With the first wave of earnings calls behind us, we analyzed who is discussing meaningful action when it comes to ESG issues. The most prevalent ESG topics were themes around carbon transition and supply chain, but we also started seeing mentions around biodiversity and cybersecurity which we may see more of in the coming weeks. We uncover key management commentary for these and other important topics.

Sam Leavitt
July 27, 2022

Key ESG Highlights in Earnings—NEP, DRX, RYA, THC, CLF...

Key ESG Highlights in Earnings—NEP, DRX, RYA, THC, CLF...

As the first wave of earnings calls comes in we’re taking a close look at who is discussing robust action when it comes to ESG issues. This week not only did we see several of the usual themes when it comes to ESG topics such as carbon transition and supply chain, but also we started to see some mentions around biodiversity and cybersecurity that we may see more of in the coming weeks.

Earnings calls are a great way to determine how companies view the world, because they are planned ahead of time. It’s also a chance for management to show investors what they view as the most important items. Amenity aims to highlight a wide range of management commentary that our technology surfaces in order to demonstrate how these themes are appearing each week. While keeping our 5 Themes for 2022 in mind, we look for the most interesting ESG disclosures in earnings calls to share with our readers.

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

Supply Chain Disclosures

Supply chains continue to be a major focal point as the war in Ukraine and inflation limit access to raw materials and goods. As resources become more scarce and single-use plastic is phased out, companies have to be smarter in how they source, utilize, and re-use materials. There is real demand at the consumer level for sustainable packaging as well as through government mandates. Companies taking steps now will be well positioned long-term.

Koninklijke Philips NV (PHIA:NL) 7/25/2022
“The step up of our productivity initiatives by over 100 million annually, the actions that we are taking to increase supply chain resilience and the acceleration of our China local for local strategy.”
Stora Enso Oyj (STERV:FI) 7/22/2022
“If we look also to investing in renewable materials and packaging more specifically, we are also meeting the demand for recycled packaging-board by initiating a feasibility study for a conversion of the newsprint machine that we have on one of our paper sites in Langerbrugge to containerboard.”
“We're also continuing our partnering with our customers to enable them to become 100% circular and improve their resource efficiency in Europe.”

Philips is a well known company with a market cap of $20.5B, and it is no surprise that they would be making moves to develop their supply chain. Stora Enso is no small fry either with a market cap of $11.6B, but the steps they lay out in their current earnings call is much more action oriented and detailed than what Philips has disclosed.

Pollution Management and Clean Technology Disclosures

As energy independence takes a newfound importance in Europe, countries are becoming more aggressive towards ramping up renewable energy capacity. Earlier this month, Germany signed a law pledging to have 80% of electricity produced by renewable energy for 2030. India has also been a hub of renewables development with foreign investment pouring in for wind and solar in recent months.

NextEra Energy Partners LP (NEP:US) 7/22/2022
"During the quarter, FPL successfully commissioned the highly-efficient, roughly 1,200-megawatt Dania Beach Clean Energy Center.
The approximately $900 million project, which was completed on time and on budget, is expected to generate nearly $350 million in net cost savings for FPL customers, while reducing carbon emissions by roughly 70% compared to the previous Lauderdale Plant.”
Drax Group PLC (DRX:GB) 7/26/2022
“And as a result, we've reduced our CO2 emissions by over 99%, more than any other European utility.
And now, over 99% of our power generation is from renewables and that accounts for over 97% of our earnings. And as you know, we have a 3 billion investment program that we intend to carry out over the coming decade.
And of that program, over 90% of it is invested in renewables or will be invested in renewables.”

Both companies highlighted above have been absolute titans in the renewable energy space and developing the low-carbon economy of tomorrow. The commentary reflects that they show no signs of slowing down with NextEra opening a new facility in Florida and Drax laying out their progress as well as next steps for renewable energy development. There’s not much more to say other than these companies have positioned themselves well to be part of a low-carbon economy for years to come.

Hydrogen Developments

Plastic Omnium SE (POM:FR) 7/25/2022
“We have a very strong order book in the first semester in all our divisions and also in hydrogen, confirming our ambition for hydrogen, our commitment to achieve 300 million sales in 2025 and 3 billion we are aiming for, for 2030.We are progressing as well on the carbon neutrality roadmap, as Flicie was showing before.
Also here, a strong commitment of the group to be fully carbon neutral in 2025 with Scope 1 and Scope 2.”

