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ESG weekly highlights: Lithium, climate, labor, cybersecurity

The lithium market has witnessed a sharp downturn this week, with spot prices continuing their decline from the late-2022 peak. This drop is primarily attributed to concerns over waning electric vehicle (EV) demand in China. Notably, Pilbara Minerals and Core Lithium are among the most shorted stocks on the ASX, reflecting investors’ apprehensions about the sector. IGO Limited saw declines following a downgrade at Morgan Stanley, while Goldman Sachs believes that it may fare better than its peers as lithium prices decline. Meanwhile, Lithium Americas is trading lower following a recent surge, triggered by the discovery of what could potentially be the world’s largest lithium deposit, which is a significant factor influencing lithium prices. ExxonMobil is also in the spotlight as it explores the extraction of lithium from fracking wastewater, indicating its entry into the transition materials market.

Thematic Performance for the Week

Thematic sectors experienced a downward trend this week, particularly in transition materials, with Core Lithium, Lithium Americas, and Livent among the notable losers. The electric vehicle (EV) sector also faced headwinds, led by Hong Kong-listed stocks like Xpeng and Nio. In contrast, Chinese renewable energy pureplays and battery manufacturers outperformed their U.S. counterparts. Diversified renewables and cybersecurity stocks showed relative outperformance. The top performers of the week included hydrogen-focused companies like Nikola, boosted by new leadership, and First Hydrogen. In regulatory news, the U.S. Securities and Exchange Commission (SEC) adopted an amended rule requiring 80% of a fund’s portfolio to match its name to combat greenwashing.

EV Makers Under Pressure

Electric vehicle manufacturers experienced a challenging week, with Chinese stocks leading the declines as European Commission President Ursula von der Leyen voiced support for an investigation into Chinese EV subsidies. However, an EU official mentioned that imposing new tariffs was not imminent. Separately, France published eligibility rules for EV incentives, excluding most China-made cars. Nio saw sharp losses after announcing a convertible debt offering, although it successfully raised $1 billion. Reports also highlighted wide price target gaps for Xpeng, underscoring the mixed outlook for China’s EV sector amidst price cuts and economic uncertainty.

U.S. Renewables Lag Behind

U.S. renewables trailed their European and Chinese rivals this week, despite some positive analyst takeaways following the Renewable Energy Plus (RE+) conference. Goldman Sachs noted signs of strong pipeline demand in utility-scale solar projects. Northland identified the Unified Foreign List of Permitted Applicants (UFLPA) as the main constraint for U.S. module imports, although signs of easing were observed. Roth projected negative growth in the U.S. residential solar sector bottoming out in the first quarter of 2024. Enphase, one of the few solar companies, saw gains during the week after a director disclosed the purchase of over $4 million in shares, citing increased deployments in Australia.

Environmental Initiatives Take Center Stage

Climate Week 2023 in New York City convened industry leaders and politicians to address critical environmental issues, including aid to developing countries and the ramp-up of renewable energy. President Biden issued a stern warning to international leaders, urging them to drastically reduce fossil fuel emissions. The United Nations Secretary-General met with heads of state and business leaders at the Climate Ambition Summit, with notable exclusions being the U.S., China, and the host of COP28, the UAE. In a significant move, sixty-seven nations signed the High Seas Treaty, aimed at conserving marine biodiversity, which now faces the ratification process. Additionally, the Taskforce on Nature-related Financial Disclosures published final recommendations for corporate reporting on nature-related risks, with GSK cited as an early adopter.

Social & Governance Matters

Industrial labor actions continued to make headlines, with U.S. auto workers launching simultaneous strikes at selected GM, Ford, and Stellantis plants after failing to reach a labor agreement. The possibility of strikes expanding gained momentum after Stellantis’s latest offer lacked a job security guarantee. These strikes also resulted in an additional 2,000 workers being laid off across GM and Stellantis. Meanwhile, Hollywood studios and the Writers Guild of America (WGA) neared an agreement to end their strike after in-person meetings on Wednesday. In Australia, Chevron agreed to accept commission recommendations to end a union dispute with LNG workers. Hyundai Motor averted labor action by increasing wages for South Korean workers by 12%.

The cybersecurity landscape took center stage this week following high-profile breaches at Shell and casinos. Shell disclosed that it had fallen victim to a cybersecurity breach in its Australian BG Group as part of the MOVEit hack, which resulted in unauthorized access to personal information. The Scattered Spider hacker group claimed to have stolen six terabytes of data from MGM and Caesars.

In regulatory actions, U.S. lawmakers raised concerns about Tesla’s relationship with Chinese battery maker CATL amid fears of subsidies flowing overseas. Regulators also launched investigations into personal benefits provided to CEO Elon Musk by Tesla dating back to 2017. On the international front, China sanctioned Northrop Grumman and Lockheed Martin for arms sales to Taiwan. In the UK, new AI principles emphasizing transparency and accountability were published, and the Online Safety Bill, aimed at tackling harmful social media content, was passed.

The week in ESG news showcased a dynamic landscape with developments in lithium markets, environmental initiatives, labor actions, and cybersecurity concerns. Stay tuned for more updates as we continue to cover the evolving ESG landscape.

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