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Small Cap Solar Underperformance and Other ESG News This Week


By FactSet StreetAccount  |  March 16, 2023

FactSet StreetAccount publishes regular company-level and summary-style ESG news. Here is this week's recap.

US solar stocks have been among the worst thematic performers this week (Invesco Solar ETF, Figure 1) as sustainability-related segments have broadly underperformed the broader equity markets. Recent market focus has been dominated by failures at Silicon Valley Bank and Signature Bank along with extreme market pressure on Credit Suisse.

Silicon Valley Bank was known as a large lender to climate tech firms, and analysts have noted Credit Suisse as a top investor in the US residential solar space. While street researchers have noted little direct exposure for solar companies to Silicon Valley Bank, the market may be concerned with the dwindling of both credit availability and bank appetite to lead equity offerings.

Figure 2 shows select US residential solar companies, sorted by market cap. Week-to-date losses are greatest for the smaller firms, which may correlate to higher dependency on availability of capital. A similar though less pronounced effect is seen in EVs and other segments. In fact, across the universe of US thematic companies that StreetAccount follows, firms with market capitalization under $1B have seen 6.8% equity declines this week, while those over $10B in market cap are down only 0.5%.

Figure 1: Thematic Segments Have Lagged Broader Markets This Week


Source: FactSet, 12:20pm 16-Mar-23

Figure 2: Week-to-Date Share Price Moves for Select US Residential Solar and EV Companies, by Market Cap


Source: FactSet, 12:20pm 16-Mar-23

Thematic Performance

  • Thematic sectors lower on the week with high beta names struggling amid risk-off move. Residential solar leading losses on Silicon Valley Bank fallout concerns though analysts noted Sunrun, STEM, Sunnova, and SunPower have limited exposure to the bank. Hydrogen segment is also weaker.

  • EVs and charging infrastructure seeing declines amidst continued concerns of softening demand. Weak earnings among smaller players contributing while established EV makers faring better. Tesla among minority of thematic stocks higher on the week despite an analyst downgrade and continued negative press. Xpeng and BYD also outperforming; the former on the launch of a new sedan model, the latter following denial of reports the company will end cooperation with Tesla on battery supplies. Transition materials seeing losses alongside analyst caution on near-term lithium market balance. 

  • EU's response to Biden's IRA remains in focus this week as the European Commission outlined the Net Zero Industry Act and Critical Raw Materials Act designed to shore up transition materials and boost green projects through streamlined permitting and simpler state aid rules. In contrast, UK green groups expressed disappointment with the Chancellor's budget, arguing proposed support for nuclear and CCS falls short of what is needed to reach net zero goals.


  • The EU Parliament voted to strengthen GHG emissions reduction target to 40% from 30% and also reached an agreement to reduce energy consumption by 2030. Germany formed an alliance with Italy and Eastern European nations for a new proposal on the EU ICE vehicle ban. Comes as Germany’s overall GHG emissions fell 1.9% in 2022.

  • UK pension funds threatened to vote against directors of Shell and BP over lacking climate targets. Comes as BP’s top economist warned the O&G industry is too focused on cutting emissions, hampering ability to meet demand; however, BP’s emissions remain largely unchanged from the previous year.

  • The US’s controversial approval of the ConocoPhillips Willow oil project in Alaska drew criticism from environmentalist and indigenous groups, who filed suit, arguing the government failed to consider climate risks and harm to wildlife and subsistence hunting. The EPA issued a long-awaited proposal on limiting “forever chemicals” (PFAS) in drinking water and finalized regulations on nitrogen dioxide emissions from coal power plants in 23 states.

Social and Governance

  • Shareholder action continues to ramp up ahead of corporate annual general meetings. A responsible investing group urged investors to vote against Credit Suisse’s recently proposed climate strategy for lack of update to its oil and gas policy. Firms are also under pressure to improve diversity and tackle racial bias as the Parker Review called on FTSE 350 companies to set ethnic diversity targets for senior positions by end of 2027.

  • Regulatory action for the week included the State of Ohio AG filing a federal lawsuit against Norfolk Southern over its train derailment in East Palestine, Ohio. The SEC and Dept. of Justice opened investigations into Silicon Valley Bank and the actions of senior execs to determine whether they broke any laws. Credit Suisse found "material weaknesses" in internal control processes, as the bank’s troubles are attributed to its missteps (including a string of scandals over many years, management changes, large losses, and questionable strategy).

  • Attention on product safety, as Honda recalled 500K vehicles due to seat belt issue. Yeti recalled ~2M products due to a risk of injury from detaching magnets. Visa and Mastercard, along with other major issuers, paused a decision to separately categorize gun shop purchases. According to a recent study, Norfolk Southern cut its spending on safety more aggressively than other railroads from 2017 to 2021.

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