Bank of America has positioned itself as one of the leading lenders in the green credit space, while peer Goldman Sachs is facing questions from the Securities and Exchange Commission over greenwashing claims. Both are among topics that may be discussed on the banks’ earnings calls next week. Outside of the finance sector, Nestle took a big step to secure the future of morning routines everywhere, Volvo is planning to make truck batteries and oil field servicer Schlumberger is getting involved in lithium production.
Last week’s biggest environmental, social and governance stories included BP’s push into offshore wind power, UK railworkers’ next round of strikes and the SEC stepping up its scrutiny on board diversity.
In the week ahead, about 186 companies with available Bloomberg ESG data are expected to host earnings calls. Here are some highlights to look out for:
Monday: Bank of America (BAC US), set to hold its call before the bell, has been the lead arranger for sustainability-linked loans this year, as companies borrowed around $352 billion in those products since January. “That sustainability-linked loans represented the largest security type of sustainable debt in the financial sector may be cause for concern,” according to Bloomberg Intelligence. These loans, in which borrowers may see incentives for reaching their sustainability targets, allow for more flexibility for the use of proceeds than green bonds, but the lack of standardized key performance indicators and targets exposes them to greenwashing risk. The debt could also be linked to a goal that the borrower is “well on the way” to achieving or one that does not add to the company’s sustainability. Last year, BofA set a goal “to deploy and mobilize $1.5 trillion of capital in sustainable finance by 2030,” according to its 2021 annual report. Over the weekend, the Glasgow Financial Alliance for Net Zero, a climate-finance alliance, sought to dismiss claims that the bank, among others, intends to leave the organization due to potential binding restrictions on fossil-fuel financing.
Tuesday: Goldman Sachs (GS US), holding its call at market open, may have to field questions about greenwashing claims, as the bank is being investigated by the SEC’s Climate and ESG Task Force to determine whether some of its investments breached sustainability metrics that were promised in its marketing materials. The probe against Goldman Sachs is part of a greater push against greenwashing that has included proposed SEC rules and a raid at Deutsche Bank. Still, policy risk for large US investment banks, “continues to be subdued heading into the US midterm elections,” according to Bloomberg Intelligence. “Climate change scrutiny will increase, but policy makers will continue to pursue a strategy of working with the industry rather than mandating change.”
Wednesday: Nestle (NESN SW), holding its 3Q sales call before the US open, joined Pepsi and other large food producers in implementing sustainable farming. The company plans to invest more than 1 billion Swiss francs by 2030 to encourage the coffee farmers supplying its Nescafe brand to use more sustainable farming methods as climate change threatens crops. “Even without the impetus of reducing emissions, there is likely incentive to find sustainable options” given the disruptions to agriculture this year from drought, floods and supply of fossil-fuel based fertilizers, said Bloomberg Intelligence senior ESG analyst Gail Glazerman. Along with the climate issues, coffee is challenged by the decades-old two main varietals, as the aging crop succumbs to modern threats like coffee rust fungus and borer beetles.
Thursday: Volvo AB’s (VOLVB SS) third-quarter earnings call is due premarket local time. The world’s second-largest truck maker moved to bring some of its battery production for its electric heavy machinery in house, announcing that it secured government approval to create a “large-scale” battery plant in Sweden, though the raw materials may come from outside the country’s borders. Batteries are more integral to the quality, and differentiation, of an electric vehicle than a typical auto-part, says BI’s Glazerman, forcing automakers to be more hands-on in the production process. Batteries account for the bulk of the cost for EV’s, and rising costs of input minerals have led to a surge in EV prices this year, forcing many automakers to move to secure long-term supplies of key resources in an effort to keep expenses in check.
- Electric vehicle makers and battery suppliers may be in for a volatile week. Tesla (TSLA US) is due to give its own results Wednesday postmarket, while battery maker CATL (300750 CH) is expected to disclose earnings on Friday. For more details on what to expect in those reports, see the US Earnings Week Ahead or the new Asia Earnings Week Ahead.
Friday: Schlumberger (SLB US), due to host its earnings call at the open, is expanding its footprint in the clean energy market by teaming up with Gradiant, a developer of water treatment facilities, to help reduce the water needed to produce lithium, a key ingredient in batteries for electric vehicles. The partnership is part of the company’s New Energy initiative, launched in 2020 to “explore new opportunities in lower-carbon or carbon-neutral technologies,” according to the company’s 2021 Sustainability Report. The move by Schlumberger typifies some legacy energy companies’ efforts to diversify their business as the global economy transitions away from fossil fuels, according to Bloomberg Intelligence senior ESG analyst Rob Du Boff, versus the move to “double down” on oil and gas production by some companies. Exxon, for example, has opted to invest in technologies that aim to minimize the impact of the energy transition on its legacy business, such as carbon capture, without ceasing oil production.
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