It is a brand new week and shares in Fortescue Metals Group Limited (ASX: FMG) are already pushing to the upside. This seems fitting considering the mining giant's aspiring green subsidiary, Fortescue Future Industries (FFI), has been included in a select group of companies that are leading the charge in commercializing emerging clean energy technologies.
The inclusion in what is known as the "First Movers Coalition" was announced at the COP26 climate summit in Glasgow on Tuesday. Notably, United States President Joe Biden revealed the coalition has been formed through a partnership between the US government and the World Economic Forum.
For shareholders and investors, a wandering question might be what role does FFI have to play in this coalition? The answer lies in the proliferation of hydrogen energy.
A cleaner way to do business
Fortescue and its green entourage of the First Movers Coalition is serious business. Sitting among 25 founding companies, Fortescue Metals Group is shoulder to shoulder with the likes of Apple Inc (NASDAQ: AAPL), Boeing Co (NYSE: BA), and Volvo Group.
On 4 November, the coalition launched its first phase of sectoral commitments in steel, trucking, shipping, and aviation. Interestingly, the term 'hydrogen' is referred to in three out of these four sectors in the press release. Perhaps hinting at the importance the US government is allocating to hydrogen as an energy alternative. In turn, Fortescue shares are finding some momentum today.
After Biden's address, FFI chief executive Julie Shuttleworth spoke to an audience, sharing the potential of green hydrogen. The event, titled "Accelerating Clean Technology, Innovation and Deployment" was attended by an array of political leaders and VIPs.
Shuttleworth explained how green hydrogen is a real alternative right now, stating:
We are absolutely confident (to make such a statement) because we are already doing it… We've built the world's first hydrogen mining truck. And, we'll be converting hundreds of trucks to green energy by 2030.
Moreover, the company aspires to slash the use of diesel by one billion litres per year by the end of the decade.
Additionally, Shuttleworth called out other companies to tackle the climate problem, saying:
We (the parent company Fortescue Metals Group) are a big carbon emitter and we are doing something about it, we will decarbonise our operations by 2030. So, if we can do this, what is stopping every other heavy, hard to abate industry from doing the same? Nothing. Just the will to do it.
Fortescue shares in review
While the company is beginning to build out some green credentials, it hasn't done much for the Fortescue share price to date. Since the beginning of this year, shares in the mining giant have slumped 42%. This follows an entrenched weakening in the price of iron ore being played out since July.
As a result, the company's trailing 12-month price-to-earnings (P/E) ratio is now floating around 3.2 times. This represents a substantial discount from the 14.6 times average P/E ratio for the mining industry. However, investors are likely discounting Fortescue shares with the expectation of a fall in earnings ahead.
Finally, Fortescue Metals Group currently holds a market capitalisation of ~$44 billion.
