Norfolk Southern Stock Performance 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.

Norfolk Southern shares (NSC, red line) have lagged peers (S&P Railroads subindex, gray line) by approximately 3% since its train derailed in Ohio on February 3, precipitating a toxic chemical leak and fire. US competitors such as Union Pacific (UNP, orange line) have also seen declines while Canadian railroad companies have outperformed (CNR-TSX, blue line; CP-TSX, green line). Figure 2 shows that news flow surrounding Norfolk Southern (blue line) had deteriorated relative to the industry (S&P Railroads subindex, light green line) prior to the event, as illustrated by FactSet Truvalue Labs Adjusted Insight Scores. The divergence in these series was caused by a number of other derailment events, including a March 5, 2022, suspension of Amtrak service due to a freight derailment in Maryland.

Figure 1: Norfolk Southern shares have underperformed since the Ohio derailment; peers have fallen in sympathy

Source: FactSet

Figure 2: Multiple train derailments involving Norfolk Southern in the past year preceded the disaster in East Palestine, Ohio

Source: FactSet Truvalue Labs Adjusted Insight Score (SASB material categories), with dotted blue line showing higher frequency pulse score for Norfolk Southern.

Thematic Performance

• Thematic sectors lower on the week with EVs declining amid concerns of weakening demand, a trend that contributed to a 30% fall in Chinese lithium prices since November. Somewhat surprisingly, transition materials names a relative outperformer this week though well lower month-to-date. Analysts noted Europe and China failing to echo resilient US demand. Reflective of the downturn, CATL began offering discounts to Chinese automakers, potentially hurting Tesla and smaller battery makers. UK EV demand is also falling on lower fuel and higher electricity prices, though the latter is boosting residential solar installations. Tesla is considering an acquisition of Sigma in a bid to secure lithium supply and scaled back plans for a German battery plant, instead favoring US cell production given IRA incentives.

• Despite EV demand concerns, charging infrastructure is outperforming this week. Analysts view the recently announced US funding as beneficial to ChargePoint, Wallbox, and Blink.

• Chinese developers of wind energy fared slightly better on the week, while overall global renewables are lower. A recent World Forum Offshore Wind report highlighted China’s dominance in the wind segment, accounting for two-thirds of new offshore wind buildout in 2022.

Environment

• The UN resumed talks on a new legally binding ocean treaty intended to protect marine biodiversity. The UN meeting, running through March 3, is a resumption of prior efforts that failed to produce an agreement last fall after disagreement over financing.

• In the US, the EPA restored 2012 protections against mercury pollution from coal-fired power plants. Elsewhere, the White House is discussing approval for Texas coast oil terminals while environmentalists urge against the projects due to associated GHG emissions.

• EU member states are preparing to endorse a plan for a global phase-out of fossil fuels ahead of COP28, a move also recently called for by the UAE environmental minister. Talks within the European bloc to spur renewables development was slowed by disagreements how to treat biomass.

• A pair of recent reports found governments spent a record $1T subsidizing fossil fuels last year, while the IEA found the fossil fuel industry has failed to address methane emissions.

Social and Governance

• Norfolk Southern faces scrutiny after the EPA used Superfund laws to order the company to pay for clean-up of the Ohio train derailment leading to a toxic chemical breach. Pennsylvania and Ohio attorneys general are investigating further actions including potential criminal proceedings while press notes the company lobbied against safety requirements. Residents are complaining of unsafe conditions though the EPA said monitoring of air and water has not led to further concerns. Another Norfolk Southern train has since derailed in Michigan but no chemicals were reported.

• Australia's eSafety commissioner ordered Twitter, TikTok, and Google to explain how they tackle child abuse on platforms. The US Supreme Court heard arguments calling for change to laws protecting internet companies from liability for user-posted content; observers see the Court as skeptical of limiting legal shield for internet companies. The US SEC and CFTC are investigating Wells Fargo retention of communications over "unapproved" messaging tools.

• BNP Paribasfaces a lawsuit from French NGOs over fossil fuel finance; it is believed to be the world’s first climate lawsuit against a commercial bank. The Netherlands warned of Russian attempts to sabotage offshore energy infrastructure. Shell and Vitol were accused by the Ukrainian economic advisor of bringing Russian oil into Europe through Turkey, prolonging war in Ukraine, though there is no allegation sanctions were breached. Legal & General filed suit against Glencore over alleged investor losses following bribery scandal fallout. Reckitt Benckiser recalled additional lot of infant formula due to potential bacterial contamination.

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.