Reviewing this week’s earnings calls, our ESG analytics shows companies being more specific and strategic at disclosing ESG action. A theme we refer to as Materiality. This week the dominant themes we identify revolve around climate spending by governments, and commentary on renewables, wages, as well as circular economy innovations.

Sam Leavitt
August 9, 2022

Key ESG Highlights in Earnings—AGR, ALB, APRN, BRKL, KBR ...

Key ESG Highlights in Earnings—AGR, ALB, APRN, BRKL, KBR ...

As the earnings calls ramp up this quarter, we are starting to see more and more mentions of ESG as it relates to our 5 ESG Themes for 2022. Companies are becoming more specific and strategic when it comes to disclosing ESG action in earnings calls which speaks to our theme around Materiality.

Climate spending by governments is on everyone’s mind and is shown clearly in our first few highlights. Other themes we highlighted throughout this week's content include renewables development, wage increases, and circular economies innovations.

ESG Safeguard Platform: ESG Topic Counts from Earnings Calls, Past 14 Days

Legislation Anticipation

Although the Inflation Reduction Act of 2022 didn’t pass until late on August 5th, companies were already anticipating the benefits of such a bill being passed, and that of similar legislation passed in Canada and the EU. There is a significant amount of government money on the table and as floodgates for climate change spending open, everyone wants a piece of the action. This speaks directly to one of our main themes for 2022 of dynamic involvement by governments when it comes to ESG.

Summit Materials (SUM:US) 8/4/22
“The bipartisan CHIPS bill passed by the Senate last week and the tentative agreement on climate change initiatives has potential to catalyze investments in aggregates and cement intensives, onshore manufacturing and green energy projects with direct and indirect benefits to our business for years to come.”
Boralex (BLX:CA) 8/3/22
“If approved by the US Senate and House over the next weeks, the bill would restore the federal ITC tax credit to the full rate for renewable energy projects completed in 2022 or later.
It would remain at this level for at least the next 10 years.
In Canada, the Canadian government has planned a new investment of around CAD 9 billion and specific measures for electrification and decarbonization of electricity and the transition to renewable energies and storage, including an investment tax credit specific to battery storage.”
TPI Composites (TPIC:US) 8/3/22
“In July, the EU announced that they are investing over 1.8 billion in 17 large-scale innovative clean tech projects, with an option for 20 additional projects that could be announced later this year.
While we won't start to see the benefit immediately, the long-term prospects of the European wind market are encouraging. In the US, we are certainly encouraged by the recently proposed Inflation Reduction Act of 2022, the stability it would provide in the US market, and the impact this Act would have to accelerate demand should it ultimately get signed into law.”

Materials Recycling, Supply Chain, and Packaging

We are finally starting to see much more action on our theme of resource and materials use. The first half of 2022 we didn’t see much in this arena, but this round of earnings calls has certainly highlighted the importance of such measures, and new legislation, specifically on EV tax credits from the Inflation Reduction Act, points to why such measures are increasingly valuable.

The tax credit for EVs that goes into effect January 1st 2023 makes it so any vehicles that have minerals sourced from “foreign entities of concern,” including China and Russia, will not be available for the tax credit. The credit is essentially for EVs built in North America with materials and components sourced from North America. It is a direct play by the U.S. government to shift manufacturing and the EV supply chain to North America. Developing circular economy capabilities is not exclusive to automotive and components manufacturers. Packaging companies and other industrials are making these developments as well.

Compass Minerals (CMP:US) 8/5/22
“Our lithium vision is to support the North American battery market by accelerating the development of a sustainable and secure domestic lithium supply chain.
Finalizing commercial relationships with proven manufacturers, like LGES and Ford, will help enable that vision and assist in solidifying the US supply chain that's essential to facilitate the electrification of the transportation sector and broader energy transition.”
Albemarle Corp. (ALB:US) 8/4/22
“As a leading lithium producer, Albemarle is investing in lithium production around the world, including China, Australia, and the Americas. This year, we plan to deliver projects that more than double our annual capacity from 85,000 tons to 200,000 tons by year end.We are also progressing a portfolio of projects that can grow our convergent capacity to as much as 500,000 tons per year on a 100% basis. As you can see, the near-term projects are largely in the Asia Pacific region.
Longer term, we expect to transition to a more localized supply chain in North America and Europe.”
Berry Global Group (BERY:US) 8/3/22
“And lastly, as pictured in the center of the slide, we have recently invested in our second mechanical recycling facility located in Europe that will enhance our capacity for post-consumer recycled products that are more and more demanded by our customers.”
KBR (KBR:US) 8/2/22
“And today, I want to spend a moment on our expanding partnership with Mura, placing KBR at the center of enabling a global circular plastics economy, so really exciting.
In June, we committed to invest an additional $100 million in Mura Technology which allows us to participate more fully in this sustainably focused, high growth, advanced recycling sector, with a global pioneer of advanced plastics recycling.”
Smurfit Kappa (SKG:GB) 7/27/22
“As you know, our current plan will see Smurfit Kappa invest circa 1 billion per annum for the next couple of years, and that capital we deploy internally has a number of goals, providing capacity to support our customers' growth, providing capacity to meet the needs for sustainable packaging products and investing in optimization and cost takeout to continue to manage our cost base.”

