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.
Chart of the week: Solar theme underperforms led by US residential names; manufacturers fare better
US residential solar names are underperforming major indices and other themes this week (Figure1, Invesco Solar ETF, yellow line) after several names reported disappointing Q2 earnings. Analysts have flagged this likelihood and favored equipment manufacturers and utility-scale names in recent months. Highlighted weakened residential demand due to lower energy prices, higher borrowing costs and California's NEM 3.0 metering reform. The segment fell sharply (Figure 2) on Wednesday following SolarEdge's (violet line) Q3 guidance which undershot Street estimates. Followed SunPower's earnings and revenue miss on Tuesday. Last week, Enphase (green line) missed on revenues and flagged macro headwinds. Today’s SunRun (blue line) report was an outlier for US residential installers, posting solid Q2 results. Company executed well with high battery attachment rates in CA; seen as gaining market share with unique ability to navigate tariff markets. Manufacturers and parts suppliers have fared better thus far. Shoals (dotted grey line) posted an earnings and revenue beat on Wednesday, though analysts noted weaker implied bookings; follows strong First Solar (dotted white line) results and analyst upgrade last week.
Figure 1: Price indices for select thematic ETFs
Insight/2023/08.2023/08.03.2023_ESG%20Weekly%20Recap/01-price-indices-for-select-thematic-etfs.png?width=703&height=416&name=01-price-indices-for-select-thematic-etfs.png)
Source: FactSet, prices as of 10:30am
Figure 2: Price indices for select US solar companies
Insight/2023/08.2023/08.03.2023_ESG%20Weekly%20Recap/02-price-indices-for-select-us-solar-companies.png?width=700&height=414&name=02-price-indices-for-select-us-solar-companies.png)
Source: FactSet, prices as of 11:30am
Thematic performance for the week
Sustainable food mixed on the week with Oatly sliding after posting wider-than-expected Q2 losses; analysts noted slower than forecast recovery in post-Covid China. Tattooed Chef and AppHarvest continue to weigh on the space after filing for bankruptcy. AquaBounty also lower following Q2 earnings miss. In contrast, sustainable farming names Vital Farms and Local Bounti are surging this week, the former posting a big Q2 earnings beat.
Mobility names also seeing mixed performance with less-established US pure plays gaining while major manufacturers slide. Faraday Future higher after announcing phase two of its three-phase delivery plan. Nikola gaining after receiving an order for 13 zero-emission trucks and receiving an additional $16.3M for its open-network hydrogen refueling network in the US. Xos trading higher following order for 30 electric vans. Tesla lower this week as the EV maker faced reports of overstating its driving range in addition to an NHTSA investigation into Model 3 and Y steering issues. In China, Xpeng led losses after a mix of analyst actions (both positive and negative) and lower July deliveries y/y; follows big gains last week on collaboration with Volkswagen. Electric aviation names higher with Archer Aviation up big after signing new contracts with US Air Force worth up to $142M. Joby Aviation little changed on the week; analysts are optimistic on certification progress despite Q2 earnings miss.
Environment
In the US, the Supreme Court permitted construction to continue on West Virginia's Mountain Valley Pipeline. Meanwhile, President Biden said extreme heat is costing the US $100B/year linking the conditions directly to climate change and detailing necessary protections for workers. The White House announced new federal procurement rules prioritizing sustainable products while proposing increase to fuel efficiency standards and issuing draft rule to speed up NEPA permitting.
Elsewhere, the head of UN climate science agency said world set to overshoot Paris target as government policies are not ambitious enough. The UAE's biggest oil producer, Abu Dhabi Nat'l Oil Co, accelerated net zero targets to 2045 ahead of COP28. Meanwhile, global banks voted to limit accounting of their own emissions in bond or stock sale underwriting. The EU confirmed easing of corporate sustainability disclosures allowing firms to exclude data they deem immaterial, though they will need to provide detailed rationale. The group has reportedly reached an impasse on taxation for polluting aviation fuels. The UK adopted ISSB climate disclosure standards for companies. Also confirmed carbon capture plans in Scotland along with wider energy security plan; committed to hundreds of North Sea oil and gas licenses and cut cost of emissions for polluting industries. PM Sunak defended his climate record amid campaigner criticism. In APAC, China denied reports it obstructed G20 climate change talks last week which failed to deliver any new pledges. India missed 2022 goal for solar energy though the country generated more than 25% of electricity from renewables in FY23.
Social & Governance
Teamsters' local unions endorsed a tentative agreement with UPS which raises wages and eliminates forced overtime. American Airlines reached a deal with pilots' union to match gains at rival United. UAW won Dem. Senator support for higher wages, benefits at Detroit Three EV battery plants; however, GM-LGES JV rejected include of Ohio workers under national labor agreement. Canada dock workers reached a tentative labor, averting an immediate strike. Trucking company Yellow shut down operations after union reportedly blocked restructuring efforts. Hollywood writers and actors to restart labor talks after a three-month hiatus. US NLRB said work rules hampering union activity are illegal.
A judge struck down J&J's $8.9B settlement aimed at resolving talc-related lawsuits. The UK's CMA is running an "invitation to comment" on whether Cameco and Brookfield Renewable's $7.9B deal to acquire Westinghouse Electric may be anticompetitive. Google's dominance in online search triggered a crackdown by South Africa's antitrust regulatory body. The US banned goods from China's Camel Group and Chenguang Biotech Group in a bid to eliminate forced labor from the US supply chain.
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.
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