There’s no shortage of environmental announcements, especially during earnings season. However, what is in short supply are specific actions to back up these claims. This week our ESG Safeguard platform picked up on this key activity with specific investments in renewables from some familiar names, BlackRock and Intel.
Some familiar names appeared on our ESG Safeguard platform in the past 7 days for advancing renewable energy development goals. Companies that start to invest in low carbon technologies to reduce their carbon footprint and expand renewable energy can become more attractive to investors, as we saw this week in the case of BlackRock and Tata Power. BlackRock is purchasing a stake in Tata Power’s renewables division, and is arguably the premier player when it comes to renewables in India.
BlackRock (BLK:US) is investing $525M, alongside Mubadala investments, to purchase a 10% stake in Tata Power’s renewable energy unit. BlackRock has long been a proponent of investing on ESG themes, and this latest spend is a good sign of practicing what you preach. As renewable and clean technologies scale, companies adopting these measures will become more attractive to investors at an institutional level like BlackRock. BlackRock has recently said that as much as three quarters of upcoming investments will be tied to companies actively working to reduce their emissions. There is a lot to like about Tata Power, and the first round of investment will be completed as early as June.
Tata Power (500400:IN) has been on our radar since last June, when they signed an agreement with Tata Motors for their renewable energy needs. In February, we saw Tata Power appear again when they signed a deal with RWE to open India’s offshore wind market. Tata Power is also a major partner for Tata Motors electric vehicle efforts and provides charging solutions in India for the automotive group. Tata Power shares are up 269% since last April.
Intel (INTC:US) will be investing $300M into clean energy solutions and pledges to be net zero by 2040. Intel also aims to reduce emissions 30% by 2030 as an interim measure. The company welcomed back CEO Pat Gelsinger in February of 2021 and he has taken strategic steps to expand production and improve efficiency. This step to reduce emissions certainly seems to fit into the larger strategy of driving operational performance at the company. Intel has lagged behind competitors like TSMC and Samsung in recent years and Gelsinger has vowed to catch-up to these other industry players in the next five years.
Smart leaders are learning that reducing emissions and sustainability objectives do not happen outside the scope of larger company strategy. It is just one piece of the puzzle that drives company outcomes. Although outspoken, BlackRock is not alone in their investment strategy to lean towards companies reducing their environmental impact. From a fundraising standpoint alone, sustainability initiatives have merit as attributes that boost a company’s investment profile. There are many more benefits, but in today's news, being attractive to investors is the clearest for the likes of Tata Power and BlackRock.
Can investors utilize ESG news sentiment to maximize alpha in the short and medium term between the intervals that are covered by ESG advisory firms, ratings agencies, and other peers? We investigated the relationship between short-term (weekly, monthly) and medium-term (quarterly) ESG news sentiment and stock returns. As the title suggests, our results indicate there is alpha, and we walked through the analysis. Watch it here.
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