to bring core platforms into compliance with the act’s obligations. Google reached a tentative settlement over its Google US Play Store; the FTC is expected to file suit against Amazon later this month for favoring its own products on its sales platform. In other antitrust news, Kroger and Albertsons may sell off stores to C&S Wholesale Grocers to pave way for merger approval.
Impact of Hollywood strike action: Warner Brothers Discovery cut its 2023 earnings forecast, citing strike-related costs. Strike among GM, Ford, and Stellantis likely if no contract reached, according to UAW president; union presented its counteroffer to Ford, which reportedly raised the wages of ~8K UAW workers as of Labor Day. Analysts warn the strikes could present a near-term headwind for auto insurers. Chevron Australia LNG workers agreed to delay strikes for one day so negotiations could continue.
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