Solar energy is powering efforts to decarbonize global utilities and economies. First Solar, a maker of solar photovoltaic (PV) modules, panels and systems, is a bright spot at the center of that transition.
FSLR stock ranks No. 6 on IBD's Best ESG Companies for 2022 list. The Tempe, Ariz.-based company sells its products to utilities. They, in turn, use solar technology to convert sunlight into electricity. It came in No. 1 in the energy category, ahead of Phillips 66 and Cheniere Energy, No. 2 and No. 3, respectively.
"Solar energy is at the heart of ESG (environmental, social and governance) beneficiaries," since governments and utility companies are moving away from fossil fuels to renewables, said Morningstar analyst Brett Castelli.
Yet even solar power companies have faced scrutiny from ESG critics. First Solar is making a green product, but it still needs to lower its own carbon footprint for manufacturing. And it needs to be mindful of gender equality and worker conditions, the critics say. It calls its in-house ESG efforts "responsible solar."
Solar Energy Boom
In the next five years, First Solar (founded in 1999) expects the number of global PV installations to double. As governments and corporations phase out fossil fuels such as coal, solar energy companies will benefit.
Meanwhile, so will the planet, according to the ESG narrative. Coal, oil and natural gas come from sources that cannot be renewed over time, and they pollute the air. Solar, wind and water, on the other hand, are clean and abundant forms of renewable energy.
In the U.S., solar energy just received a big boost from Uncle Sam. President Joe Biden signed the Inflation Reduction Act into law in mid-August. It contains manufacturing incentives and homeowner tax credits for solar installations.
Castelli expects First Solar to be a big winner from the recently signed act.
FSLR finished behind some big names on IBD's Best ESG Companies for 2022. Worthington Industries is No. 1 on the list and J.B. Hunt follows. Verisk took third and Texas Instruments came in fourth. Technology behemoth Apple finished fifth.
Last year, First Solar made progress on all three metrics that underpin ESG investing — environmental, social and governance. And its financial and stock performance have been solid as well. It had a Composite Rating of 81 out of 99 as of Aug. 31. Its RS Rating was a near-perfect 98 when the list was compiled at the end of August.
FSLR Stock, First Solar Earnings
Shares of First Solar nearly doubled in the third quarter, after the company hiked 2022 revenue guidance. On Oct. 4, FSLR stock pegged a 52-week high of $145.74. To see FSLR's current ratings and its stock chart visit IBD's Stock Checkup page.
The Inflation Reduction Act and ESG investing are upside drivers for the company. The new law promotes domestic manufacturing. First Solar has three Ohio factories and is adding a fourth in the southeastern U.S.
'E' In ESG Investing: Improving Technology
Asia, China in particular, is home to 90% of global solar manufacturing.
Most Chinese companies, including JinkoSolar, use crystalline silicon technology, which makes up 95% of the market. First Solar modules use cadmium telluride, which has a 5% share.
First Solar panels are a type of thin-film technology. This technology has a far lower negative impact on the environment than silicon-based modules made in China, the company says.
For example, First Solar recovers more than 90% of the semiconductor material for reuse in new solar modules. It recovers 90% of the glass and uses it in new glass container products. Additionally, in 2021, its water recycling measures saved more than 268 million liters of water.
First Solar's environmental efforts extend up and down the product life cycle. They range from "raw material sourcing to end-of-life recycling" of modules, according to its 2022 Sustainability Report. That report came out July 26 and updated investors on its ESG progress.
Morningstar's Castelli thinks FSLR is "uniquely positioned" with its differentiated technology and U.S. manufacturing capacity.
He noted a possible caveat. Cadmium is a hazardous substance and a suspected carcinogen. And that has led to run-ins between First Solar and local communities where it plans to install solar power farms. However, First Solar says cadmium telluride is much more stable and safe than cadmium.
'S' In ESG Stock: Improving Worker Safety
Generating solar energy is carbon free. But the manufacturing practices and worker conditions for solar power — related to the "S" in ESG — are under scrutiny.
Two years ago, allegations emerged of forced labor in the Chinese solar supply chain. In the past year, solar customers and ESG investors have become more concerned about industry labor practices.
"First Solar does not have any exposure (in China)," Castelli said. While First Solar operates in Asia, its factories are in Vietnam, Malaysia and India.
"We have consistently demonstrated that the solar-at-any-cost approach, which turns a blind eye to the human and environmental costs of PV manufacturing, does not have to be the norm," said First Solar CEO Mark Widmar. He made the remarks in a news release accompanying the 2022 Sustainability Report.
"Customers increasingly value our comprehensive approach to responsible sourcing and supply chain due diligence — from our supplier screening process to our ethics hotline," Widmar said in the report.
'G' In ESG Investing: Improving Diversity
First Solar continues to make strides on governance. In 2021, it increased the gender, racial and ethnic diversity of its board of directors.
Women in management roles rose 4%. A third of its board is now diverse, with 25% of seats held by women and 17% held by racially or ethnically diverse members. Each board committee now has at least one diverse member.
Improving gender diversity in technical careers requires early exposure. Recently, First Solar participated in the University of Toledo's Introduce a Girl to Engineering Day.
The event attracted around 750 middle-school girls from across Ohio. First Solar demonstrated solar panel kits.
"The general reaction is one of 'Wow. I didn't know engineers did that.' It's eye-opening for them," said Lesley Berhan, associate dean for diversity, inclusion and community engagement in the university's College of Engineering.
Women In Science
Women are underrepresented in science, technology, engineering and math (STEM) careers, as well as university programs. Intervening in middle school — before girls go to high school or college and make career choices — is important, Berhan told IBD.
"Companies are interested in diversifying their workforces — it is mutually beneficial" for schools and corporations, she added.
And, First Solar says it's currently reviewing gender pay at the company. It expects to expand that effort to assess racial pay equity. It raised minimum hourly wages last year. Rival solar company Sunrun says it has already achieved gender pay parity.
Women in solar power make 74 cents on the dollar compared to men, a 2019 study by The Solar Foundation and the Solar Energy Industries Association found. The report added that "the solar industry has more work to do in order to reflect the diversity of the overall population."
Find Aparna Narayanan on Twitter at @IBD_Aparna.