Plastic Omnium is an automotive parts company primarily focused on lighting systems. What is interesting about the passage preceding our extraction though is that they are now getting into hydrogen technology. By using their foothold in the industry they are expanding their product offerings to hydrogen solutions, an area we at Amenity have had our eyes on for some time now.

Scatec ASA (SCATC:NO) 7/26/2022
“We have moved the 100 megawatts green hydrogen project in Egypt into the backlog. The project will supply about 12,000 tonnes of green hydrogen per year to Fertiglobe under a long-term offtake agreement.
The 100-megawatt of electrolyzer capacity for the hydrogen production will be powered by 260 megawatts of renewable energy generation.”

Scatec is a Norwegian renewable energy company. Again, we see hydrogen enter the picture in the form of a utility scale agreement with Fertiglobe. Green hydrogen production has become especially popular in areas where solar capacity is very high and the cost of production is cheap. In fact with rising fuel costs, hydrogen fuel solutions may become more attractive at a consumer level in the near future.

Steel and Smelting

JSW Steel Ltd. (500228:IN) 7/22/2022
“So the way we are working as a part of decarbonization is we are reducing carbon emissions to replace our entire coal-based power plants with renewables, we are in the direction with 958 megawatt we have signed with JSW Energy, 225 megawatt already started.”
Cleveland Cliffs (CLF:US) 7/22/2022
“Look, first and foremost, the shutdown of Indiana Harbor #4 was driven by our commitment to reduce our carbon footprint.
We can only do that because Indiana Harbor #7 is a massive consumer of HBI and we use much more coke rate over there.
We generate a lot less CO2 per tonne of steel produced and we are able to serve the entire Indiana Harbor complex plus Riverdale just operating the Indiana Harbor #7 furnace.”

Both companies above are steel smelters and have laid out concrete steps to phase out unproductive assets that will improve operation efficiency while reducing carbon emissions. This is the kind of thinking that makes sustainable business practices part of the core business, driving value for shareholders, rather than an add-on that exists separately from the company strategy. These types of initiatives are what we aim to highlight in our data at Amenity; where companies are taking ESG seriously, and understanding how it materially fits into their business outlook.

Human Capital and Diversity Disclosures

As inflation continues to rise, companies are having to consider employee compensation and overall job satisfaction. These issues continue to emerge as problem areas for companies to address. It is interesting to see such little discussion, so far in earnings calls, and we will be on the lookout for more of these themes as it comes. However, what we did find was discussion of strikes impacting business for Ryanair, and Tech Mahindra disclosing diversity metrics.

Tech Mahindra Ltd. (532755:IN) 7/25/2022 
"I'm just briefly covering what has happened during the quarter and we have also improved the gender diversity from 34.1% to 34.4%."
Ryanair Holdings (RYA:IE) 7/25/2022
“We've seen an unprecedented level of disruptions down to strikes, down to shortages of staffing in both ATC and airports, albeit on the handling side or on the security side.”


Icade SA (ICAD:FR) 7/25/2022
“Icade also remains committed to its far-reaching goals for preserving biodiversity.
All of these items were included in the Say on Climate and Biodiversity resolutions approved by 99.3% of the shareholders at April's shareholder meeting.”

It is interesting to note that the company mentions their shareholder resolution on Climate and Biodiversity. It shows not only that the company is seriously considering this in their ESG strategy, but also that an overwhelming majority of their shareholders are interested in Icade furthering these aims.


Tenet Healthcare (THC:US) 7/22/2022
“The cybersecurity incident did create pressure on our hospital patient volumes, contributing to a 5.3% decline in adjusted admissions.”

This is very interesting management commentary. Healthcare and cybersecurity could be an area of emerging ESG risk, and this is evidence that points to that. As medical records increasingly move toward the cloud from old paper records, patient information that can be highly sensitive in nature is at risk. This is especially a concern as larger healthcare companies have collectivized data on many patients. The company considered this incident material enough to talk about in the earnings call and admitted that it did contribute to lower business. This theme is something to look out for as more medical records take to the cloud.

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About Amenity

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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