The Materials sector is ripe for innovation. There have been interesting developments in recent weeks from a technological standpoint as well as some negative headlines for environmental infractions. This week, we use our ESG Safeguard platform to highlight the most significant movement in the sector.
The Materials sector includes metals, mining, and chemicals. These companies provide the basic inputs that make the latest energy infrastructure tick, from the raw materials used to make wind turbines and solar arrays, to the chemicals used in the production and storage of hydrogen. In recent weeks, companies have made notable efforts to further positive developments in the space. However, when we last covered Materials in May, there continues to be friction between the large mining corporations and the communities where they operate. We use our ESG Safeguard platform to highlight the most significant movement in the sector.
Ball Corp. (BLL) is well known for their iconic glass jars, but the company also manufactures a variety of other products, including cans for major beverage companies and aerosols. At the beginning of the month, Ball announced new sustainability targets and has been rolling out initiatives to help them reach those milestones. The strategy for the company focuses on energy use and product stewardship. Ball aims to use all renewable energy in company operations by 2030. As a step towards achieving these objectives, Ball signed a 10-year power purchase agreement with Falck Renewables for wind energy in Sweden. For their products, Ball is committed to sourcing aluminum from sustainable sources and is moving 80% of its production to a newer lightweight design.
The company is also placing greater emphasis on the end of life opportunities for aluminum. Aluminum is praised for being infinitely recyclable, and according to Ball, only 25% of cans are currently being recycled in America. Globally, however, aluminum is recycled at a rate of 69% and Ball aims to help the world achieve a remarkable rate of 90% recycling, primarily by investing in markets where they operate. As a manufacturer of the ubiquitous aluminum can, Ball has a real opportunity to advance circular economies at a global level.
As a supplier of gas for industrial purposes, including oxygen and hydrogen, Air Liquide (AI:FR) has been exploring the applications of renewable energy through hydrogen. This week Air Liquide became the primary partner for private company Energy Observer, which is piloting a unique prototype ship that is completely fuel independent. The vessel uses three different types of renewable energy including a salt-water electrolysis system that allows the ship to generate hydrogen fuel while at sea. It has been sailing autonomously for four years now and the new stage of partnership involves developing sustainable infrastructure at the ports that the ship visits. A previous engagement between the two companies resulted in a stunning display in May when the Eiffel Tower was lit up green entirely with renewable hydrogen. Although a novel prototype now, the Energy Observer vessel has exciting potential if it can be scaled to larger commercial shipping, an industry that relies heavily on diesel power.
Nucor (NUE) is a U.S. steel maker and one of the few companies that makes steel for offshore wind turbines. Last week they announced they would target a 35% reduction in scope 1 and 2 emissions by 2030. The initiatives were not very specific other than stating that the company would be investing in carbon capture and more energy efficient technologies. Currently the company’s carbon intensity is one-third compared to the world average so they are ahead of the curve in that regard. The company sees their real value in supporting renewable energy infrastructure as they manufacture for both the wind and solar segments. Much like Ball, the company is also keen to increase circular economies.
Last time we talked about Rio Tinto (RIO:GB) it was in a positive light. In May, the British mining company was involved in a competition to spur investment in electric vehicles for the mining industry. This time around the news is not so rosy. Last week, Rio Sava, the Serbian subsidiary of Rio Tinto was hit with criminal charges by the Coalition Against Environmental Corruption for polluting the land and groundwater of the Jadar Valley in Western Serbia. The charges date back to 2015 and the company does not deny their involvement in the pollution. Earlier this month, Rio Tinto shut down operations in South Africa after experiencing unrest in the region and violence towards their employees. These are not the first instances of friction between Rio Tinto and local communities, the most notable example being the Juukan Gorge fiasco in Australia where in May 2020 the company destroyed a sacred aboriginal site while expanding one of their mines.
The Materials sector is at the very heart of the emerging green economy. Some companies in the category continue to be at odds with the communities where they operate, while others are leading transformative innovations and partnerships. Materials will continue to be at the forefront of innovations as they are the companies dealing with the basic inputs that are used to build the world around us.
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This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.
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