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.
Source: FactSet
Chart of the Week: Tepid Market Response to EU’s Green Deal Industrial Plan
On January 17, the EC announced Europe’s response to the US IRA legislation that targets onshoring of critical materials and incentives to produce clean energy. Analysts have noted that Europe’s policy is in some ways a re-packaging of existing incentives and efforts. Thus far, the market response has been smaller than that following the U.S. announcement on July 27, 2022, as measured by the iShares Global Clean Energy ETF (green).
Thematic sectors are mostly lower on the weekwith EVs and charging infrastructure weaker as carmakers struggle to compete with Tesla’s industry-leading margins. Tesla gained on the week after Musk beat a shareholder lawsuit and analysts were positive on the U.S. Treasury Department’s classification of the Model Y as an SUV, which unlocks greater tax incentives. Elsewhere, solar stocks are lower, led by U.S. residential names as analysts note a slowdown in demand. Hydrogen also lagging following a strong start to the year. Energy storage and wind among the few gainers.
Debate surrounding the EU green dealcontinues, though market response has been muted. Analysts see the plan as favorable for green tech but emphasize the funds are largely repurposed from other schemes. Key beneficiaries said to include Vestas Wind Systems, Nel, ITM Power, RWE, Orsted, Umicore, BASF, Air Liquide, Evonik, and Johnson Matthey. The EU internal market commissioner has criticized the plan, suggesting a constant changing of state aid rules will confuse businesses. Supporting this claim, Denmark halted the approval process for offshore wind farms on uncertainty over the new rules. Other EU members are unhappy with the push from France and Germany as the measures are believed to favor the two countries.
In the U.S., President Biden's State of the Union address touted infrastructure and IRA laws, warned of climate change, and said O&G still needed. California lawmakers introduced bills on corporate emissions disclosure and fossil fuel divestment while U.S. Atlantic coast leaders called for offshore wind moratorium following whale deaths.
The energy industry warnedthat UK's Net Zero goals are at risk without budget tax breaks to encourage investment in green energy. Meanwhile, BP lowered its GHG emission reduction targets. A planned EU law banning the import of deforestation-linked goods draw criticism from Indonesia and Malaysia, the world's largest palm oil producers, contending the law is protectionist and discriminatory.
COP28 President Al Jaber defended the need for fossil fuels in the energy transition though an IEA report found renewables, nuclear power will dominate growth in global power supply over next three years, growing quickly enough to meet demand. The CDP reported fewer than 1 in 200 companies have a credible climate plan; in a separate finding, single-use plastic production rose 6M tons in 2019-2021 despite regulations. In Australia, a proposed coal mine was rejected under environmental Lastly, India, France, and the UAE entered into an agreement to work on climate change, biodiversity, solar, and nuclear energy.
Companies face allegations of human rights violations as a UK inquiry found HSBC complicit in Hong Kong human rights abuses. McDonald's signed a legal pledge to better protect staff amid complaints of widespread sexual harassment. Air pollution from Eskom coal-fired plants is in breach of South African emission standards and are said to put 80,000 lives at risk.
Climate risk governance a focus as South Korea fined Mercedes-Benz, BMW, Volkswagen over collusion on diesel emission rigging. Shareholders sued Shell's board for failure to manage the company's climate risks. Mellon Investments was delisted by CA100+ for failing to engage with focus companies. Shareholder resolutions for climate action were filed at big banks ahead of corporate annual general meetings.
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