Renewables Development

We continue to see traditional renewables development from small and large companies alike, into wind and solar energy. We also highlight some interesting outside the box solutions as they relate to offshore wind and hydrogen in the next section as well.

Centrica Plc (CNA:GB) 7/28/2022
“We're currently building an 18-megawatt solar farm at Codford in Wiltshire that will cost around 15 million.”
Enel Americas (ENELAM:CL) 7/27/22
“The main reason of this sale was the fact that we are committed with our decarbonization strategy and we have announced that we intend to be a net-zero company a net-zero emission company by 2040.
Our group is focused on developing renewable plants and we are working on replacing thermal capacity with renewable capacity.”
TransAlta (TA:CA) 8/5/22
“On the growth side, our development team secured another 200 megawatts of renewables growth with the announcement of the Horizon Hill wind project with Meta, formerly known as Facebook.
In Western Australia, we're moving In Western Australia, we're moving ahead with the Mount Keith transmission expansion project with BHP. We also made a commitment to invest CAD 25 million in Energy Impact Partner's new deep decarbonization fund, which is focused on making investments in companies with transformative technologies critical to deep decarbonization, including long-term storage, novel generation and industrial decarbonization.”
Avangrid (AGR:US) 7/27/22
“We continue to make steady progress on Commonwealth Wind. Recently, we secured a key position that enabled us to fully interconnect the project in Cape Cod, creating synergies with Park City Wind and streamlining our project schedule.We have also executed our PPA for 1.2 gigawatt with the Massachusetts utilities and have filed those contracts with the state regulator for final approval.
Our strategy for Park City and Commonwealth Wind is to execute these two wind farms as a single 2-gigawatt project.”

Thinking Outside the Box to Get Into the Game

Both companies here have traditionally operated outside the renewables space. Similar to our past coverage of Sembcorp Marine in Singapore, SBM Offshore of the Netherlands is pivoting their strategy to account for a rising demand in offshore wind. By pivoting offshore technology away from fossil fuels, the company is able to expand their revenue streams and capture some of the demand in a growing renewables market.

Similarly, Fertiglobe, who’s primary revenue stream is in fertilizer in the Middle East and Africa, is getting into the renewables game as well. How is this possible? The answer is ammonia, a critical component in fertilizers and a cost effective way to keep hydrogen fuel in a stable environment for transportation. Particularly, Egypt has garnered interest from companies to produce clean hydrogen with solar, and Fertiglobe is going to be a key ammonia provider for many of these companies.

SBM Offshore NV (SBMO:NL) 8/4/2022
“The construction installation of that three, 8.4 megawatts floaters megawatt floater will account for about 10% of the total installed floating wind electricity generation capacity by 2023.
This is the first floating offshore wind project under construction in France, and will be the first project worldwide to be installed using tension leg platform mooring technology, which has the minimum motion and seabed footprint.”
Fertiglobe Plc. (FERTIGLOBE:AE) 8/2/22
“This reaffirms our unique positioning in this hydrogen economy and leveraging existing infrastructure we already have in place.
In addition to developing our own clean ammonia platform to help achieve the world's decarbonization targets, we're committed to reducing the GHG emissions by implementing our operational excellence program across our production platforms.”

Human Capital, Access, and Affordability

Human Capital and Diversity measures is an area we are still hoping to see more of a focus. We see some wage increases from a variety of companies here, and even some strategic discussion on affordable housing. But with the frenzy around the climate spending this quarter, and supply chain concerns reigning supreme, the “S” portion of ESG seems to be taking a backseat in earnings calls even amidst the rampant inflation and increased cost of living. We will continue to monitor this theme as earnings season continues, and see if this changes.

Blue Apron Holdings 8/8/22 (APRN:US) 
“As we've discussed in the past, when we increased our starting hourly wages to $18 per hour, we viewed it not only as an investment in our ESG initiatives, but also as simply a wise business decision.”
Brookline Bancorp (BRKL:US) 7/28/2022
“So we have seen some strong demand for talent, and retention and attraction of talent is costing more, certainly. I think we've largely seen that. We raised our minimum.
Early this year, we raised our minimum wage, the minimum that we pay for a lot of folks to $20 an hour, with other market adjustments.”
Equity Residential (EQR:US) 7/27/22
“As part of this support and in addition to the more than 2,600 apartment units that we already operate in affordable programs, we have funded about half of our $5 million commitment to a privately held affordable housing preservation fund that expects to preserve approximately 1,600 affordable housing units when it's fully deployed.”
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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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