Name: Enphase Energy, Inc. (ENPH)
FLIT Investment Theme: Green Energy
Headquarters: Fremont, CA, US
Year Founded: 2006
Business Overview: Enphase Energy, Inc. designs, develops, manufactures, and sells home energy solutions for the solar photovoltaic industry in the United States and internationally. The company offers a semiconductor-based microinverter, an essential energy component in solar panels, and also provides energy monitoring and control services. It also offers AC battery storage systems. The company sells its solutions directly to solar distributors and large installers, original equipment manufacturers, strategic partners, and homeowners.
Source: Company disclosures, Koyfin
FLIT Impact Rating & Analysis
FLIT Invest Impact Rating: 5 (out of 5)
Assessed for impact metrics including: clean energy generated, carbon emissions avoided, lives improved.
Through Enphase’s products and services in solar power systems, 8 million metric tons of CO2 emissions were avoided in 2021 alone. Since the start of their operations in 2006, this figure has grown to 31 million metric tons of CO2 emissions, equivalent to removing over 6.5 million cars from the road for one year. Their solar energy products also generated 11.3 billion kWh of clean energy in 2021 – which is enough to provide electricity to over 1.5 million homes for one year.
Based on our analysis, we found that Enphase’s work aligns with multiple United Nations Sustainable Development Goals, including:
- SDG 7 Affordable and Clean Energy provides access to reliable, affordable, and modern energy services to their customers.
- SDG 9 Industry, Innovation, & Infrastructure, because their core business contributes directly to the “adoption of clean and environmentally sound technologies and industrial processes.
- SDG 11 Sustainable Cities & Communities enhance inclusive and sustainable urbanization
- SDG 13 Climate Action by avoiding greenhouse gas emissions.
Enphase highlighted multiple other UN SDGs in their sustainability disclosures to which they claim to contribute. However, FLIT analysts evaluated that these claims were not strong enough, not linked to the company’s core operation, or not intentional. Therefore, FLIT did not attribute company revenues to sustainable development targets and goals in our UN SDG mapping exercise.
Source: Company disclosures, United Nations, FLIT analysis
FLIT's ESG Assessment
FLIT Invest also conducts ESG analysis on every company in our portfolio. ESG framework pertains to environmental, social, and governance risks posed to a company’s operations and how well they address these risks.
Operationally, Enphase could do better. They provide environmentally positive solutions but lack reporting and disclosures of their own operations. They published their first Sustainability report in 2021 related to the calendar year 2020. Their reporting referenced the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI) standards to report on additional material sustainability issues. They also provided disclosures aligned with the four key themes of the Taskforce for Financial-Related Climate Disclosure (TCFD). However, based on our assessment of these disclosures, we found gaps in their reporting and potential omissions that could be significant.
ESG Ratings: MSCI: A (as of Nov 2022) and Sustainalytics: 22.3 (as of Jan 2023)
- ENVIRONMENTAL: limited to no data and disclosures around multiple environmental metrics, such as waste, water, emissions, or the company’s energy usage. They do not have net zero or any decarbonization goals, nor are Science Based Targets initiative (SBTi) or Climate Disclosure Project (CDP) verified. They are not involved in deforestation.
- SOCIAL: BIPOC representation within the workforce is significant at the board level (29%); however, representation of women is very poor within the workforce (16%) and especially at the board level (14%). There is no information about the gender pay gap. In 2020, the company appointed its first-ever female director. May this be the start of a more diverse approach to leadership.
- GOVERNANCE: Enphase is not involved in politics or lobbying at interfering levels. There have been allegations of fraud by using a third party to conduct accounts back in 2020. Over 2% of shares are held by insiders (executives of the company). However, the company is majority-owned by institutional investors (large asset managers, such as BlackRock or Vanguard), alleviating governance risk.
Source: Company disclosures, MSCI, Sustainalytics, CDP, SBTi, GoodsUniteUS, Yahoo Finance, FLIT analysis.
FLIT's Call To Action for Enphase Energy
In the future, FLIT Invest wants to see better disclosures from Enphase Energy – it is clear they are making an impact through their products and services, but it is unclear on multiple topics how they are managing their own operation’s impact and their exposure to environmental, social, and governance risks.
This summary of the FLIT impact and ESG analyses has been prepared based on company disclosures and analyses as of August 2022.
Footnote 1: Content is for informational and educational purposes only. Any views, strategies or products discussed may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. The information contained herein should not be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product. Investors should carefully consider the investment objectives and risks as well as charges and expenses of a mutual fund or ETF before investing.