BlackRock, JPMorgan and State Street withdraw from climate group

by — February 19, 2024 in Economy
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Climate hawks have long questioned the financial industry’s commitment to sustainable investing. But few anticipated that JPMorgan Chase and State Street would leave Climate Action 100+, a global investment coalition that has been pressuring companies to decarbonize. Meanwhile, BlackRock, the world’s largest asset manager, reduced its ties to the group.

In total, the movements amount to an output of almost 14 billion dollars of an organization aimed at marshaling Wall Street influence to expand the climate agenda.

The withdrawal shook the political landscape. Rep. Jim Jordan, the Ohio Republican who compared the coalition to a “sign” force companies to reduce emissions, asked for more financial companies do the same. And Brad Lander, the New York City Comptroller, accused companies to “give in to the demands of right-wing politicians funded by the fossil fuel industry.”

The companies say they are committed to the climate cause. JPMorgan said it had created an internal sustainable investing team to focus on green issues. And BlackRock will maintain some ties to the coalition: It has transferred its membership to an international entity.

A recent Climate Action change raised red flags. Last summer, the group shifted its focus from pressuring companies to reveal their net-zero progress to getting them to reduce emissions.

State Street said the new priorities compromised its “independent approach to proxy voting and portfolio company management.” And BlackRock, which has become a political lightning rod for its embrace of climate considerations when investing, said such tactics would “raise legal considerations, particularly in the United States” (hence the transfer to an offshore division).

Political tension around environmental issues remains high. House Republicans, including Jordan, have opened an investigation into the company and other Wall Street giants to determine whether their support for environmental, social and governance considerations for investing violates antitrust rules.

Thomas DiNapoli, New York state comptroller, told DealBook that he was “disappointed” that private asset managers were walking away from the climate group. (He announced Thursday that the pension fund for state government workers restrict investments in Exxon and seven other oil and gas companies due to their sustainability record).

The SEC approves the agreement to make Donald Trump’s social network public. Shares of Digital World Acquisition Corporation, the blank check company that agreed to merge with Trump’s Truth Social, rose 16 percent. in the news. At current prices, Trump’s stake in the post-merger company is worth nearly $4 billion on paper.

The Justice Department reportedly plans to review the proposed sports super app. Antitrust officials examine the joint venture that would combine content from Disney, Fox and Warner Bros. Discovery to potentially cause harm to consumers and sports leagues, according to Bloomberg. Company executives say the company is intended to address cord-cutting and will not allow collusion, but skeptics say it would reduce competition for sports rights.

A Chinese electric vehicle giant is said to be considering building a factory in Mexico. BYD, which recently overtook Tesla as the world’s largest seller of electric vehicles, is Review potential locations for a plant., according to The Wall Street Journal. That could allow the automaker to export to the United States without incurring heavy tariffs, but it would face stiff opposition from its American rivals.

Soccer superstar Kylian Mbappé plans to say goodbye to Paris Saint-Germain. Mbappé told the French club that He will go away when his $215 million per year contract expires at the end of the season, raising questions about which team could afford him. (Betting odds correspond to Real Madrid of Spain). In other sports news, Rob Manfred He said he will step down as commissioner of Major League Baseball in 2029.

The race to advance in the field of artificial intelligence is increasingly intense. The latest: OpenAI on Thursday unveiled Sora, a product that can generate Hollywood-quality videos (for the most part) from text messages in a matter of seconds.

OpenAI’s new tool, and others like it, will undoubtedly put more pressure on regulators to put limits on AI, especially given the dangers the technology poses to upcoming elections if it falls into the wrong hands.

Sora shows how quickly AI is advancing. Ten months ago, versions of the video generation technology produced four-second clips that were blurry and choppy. OpenAI’s product, by contrast, generates 60-second content that resembles the work of a major studio.

Sora is far from the only text-based video generator out there; Google, Meta and others are also on the case.

This alarms AI watchdogs. “I’m absolutely terrified that this kind of thing will influence a narrowly contested election,” Oren Etzioni of the University of Washington told the Times. Regulators are already wary of AI’s potential to cause election damage, given incidents like a series of robocalls in New Hampshire that featured fake comments disguised as those from President Biden.

