Sustainability Week 2023 Key Takeaways

This spring, TD Cowen hosted its first Annual Sustainability Week. The event offered ESG portfolio managers, sector specialists, buyside sustainability teams, corporate managements, and venture capitalists the opportunity to gain from the breadth of ESG– and sustainability-related resources available from TD Securities and TD Cowen. 

Over 160 leading companies, policy makers and other stakeholders participated in a week of company presentations, fireside chats and panels, prominent keynote speakers and topical bootcamps. The bootcamps covered some of the most critical topics of the day including electric & autonomous vehicles, carbon capture, EV charging, hydrogen, lithium, nuclear, renewable diesel, residential solar, synthetic biology and utility scale solar.

The TD Cowen Research Team came away with unique insights into these vast topics.

Policy

The conference focused on policy themes of industrial and trade policy as they impact climate objectives, along with next steps in reforming the infrastructure permitting process. We are watching for the pace of industrial policy financing to potentially grow into the 2024 election cycle. The Administration appears open to more international trade deals to ‘plug’ select supply chain gaps.

Synthetic bio

We believe the secular sustainability trend is durable with product performance equal to or better than traditional non-sustainable alternatives. Costs near or at price parity could be the key drivers of widespread adoption.

Power generation, EV and grid

Some of the biggest power generation, EV and grid themes discussed included residential solar demand and Inflation Reduction Act (IRA) tailwinds. Residential solar visibility remains relatively strong and better than initially expected. 

Energy storage

In stationary storage, we walked away with a better understating of the strong value proposition present in robust and differentiated software offerings. Discussions also addressed the need for energy storage solutions beyond those based on lithium-ion technology as well as the transition to long duration solutions.

Next-gen environmental services

We observe a continued push to increase plastic recycling from heavy plastic users like converters and consumer packaged goods companies. They are also addressing single use plastic waste through biodegradable solutions. In addition, these companies seek an overall reduction in the carbon footprint of plastic production.

Next-gen materials

We largely see sentiment continuing to improve for lithium names as spot pricing rebounds, EV orders pick up, and consolidation trends percolate.

Hydrogen

The week reinforced our view of a two-phase hydrogen deployment process: 

• Phase 1 (the 2020s) decarbonizes existing H₂ use, which accounts for 2-3% of global CO₂. Initially, this is achieved with natural gas based H₂ and carbon capture which are economically competitive following the IRA.
• Phase 2 (late 2020s and 2030s) adds clean H₂ and decarbonizes other heavy industry and mobility.

Industrial gases, fertilizer companies and oil & gas have the most apparent benefit from Phase 1. Phase 2 beneficiaries are harder to identify as competitive dynamics are still evolving.

EV charging and next-gen batteries

EV charging conversations at the event touched on many topics – reliability, pricing, energy cost inflation, infrastructure growth requirements, utilization, fleet potential and policy. The “elephant in the room” was undoubtedly the decision by major OEMs to include NACS inlets on upcoming models. 

In next-gen batteries, we continue to see companies focus on commercializing a better, safer, and cheaper battery that can further accelerate e-mobility, unlock new features in the consumer electronics space (e.g., AR/VR) or electrify new markets.

US Water Services

The outlook for water is relatively positive in municipal bond markets but more cautious on residential and commercial.  While federal infrastructure spending should be a clear positive, the impact will likely not take effect for at least a year.