After reaching a milestone of 100 write-ups highlighting ESG themes and the companies behind them, this week we created a 365-Day ESG sentiment ranking of all the companies we covered over the past two years. Our analysis shares the top ESG themes and which companies are taking an action-oriented approach to those themes.
For our 100th ESG Spotlight at Amenity we wanted to take some time to revisit themes we have been tracking and the companies that best exemplify progress in these areas through an action oriented approach that we track on our ESG Safeguard platform.
This week Iberdrola (IBE:ES) began final commissioning of a wind-solar hybrid plant in Australia to bring the solar panels online. As of April, only the wind turbines were providing energy to the grid. At full capacity this behemoth, located in Port Augusta, provides 317 MW of power. The company broke ground on their $500 M investment in October 2020.
Wind and solar infrastructure continues to get plenty of play in the ESG space and Iberdrola remains an absolute titan in this category from the standpoint of scale and reach. Iberdrola is one of the largest renewable energy operators and developers in the world with every week bringing more news, from acquisitions, to power purchase deal signings, or development of new projects. They show no sign of slowing down and even have a great interactive map on their website that details renewable energy operations.
In terms of energy transition BP (BP) and Equinor (EQNR) have also shown interest in renewables, particularly in offshore wind development that has been happening for some time now in Northern Europe.
As a follow up to our recent piece on deforestation and greenwashing, Enviva (EVA) was hit by short-sellers last week on similar grounds, and has been named in subsequent class action lawsuits. Shares have rebounded slightly after the selloff, but remain down 20% in the past month.
Other companies with track records on deforestation that we have mentioned include Marfrig (MRFG3:SA) and JBS (JBSAY:SA), but all companies that have agricultural supply chains have to be increasingly aware of deforestation as a risk. Deforestation can degrade supply chain productivity in the long run and increases risk of erosion and flooding, making it a material financial risk in addition to reputational risk. As an antithesis to harmful practices employed in agriculture like deforestation, the idea of “regenerative agriculture” has emerged as a way, in theory, for agriculture to have a positive impact on the environment.
Companies making positive strides for regenerative agriculture in recent months include Kellogg (K:US) and Nestle (NESN:SW). Despite issues last year for labor in what was called “Striketober” that lingered into 2022, Kellogg has consistently appeared on our platform for material agriculture initiatives. In February they began an initiative to pay rice farmers in Louisiana to reduce greenhouse gas emissions by the ton and give them best practices in order to do so. This month the company also launched a program to repopulate the British Yellowhammer through habitat restoration working directly with British farmers. Nestle has also pledged $1B towards regenerative agriculture, particularly in their coffee supply chain.
Regenerative agriculture has direct impacts on any company with an agricultural supply chain, and in a time, when water is becoming more scarce and companies are under greater pressure to protect biodiversity, this is one of the clearest investments companies can make to protect their bottom line from a supply chain standpoint and reputational standpoint as well.
ArcelorMittal (MT:NL) began work on retrofitting its Dofasco plant in Hamilton Ontario to switch from coal to natural gas, and eventually will move to green hydrogen. The company is also exploring green hydrogen solutions in South Africa. This is one of the many initiatives we have seen in recent years to move the Metals and Mining sectors towards low-carbon solutions.
The Metals and Mining sector along with Industrials has had more interplay with green hydrogen in the past year as it has emerged as an ideal technology to replace the diesel systems that power manufacturing and shipping. Companies like Plug Power (PLUG) and Bloom Energy (BE) have been busy developing partnerships and hydrogen capacity. The melding of the two industries is most exemplified by Fortescue Metals (FMG:AU) who have been busy making their own hydrogen for industrial use at home in Australia and abroad. Avangrid (AGR), who we know primarily for their offshore wind developments, has entered into the hydrogen space this week as well. As renewable energy continues to scale up, the price and availability of green hydrogen will be more attractive in the near future.
The Social side of ESG has been undoubtedly marked by Human Capital issues and organized labor. Companies like Starbucks (SBUX) and Tesla (TSLA) have been in the spotlight recently for having to contend with labor organizations, but are not unique to these companies. Just recently we discussed how the auto-industry as a whole were experiencing higher instances of Human Capital issues compared to other similar industries.
On our platform, mentions of “unionization” have increased 241% in the past 365 days, while mentions of “strikes” have increased 80% over the same period. This is indicative of not only labor trends, but also the relationship between employee and employer which represents a growing trend rather than an isolated issue pertaining to a few companies. On a more positive note, mentions of “Financial Inclusion” have increased 37% in the past year. Many financial institutions laid out bold plans for increased lending and financial inclusion in 2020, but we have not seen much news on that front recently. It would be great to see what kind of progress banks are making there.
The past nine months of 2022 have shown tremendous growth in decarbonization through renewables development and clean hydrogen. However, resource use in other areas, especially when it comes to water and plastic reduction, remains a gray area for companies, if not an outright blind spot, especially for the consumer goods companies. Deforestation and habitat loss continues to be a worrisome development as well. On the Social and Governance front the pushback against organized labor and social blunders have grabbed much of the headlines in 2022 at a corporate level. Financial inclusion is a bright spot, although more transparency in this area would go a long way.
As we approach the close of another year we continue to track these issues with our ESG Safeguard platform, especially with upcoming earnings calls. It is hard to believe that this is already the 100th ESG Spotlight, and we at Amenity continue to strive to make our products more insightful and innovative in order to deliver meaningful, real-time insights. Whether you have been a reader since our first ESG spotlight, reading for the first time, or somewhere in between, we thank you for being part of this journey.
No research analyst is happy with content discoverability, especially with regard to ESG content. Inaccurate tagging, inconsistent tagging, over/under-tagging, or the inability to match topics and themes to client interest are all too familiar issues. Our last webinar was hosted by Eidosmedia where we highlighted how you can improve ESG content availability and discoverability with Amenity’s industry-leading intelligent tagging solutions delivered in turnkey fashion through the Eidosmedia platform.
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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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