Weekly ESG Highlights: Feb. 2, 2023

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.

Thematic Performance

• Thematic sectors higher on the week, again outperforming broader market. European hydrogen higher amidst a host of supply and collaboration deals including Hydrogen-Refueling-Solutions, Johnson Matthey, EDP Energias de Portugal, and Green Hydrogen Systems. ITM’s new CEO and strategy was well-received by analysts.

• The EU announced its Green Deal Industrial Plan, the anticipated response to US and China green subsidies. EU aims to enact up to ~$10B in trade deals to secure transition materials and reduce reliance on China. Analysts see plan as positive for venture capital investments though warn relaxation of state aid rules opens door to internal market fragmentation. US still seen as ahead on green incentives. European solar, wind pure plays broadly outperforming market while diversified utilities lag.

• Global EV makers mostly higher on the week, led by US names. Chinese EV makers also up despite mixed deliveries and threat from Tesla which plans to increase Shanghai production after price cuts boost demand.

Environment

• In the US, federal agencies blocked copper mining in part of Minnesota and banned Pebble Mine in Alaska while White House continues to evaluate a controversial Alaska oil project with final decision expected within a month. New York City pension plans filed proposals at at Goldman Sachs, JPMorgan Chase, RBC, BofA to set 2030 emissions reduction targets, including the energy sector.

• In the EU, climate thinktank Ember’s electricity review found wind and solar generated more electricity than gas for the first time as the bloc moved away from Russian fossil fuels. An annual report from BP likewise concluded the Ukraine war will weigh on long-term energy demand and accelerate shift to renewables. UK government published its five-year environmental improvement plan to create and restore wildlife habitat and provider wider access to green space and water.

• Elsewhere, the Net Zero Asset Owners Alliance banned members from counting carbon removal schemes towards emissions reductions targets amid increasing scrutiny on offset market. A new report found human activity, drought may have already degraded more than a third of the Amazon.

Social  

• Workers' rights in focus as UK braced biggest day of strikes since 2011 as up to 500K public sector workers walk out over pay. Toyota labor union seeks largest wage hike in 20 years. Intel cuts management pay to weather chip downturn, avoiding wider job cuts. France facing new wave of strikes against Macron's pension reform. Amazon cited by Labor Dept. for second time in a month over warehouse injuries.

• In other social news, Brazil miner lobby seeks end to illegal mining that caused Yanomami tragedy. Nearly 14K Nigerians filed claim against Shell seeking compensation for environmental damages.

Governance

• Adani losses swelled to $100B following suspension of share sale; regulators investigating. Central bank asking local banks for details of exposure. Citigroup stops margin loans against securities.

• Elsewhere, the US Department of Justice is examining agreements between Visa, PayPal in a deepening antitrust investigation. Johnson & Johnson blocked by appeals court from shunting talcum legal liabilities into bankruptcy. NLRB find Apple broke labor laws multiple times following year-and-a-half investigation.

Chart of the Week: Hydrogen Names Outperform Solar to Start 2023, Reversing Last Year’s Trend

Last year, the solar space was among the better performing ESG thematic segments amidst across-the-board energy demand while speculative plays like hydrogen suffered as central banks tightened rates. So far in 2023, hydrogen gains (HDRO-US, Defiance Next Gen Hydrogen ETF, green) have outpaced those in solar (TAN-US, Invesco Solar ETF, peach). This takes place as analysts have become more cautious on US residential solar growth while traders interpreted Fed Chair Powell’s recent testimony as dovish. StreetAccount calculations show the hydrogen ETF (HDRO-US) trading at the 36th percentile compared to its one-year price history while the solar ETF (TAN-US) currently trades at the 74th percentile over the same period.

Figure 1: After trading in lockstep, solar segment outperformed hydrogen last year.

Source: FactSet

Figure 2: So far in 2023, hydrogen names have outperformed

Source: FactSet

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