General Motors is a favorite among ESG funds.

During the last five years, a wave of do-good ETFs has inundated U.S. markets, attracting billions of dollars in investor capital. But, due to the global energy crisis, inflation, and recessionary anxieties, ESG (environmental, social, and governance) investment has taken a back seat, with energy security and portfolio protection emerging as key considerations. Furthermore, a number of Big Oil firms have lately reduced their renewable energy expenditures and climate commitments in order to increase fossil fuel output.

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Yet, this does not imply that ESG is extinct. According to a recent Deutsche Bank survey, 53% of investors consider climate change to be the most important factor influencing their investment decisions, up from 47% in 2021, while another PwC study found that ESG issues are now among investors' top five concerns, with 44% citing the need to reduce greenhouse gas emissions.

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ESG funds exist in a variety of shapes and sizes. It's hardly surprising, therefore, that major automakers and even Big Oil are now among the top holdings of several ESG funds.

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Engine No. 1, the investment business that was successful in persuading Exxon Mobil to accept more stringent climate targets, introduced the Transform Climate ETF last year (ticker: NETZ). NETZ states it "...invests in stocks of firms that are regarded socially conscientious in their business operations and directly promote environmental stewardship" as part of its investing concept.

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What's more, guess what? General Motors Co. is the fund's fourth-largest investment, while Occidental Petroleum was formerly one of its top three holdings. According to Engine No. 1, the approach to reducing carbon emissions must include investment in legacy firms that will drive and benefit from the energy transformation.

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Yet Engine No. 1 is far from alone; for many years, G.M. has been seen as an ESG play: "We do have a sustainability fund that owns it in part because of its drive to electrification," Christopher Marangi, Gamco's value co-chief investment officer, told Trade Algo.

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Overtaking Tesla

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GM is one of the legacy manufacturers with the most significant renewable energy initiatives, and its presence is seen most strongly in the E.V. industry. G.M. delivered 39,096 all-electric vehicles in the United States in 2022, a 57% increase year over year. While that amount represents only 1.7% of G.M.'s total volume sold and cannot compete with Tesla Inc's 1.3M E.V. sales, G.M. may be able to turn the tables on Tesla in a few years. GM CEO Mary Barra announced that the firm aims to create 400,000 electric cars from 2022 to the first half of 2024, and that the firm will be able to produce more than one million E.Vs in North America annually by 2025. Nevertheless, according to a 2022 "Car Wars" analysis, G.M. and Ford Motors will each have around 15% E.V. market share in 2025, while Tesla will fall from 70% to 11%, with new vehicles like the F-150 Lightning and Silverado E.V. electric trucks fueling the dramatic increase. Tesla looks to be losing its leading E.V. market share since both legacy manufacturers are rapidly increasing their portfolios and offerings.

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G.M. has been exploring a slew of E.V. and battery developments in order to fuel the E.V. boom. The business is already hard at work on its Ultium battery technology, which is a flexible battery architecture with higher energy density, lower anticipated costs, and more range. Furthermore, G.M. is spending $650 million in Lithium America, a mining business, to establish a Nevada mine harvesting lithium, a vital battery element, with production set to begin in 2026. The investment by G.M. will be utilized to develop the Thacker Pass project in Nevada, which has the largest known lithium resource in the United States.

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Meanwhile, G.M.'s new battery facility in Ohio began production in August, and a second battery plant in Tennessee is set to launch this year. G.M. has already begun selling some high-end electric cars that use battery packs manufactured at its Ohio facility, and it expects its E.V. This year, sales are expected to rise dramatically as the company introduces more inexpensive models such as the electric Chevrolet Equinox, electric Chevy Silverado pickup truck, and Blazer sport utility vehicles. Overall, G.M. plans on having nine E.V. In comparison to Tesla's four automobile types, cars will be available in the United States by the end of the year.

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