ESG Stock Watch: Europe’s Auto Firms Seek US Subsidies Amid Green Economy Fight

The European Union’s Green Deal was the most ambitious environmental plan put forward by any major economy when it debuted three years ago. It called for Europe to reach net-zero carbon emissions by 2050, set interim goals for greenhouse gas reductions before the final whistle, and prompted some companies, including Glencore Plc and Norsk Hydro, both due to report earnings next week, to establish their own transitional targets before 2050. To assist in meeting the Green Deal’s vision, the plan a

(Bloomberg) — The European Union’s Green Deal was the most ambitious environmental plan put forward by any major economy when it debuted three years ago. It called for Europe to reach net-zero carbon emissions by 2050, set interim goals for greenhouse gas reductions before the final whistle, and prompted some companies, including Glencore Plc and Norsk Hydro, both due to report earnings next week, to establish their own transitional targets before 2050. To assist in meeting the Green Deal’s vision, the plan aimed to improve access to state funds for companies, as well as empower the European Investment Bank to mobilize €1 trillion ($1.1 trillion) for climate financing.

Europe’s successes have been met in the US with the greatest flattery — imitation. President Joe Biden’s Inflation Reduction Act — which he called “the most significant investment ever to tackle the climate crisis” during Tuesday’s State of the Union address — also made billions of dollars available to companies willing to help build a greener economy. Thanks to the landmark legislation, major European brands such as Mercedes-Benz Group, also reporting next week, along with Siemens Energy AG and Volvo Car AB, have been increasingly drawn to the guaranteed returns available to them for building out manufacturing footprints in the US, thanks to the IRA subsidies. Europe, for its part, is not ready to concede its place as the premier locale for green investment, with German Chancellor Olaf Scholz backing new financing options to drive the momentum in the region.

Fellow European heavyweights Michelin and Renault are also hosting conference calls next week. Read on to learn how they are navigating their environmental, social and governance goals.

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Monday: Cie Generale des Etablissements Michelin (ML FP) is working toward creating more sustainable, longer last tires to help tackle a source of pollution common to both internal combustion and electric vehicles. Michelin estimates that 1 million tonnes of tire- and road-wear particles are emitted annually in Europe as a consequence of road travel, according to a 2021 study. This dust ends up in the atmosphere and waterways, and is one of the most common sources of microplastic pollution in the ocean. The problem is set to worsen as the world switches to EVs. Weighed down by their heavy batteries, EVs can generate as much as 10% to 20% more particulate matter than traditional vehicles, according to the company. Tires also a factor in the efficiency of next generation cars and trucks, with manufacturers navigating the delicate balance between grip and aerodynamics that will effect EVs’ range, and therefore the frequency of charging. The company has been making progress on sustainable tires, producing bus tires that contain 58% sustainable materials, according to a press release. Michelin is scheduled to host its full year conference call at 6 p.m. Paris time.

Tuesday: Norsk Hydro (NHY NO), scheduled to hold its call at 8:30 a.m. in Oslo, plans to strengthen its position in low-carbon aluminum. Demand for aluminum made with fewer emissions is expected to surge, as companies become more selective about metals to mitigate their own emissions. Hydro is “focusing on segmenting the market and going for the customers that are looking for low carbon aluminum, like Mercedes,” Chief Executive Officer Hilde Merete Aasheim said in December. BloombergNEF projects that demand for aluminum will surge 77% from 2021 to 2040 as the metal is increasingly used in lighter-build cars, like battery-electric vehicles, and in the power sector for solar and wind installations. Primary production is not expected to be enough to meet the anticipated demand, so recycling efforts will have to expand to make up the shortfall.

Wednesday: Glencore (GLEN LN), holding its call at 8:30 a.m. London time, has “an ambition of being a net-zero total emissions business by 2050,” including a 15% reduction benchmark by 2026. Still, the company has grown its coal production in the past six quarters. It said last week that 2022 coal volumes rose due to its acquisition of the remaining stake of the Cerrejón mine in Colombia, adding that “on a like-for-like basis, group production actually declined by almost 9 million tonnes” due to “abnormally wet weather.” “Glencore was one of the last, major, holdouts on moving away from coal,” Bloomberg Intelligence Senior Analyst Rob Du Boff said. “It will be interesting to see [how the company] reacts to potential changes in the coal demand outlook amid the war in Ukraine.” CEO Gary Nagle said, after activist investor Bluebell Capital Partners pushed the company to exit coal, that it was the firm’s best interest to run down its mines over 30 years rather than spin them off. Apart from the coal-related issues, Glencore is contending with ongoing unrest in Peru that caused it to temporarily shut down a copper mine.

Thursday: Renault SA (RNO FP) has taken the major step in recent weeks of rewriting its long-time partnership with Nissan Motor Co. in a measure that will allow the French automaker to move forward with its radical new structure. With the agreement, Renault now has Nissan’s support to implement Chief Executive Officer Luca de Meo’s plan to split the manufacturer into five separate units, including breaking out its Ampere electric vehicle division. The two companies will stay close, with Nissan intending to take as much as a 15% stake in that business. Other projects shared between the two range from collaborating on trucks in Argentina, SUVs in India and a charging network in Europe. Prior to the agreement, Renault had presented a version of the plan that replaced Nissan with outside investment, with de Meo saying the proposal “works by itself” even without the longtime partner. One of the final dominoes that needed to fall for the deal to work came when the French government backed off its call for Renault to take over the Japanese carmaker. France is Renault’s largest shareholder, with a 15% stake. Renault is due to host its fiscal 2022 earnings call at 8 a.m. Paris time.

Friday: Mercedes-Benz Group (MBG GR) is teaming up with ChargePoint and solar-energy firm MN8 to add its first charging stations in America this year, on a quest for a total of 10,000 sites spread across the US, Europe and China. Having prime locations for charging points is expected to be crucial for turning electric fueling into a viable business. A mature charging network may also help convince would-be customers to choose one of Mercedes battery-powered models. Proper grid connections, as well as the safety of the location, are key aspects for carmakers to consider when setting up their new stations. The competition for these sites is heating up in the US, where Tesla and ChargePoint operate two-thirds of the stations. EV-charging investments are set to cross $100 billion in 2023, according to BloombergNEF, signaling the infrastructure is reaching the critical mass needed to access low-cost capital on the path to $1 trillion in investments. Mercedes is scheduled to host its year-end conference call at 9 a.m., followed by a call with analysts and investors at 10:15 a.m. local time.