How the £1BN Gigafactory in Sunderland Will Help Firms Achieve ESG Targets

By  //  July 15, 2021

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In early July, Nissan announced plans for a new £1bn ‘gigafactory’, built in partnership with Chinese firm Envision. It’s set to create 900 jobs at Nissan, 750 jobs at Envision, and another 6,200 when the entire supply chain is considered.

This comes despite predictions of a post-Brexit exodus of big business to the continent. Part of the reason for Nissan’s continued preference for the UK stems from the ‘rules of origin’ requirements contained in the Brexit deal, which exempts the UK from tariffs when exporting batteries to the UK.

The term ‘gigafactory’, coined by Elon Musk, refers to a large-scale factory producing lithium-ion batteries for cars. It is thought that the new facility has a capacity of around 9GWh, which will be enough to power around 100,000 vehicles each year.

Sunderland is already home to a much smaller factory of this sort, owned by Nissan. The firm has claimed that it will be committing a further £432m to develop the Leaf, which is already being built in Sunderland. This is a boost for the Northeast, but it’s also a boost for the wider economy.

The UK is lagging behind other European countries, but the Nissan factory is not the only new one set to be built in the Northeast, with Britishvolt intending to build an even bigger Gigafactory in Northumberland.

What is ESG?

In recent years, the consuming and voting public has become increasingly concerned by the impact that their spending habits might have on the environment. This has driven a palpable shift in the regulatory environment, but also in the sorts of business that investors are looking for. Long-term good bets, it is thought, are also the ones that are environmentally sound.

The business of the future is one that is not just obsessed with bringing in as much cash as possible, but one which is concerned by Environmental, Social and Governance (or ESG) factors.

What influences ESG?

Investors might assign a particular business a score based on a range of related factors. The amount of waste being produced, the amount of water being used, and the company’s overall use of energy might all be factors. As such, if businesses can get access to inexpensive, efficient lithium-ion batteries, they might see their ESG score being marked higher.

Of course, there are ways that this system can be gamed, and consumers are right to be cynical about greenwashing practices, and that ESG-driven companies will make every effort to trumpet their ESG credentials, even if on further examination, those credentials are found wanting. It’s the responsibility of investors to perform that examination in the face of rising public skepticism.