We share views from Christopher Sheeron - The first-ever guest author for C-MACC's most recent ESG and Climate report titled "Does DC Understand Economics – Energy Proposals Suggest No".
Main Points from this report include:
The Colgate Palmolive sustainability and social impact report is very comprehensive, and we like the comprehensive inclusion of water security towards the end. The challenge for all corporates that set goals like those outlined below will be the elements that they cannot control – something we discussed at length in this week’s ESG and Climate report with a focus on sustainable fuels. We cannot pursue renewable power as fast as we would like without supportive policy around materials investment – Colgate Palmolive will not be able to get to 100% renewable power by 2030 if it is either not available or prohibitively expensive because of competition. The company will also not be able to meet its sustainable materials goals of the sustainable goals that need to come from crops. We do not have a radically different farm policy. The goal to achieve 100% recyclable reusable or compostable plastic packaging by 2025, is very ambitious and has some negative ramifications for the compounders, who will likely lose volume, and positive ramifications for compostable polymers.
It is interesting to note both 3M and Michelin addressing water in their ESG narratives - Exhibits below. Water is not getting a lot of air time from the ESG crowd yet, but it is very much on our radar and we will publish our first water index in tomorrow’s ESG and Climate report.
In last week's ESG & Climate report titled The Evolution Of the Plastic Industry Could Stall in 2022, we introduced our “new materials” stock index, and we have included our hydrogen index in this week's report titled, Hydrogen – Hype, Hope, and Headlines. We have created these for several sectors and each week we will add the chart below showing one-week and one-year performance for each index. Note that these are simple averages for each group and are not market cap-weighted. If we did a market cap weighting, we would have a couple of sectors where one stock dominated all - EVs for example. The steep decline in the EV index in 2021 was largely due to the negative performance of the Chinese EV companies that trade in the US and are included in the index. Note that all sectors have had a bad start to this year. We have chosen to include a water category as we have noted since we began this service that water is an area that we believe will be in greater focus going forward and will be considered an ESG topic.