Tesla might not be the world’s most sustainable car company. That mantle—for the moment—rests with Chinese electric vehicle make XPeng
XPeng (ticker: XPEV) published its first ESG report on Thursday. ESG is short for environmental, social and governance and companies publish ESG reports—sometimes called sustainability reports or impact reports—to tell stakeholders how their operations are impacting communities they serve.
Solid ESG reports are one less thing for investors to worry about. That’s good news for XPeng—the stock was rising about 2.8% in premarket trading Friday.
XPeng’s inaugural report details the environmental benefits of an EV compared with a gasoline-powered car. Environmental benefits of electric cars probably don’t come as a surprise to anyone. The report also details actions taken by the company to improve vehicle safety, employee relations and corporate governance.
Tesla’s 2020 impact report detailed similar things as the XPeng report, including expected environmental statistics as well as efforts Tesla is making on diversity, inclusion and community development.
Those sustainability reports come right from the companies, but there are third-party ESG rating firms. Investment services firm MSCI is one of them. MSCI ratings range from AAA to CCC.
In September, Tesla had an A rating from MSCI, putting it, roughly, in the upper third of companies ranked. MSCI marked Tesla below average with respect to product quality and labor management.
XPeng, however, has an AA rating and is the “world’s highest-rated auto manufacturer,” according to Citigroup analyst Jeff Chung. “Highly praised by MSCI ESG Research was [XPeng’s] continuous commitment to deliver long-term sustainability-focused innovation,” added Chung in a Friday report.
The AA rating from MSCI puts XPeng, very roughly, in the top 10% of companies ranked.
XPeng stock has declined about 8% year to date. ESG issues aren’t the reason. Valuation is, very likely, the biggest reason shares are down. XPeng is growing quickly but is richly valued. Shares started the year valued at about 12 times estimated 2021 sales. Now shares are trading at about six times estimated 2022 sales.
Tesla started the year trading at about 16 times estimated 2021 sales. Now shares are trading at roughly 11 times estimated 2022 sales.