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.
Mixed renewables have underperformed (Figure 1) so far this month despite positively received earnings reports for Next Era Energy and Atlantica Sustainable Infrastructure. Hannon Armstrong results came in near expectations though the firm on Tuesday priced a private capital raise that impacted share prices. In general, however, analysts have highlighted increased earnings potential in coming years due to IRA tax credits. Recent underperformance continues to be a theme for the year where the segment, also including Brookfield Renewable Corp, has underperformed both the utility sector and the broader equity markets, bringing share prices near 52-week lows.
The decline in mixed renewables share prices has corresponded with higher Treasury yields, which have risen coming out of the regional banking stresses seen earlier this year (Figure 2). The 10-year Treasury yield has increased to 4%, almost 60 basis points higher than levels three months ago. The move was accelerated by Fitch’s US downgrade last week as investors debated debt sustainability. It remains to be seen whether further concerns emerge. Meanwhile, investors largely expect that the Fed will pause its rate hiking cycle as disinflation trends continue. This could remove an important upward impetus on Treasury yields in the coming year. Recent declines are contrary to history; as we explored in a previous blog post, thematic names including Next Era Energy have tended to see share price increases following prior Fed hiking cycles.
Figure 1: Recent price changes for select mixed renewables companies
Source: FactSet, prices as of 10:40am, August 10, 2023
Figure 2: Diversified renewables share prices versus Treasury yields (inverted)
Source: FactSet, prices as of 10:40am, August 10, 2023
Thematic sectors lower on the week with North American stocks leading losses. Wind names struggling amid ongoing quality concerns. Siemens Energy sliding after detailing charges of €1.6 billion for remedying Siemens Gamesa quality control problems and €600 million for higher production costs and challenges in offshore activities. TPI Composites also lower after wider-than-expected Q2 loss; follows lowered FY guidance prompted by wind turbine and blade quality issues as well as longer production times. American Superconductor sharply lower after surging on reports of LK-99 superconductor discovery, which has been largely debunked. Stock remains lower today despite Q1 beat.
EV names trading lower led by electric bus maker Proterra on bankruptcy news. FCEV names Hyzon (wider-than-expected Q2 loss) and Nikola also declining following gains last week. Rivian fell despite better-than-expected Q2 results and increasing FY production target; analysts noted concerns over plateauing demand and cash pile sustainability. Rivian cited strong demand and methodical pricing for refraining from price cuts, while Lucid announced Air luxury sedan price cuts. Stock is among minority of EV names up on the week despite Q2 miss. Notably, Lucid had the highest short interest as a proportion of float (as of Jul-31) of our thematic coverage. Tesla trading lower following unexpected departure of CFO Kirkhorn.
Alt fuel and hydrogen losses led by US names amid disappointing earnings reports. Fuel cell developer Plug Power downgraded following Q2 earnings miss. Low-carbon fuel names Westport and OPAL fuels also lower after disappointing on earnings. Street research this week highlighted several drawbacks of hydrogen as low-carbon fuel including storage and transportation difficulties as well as reliance on water given an increased threat of shortages.
Sustainable food seeing mixed results: Edible Garden surging on Q2 earnings beat (though stock remains sharply lower YTD). Beyond Meat fell on disappointing Q2 results and lower FY guidance; analysts highlighted weaker US demand and worsening perceptions of the purported health benefits of plant-based meat. Sustainable fashion names among few gainers this week on positive Q2 earnings. Allbirds seeing big gains after reporting modest upside on Q2 revenue and EBITDA despite lower sales year over year. RealReal and thredUP extending YTD gains after posting narrower-than-expected Q2 losses.
In global news, eight South American nations met for the first time in 14 years to discuss Amazon rainforest protection and illegal mining. The proceedings ended without an agreement while Brazil criticized the EU for an upcoming 2024 ban on products linked to deforestation, saying only a small fraction of farmers commit environmental crimes. The Reserve Bank of Australia said more green investment is needed to hit net zero goal; BlackRock and New Zealand are planning a NZ$2 billion climate infrastructure fund. In the UK, BP is looking to build two subsidy-free offshore wind farms.
In the US, the Edison Electric Institute said EPA power plant emissions plan relies too heavily on carbon capture and storage (CCS) and hydrogen. Biden created a Grand Canyon national monument to block new mining, namely uranium. Critics say the administration actions are blocking too much acreage from mining though advocates say only 1% of the uranium reserves are located within the monument boundaries.
Contentious labor negotiations with automakers continue: UAW president rejected Stallantis’s recent proposal that cut healthcare coverage, 401(k) contributions, and vacation days. Automakers contend their labor costs could individually grow $45B-$80B/year if UAW demands are adopted. While GM confirmed future wage hikes, it pushed back on demands it claims would threaten the health of the company.
Regulatory and legal action: The SEC and CFTC fined nine Wall St firms total of $549M over the use of "off channel" work communications such as WhatsApp. Google’s efforts to dismiss litigation related to allegedly improper data collection denied by a US judge; however, a federal judge limited an antitrust suit against the tech giant to its search business, though it still must contend with litigation from the DOJ and states. Six British water companies face litigation over "misleading" sewage discharge reporting. Adobe’s Figma deal will be subject to in-depth review in the EU over competition concerns. The Biden administration will ban some US investment in Chinese tech, citing security risks.
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