Reaching the halfway point of 2022, we use our ESG Safeguard platform to revisit our ESG analysis on 5 Themes that we outlined at the beginning of the year and review how these focus areas were reflected in the market.
Half a year later we have seen some interesting developments on all five themes and can confidently say that our technology gave us insights into ongoing trends.
Our first environmental theme around resource and materials use showed some increases in topics like “recycling” and “sustainable packaging,” but renewable energy saw the largest volume increases. The typical companies in food and staples made commitments to reduce plastic waste and improve resource management, but other consumer companies in industries like fashion and apparel made strides towards sustainability as well. The big companies in food and beverage staples will continue to be core drivers in packaging materials use, but other companies are showing they can step-up and reduce their impact as well.
Our second environmental prediction around increased development in clean technology, outside of wind and solar, proved stronger with our analysis showing an 88% increase in “green hydrogen” mentions, and a 107% increase in “hydrogen fuel cell” mentions.
One of the key players in the hydrogen market has been Plug Power (PLUG) based in New York state. Plug made news a few times in recent months including in our May energy coverage, as well as more recently for partnering as a hydrogen provider for the port of Antwerp-Bruges in Belgium. Hydrogen also has been used more conceptually in vehicles recently. In the case of Renault (RNO:FR), they are pioneering the design of a new car that will be a fuel cell and electric vehicle hybrid, greatly furthering the range and capabilities of electric vehicles.
Over the past few years hydrogen has emerged as a viable technology as solar and wind prices have gone down. With the technology progressing it has the potential to be used as a substitute for natural gas. Companies in Europe and the U.S. are currently exploring this option.
The main focus for Social and Governance in our 2022 outlook was Human Capital. Our analysis shows that from Q1 to Q2, nearly all major Human Capital topics saw increased mentions. Perhaps most alarming is the spike in mentions of “worker injury rates.”
The last quarter of 2021 saw a significant uptick in strikes across a variety of industries that continued into 2022. This year Starbucks (SBUX) has been in the eye of the storm when it comes to unionization efforts, and not for positive reasons. As of this month, 171 Starbucks locations have union representatives, in 2021 that number was 0. Yet, the company has been outspoken in vehemently opposed to unionization, with CEO Howard Schulz having taken up the task of trying to beat back that rising tide. Alternatively, other companies like Microsoft (MSFT) have taken up more favorable stances on unions, but there is no denying at this point the growing wave of labor unions is no mere fad.
From a Governance perspective our trend of outside factors affecting companies is shown by increases in topics like “antitrust”, “cybersecurity”, and “food prices”. Other macroeconomic conditions like tight supply chains brought on by the pandemic, crop failures, and war in the Ukraine are pushing companies to the brink. With the Federal Reserve raising interest rates to combat inflation, companies are becoming increasingly wary about what kind of risks to take and how to effectively spend scarce resources.
Greenwashing in finance is receiving scrutiny, with Deutsche Bank (DB) being hit a few weeks ago for fraudulent ESG practices and the SEC vowing to crack down on further transgressions. As our analysis has highlighted in past coverage, a lack of transparency in ESG funds has been an ongoing problem, with banks in particular protecting the content of their ESG Funds as intellectual property. In the case of Deutsche Bank, a whistleblower came forward leading to a year long investigation before German authorities and the SEC acted. Given these events, the SEC will require more defensible ESG methodology for ESG labeled funds in the future.
In the first half of 2022 most of the themes we honed in on at the beginning of the year became more prominent, with the exception being resource and materials use which only saw marginal volume increases in news and earnings calls. Hydrogen continued to see attention in the wake of widespread wind and solar developments. On the Social and Governance side Human Capital became even more prominent as more companies are grappling with unions and diversity matters. We saw some of the first major action in Greenwashing enforcement when Deutsche Bank was raided a few weeks ago.
We feel confident that our NLP technology has given us a glimpse into the Five ESG trends we identified six months ago, and will continue to do so as the year unfolds.
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Amenity Analytics is the industry leader in providing insights from unstructured text by using Natural Language Processing (NLP) assisted by Artificial Intelligence (AI) and Machine Learning (ML). Amenity’s NLP system is a sector-agnostic, language-dependent tool for quantitative text analysis that is deployed across the financial services industry and beyond.
This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.
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