Part of new artificial intelligence legislation proposed by Governor Kathy Hochul of New York, which broadly aims to criminalize some misleading uses of technology, includes requiring disclosure of the use of AI in all political communications.

Tech giants are aware of the risks. OpenAI’s Sam Altman said at the World Economic Forum last month that he was wary of how his company’s products could be misused. Companies like Meta are also pushing for industry-wide measures, such as labeling AI-generated content.

OpenAI is not yet widely releasing Sora, and researchers and others are testing it first. The company will also label videos produced by Sora with watermarks that will identify them as AI-generated, although they can be removed and are difficult to detect.

It’s unclear how far companies are willing to go to limit promising technologies. Lessons could be learned from their efforts to control political content: Meta’s former public policy executive at Facebook, Katie Harbath, told the Wall Street Journal that tech platforms are struggling with what is allowed and what sanctions are acceptable. “A lot of them have been more like, ‘It’s probably better for us to be hands-off as much as possible,’” he said.

— Lina Khanchair of the FTC, in response to an article in The Cut by Charlotte Cowles, a financial columnist, about how she got scammed out of $50,000 which has since gone viral.

In a week full of market-shaking concerns, including the hotter-than-expected inflation report, the typo in the earnings release that briefly spurred a big rally in Lyft stock still stands out.

“I don’t remember anything this egregious, where a stock was basically up more than 60 percent after hours,” Steve Sosnick, chief strategist at Interactive Brokers, told DealBook. “It was stunning.”

A summary: On Tuesday, Lyft told investors it expected its profit margin to grow this year by 500 basis points, or 5 percent, well above what market watchers expected.

…Except the company later said the statement should have read fifty basis points, or 0.5 percent. “This was a serious mistake,” said David Risher, Lyft’s chief executive. he told Bloomberg“but it was a zero in a press release.”

That “one zero” was a big problem. The company’s shares rose 62 percent in a matter of minutes, adding hundreds of millions in market value, and then plunged when the company clarified the figure. (He he recovered again on Thursday after a number of analysts upgraded their price targets for the stock).

The initial surge was a reminder of the ubiquity of AI-powered e-commerce, and how technology can trigger a market frenzy. “Algorithms are faster at reading data than people,” Sosnick said. When robots read an extra zero in an earnings release, they are programmed to attack. In the case of Lyft, it was buy, buy, buy.

Wall Street has become reliant on algorithms for more than a decade, and sophisticated retail investors followed suit. Advances in natural language processing, a branch of artificial intelligence, allow these programs to analyze and trade market-moving events (including company press releases, news stories, social media posts).

Expect these systems to focus on Friday’s University of Michigan consumer confidence report and next week’s Nvidia earnings report.

AI advocates want to go further, using generative AI, the technology behind chatbots like ChatGPT, to make these systems faster and smarter. (Of course, these systems still have major flaws, including occasional hallucinations; technology talks about “making things up.”)

Offers

  • Barclays is reportedly receiving offers from private equity firms such as Brookfield Asset Management and CVC Capital for its payments business, which could be valued at 1.3 billion dollars. (Bloomberg)

  • The latest hedge fund bet It’s in cocoa, for a sum of 8.7 billion dollars. (FOOT)

  • A former BlackRock executive is moving into Lingotto, the investment firm backed by the billionaire Agnelli family, to make deals involving esoteric assets. (WSJ)

Policy

  • Amazon maintains that the National Labor Relations Board is unconstitutional, a legal argument recently made by SpaceX and Trader Joe’s. (NY)

  • “New York City is suing TikTok and Instagram for ‘addictive’ children” (The edge)

The best of the rest

  • Aleksei Navalny, the leader of the Russian opposition, collapsed and died in the penal colony where he was detained, according to state media. (NY)

  • Boston faces a fiscal deficit of almost a billion dollars as the office building crisis intensifies. (Bloomberg)

  • “The insatiable ambition of Lebron James(WSJ)

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