How Wall Street is securitizing the climate-change movement

How Wall Street is securitizing the climate-change movement
How Wall Street is securitizing the climate change movement
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It really hasn’t been a great year for the environment. Not only have been there forest fires and flooding blamed on climate change, the surge in demand and lag in supplies as the global economy has reopened from COVID-19 lockdowns have made not just oil but coal also thrive this year. And the just completed United Nations climate change conference ended on a whimper when China and India pushed for a last-minute change to phase down, rather than phase out, coal.
An examination of what happened at the U.N. conference in Glasgow, Scotland, comes from Daniela Gabor, a professor at University of the West of England, Bristol, who is an expert on shadow banking and capital controls. She focuses on what central banks and investment firms announced there, in a publication called Phenomenal World, published by the Jain Family Institute, which was founded by Bobby Jain, the co-chief investment officer of hedge fund giant Millennium Management. Central banks, she said, missed an opportunity to shrink private lending to carbon activities. What they could have done is explicitly penalize dirty lending in both monetary policy and regulatory frameworks, and brought private equity within the scope of the regulatory regime, so that fossil-fuel assets just don’t get moved from one owner to another. Instead, they opted for what she called 2019-style voluntary decarbonization efforts, about disclosure of climate risks and stress-test scenarios. Gabor broke down the $130 trillion of assets said to be allocated to achieving net zero emissions, from the Glasgow Financial Alliance for Net Zero. That number, she pointed out, was just the combined assets of the firms signing up, many issued to finance dirty activity. Furthermore, the investment managers including BlackRock
BLK,
-0.94%
running $57 trillion committed to decarbonizing 20% of emissions by 2030, not the 50% scientists say is needed to stay within 1.5 degrees Celsius warming. She noted John Kerry, the special presidential envoy for climate, talked about blending finance and de-risking investment to have “bankable deals.” “This is the Wall Street Consensus mantra: the state and development aid, including multilateral development banks, should escort the trillions managed by private finance into climate or the Sustainable Development Goals asset classes,” said Gabor. Each of the five initiatives from GFANZ follows the logic of new asset classes backed by the state. In her words: Together they make up an alphabet soup of Wall Street Consensus initiatives. Finance to Accelerate the Sustainable Transition-Infrastructure (FAST-infra) targets labeling of sustainable infrastructure assets, an extension of the G-20 Infrastructure asset class. In the same vein, Mobilizing Institutional Capital Through Listed Product Structures (MOBILIST) promotes securitization products (yes, shadow banking) for SDG financing. The Innovative Finance for the Amazon, Cerrado and Chaco (IFACC) initiative boldly attributes deforestation and ecosystem destruction to the absence of adequate financial instruments for farmers. The Climate Finance Leadership Initiative (CFLI) identifies India as a pilot country for concerted efforts to mobilize private finance around new models for funding sustainable infrastructure and building public-private partnerships, including with the national government and multilateral organizations. The Global Energy Alliance for People and Planet aims to accelerate the energy transition by raising 100 billion in private and public capital. Her sobering conclusion isn’t just that private finance is trying to portray its greenwashing as climate activism. “This is rather predictable. The more worrying development is that the state is not only prepared to let finance get away with it, but is willing to subsidize the climate destruction guaranteed by this path,” she said.The chart

The monthly data from Finra show another spike in margin debt at brokers, which is now approaching $1 trillion. “This type of stock market leverage doesn’t predict when the market will crater. What it does predict is that when this market is going down hard enough, it will trigger massive bouts of forced selling as margin calls are going out, and leveraged investors have to sell stocks to pay down their margin debt, which then pushes down prices further, which then triggers more forced selling, and more fears of forced selling, as portfolios are being liquidated, thereby accelerating the swoon,” says Wolf Richter at the Wolf Street blog.The buzz The House is set to approve $2 trillion in spending on education, health and climate on Friday morning, as the legislation then faces an uncertain path in the Senate. A decision on who President Joe Biden will pick to be the next Federal Reserve chair could come Friday, if the timeline the president suggested earlier in the week is accurate. Jerome Powell picked up a crucial favorable comment, if not outright endorsement, from Sen. Joe Manchin after a meeting. Fed Vice Chair Richard Clarida also is due to speak. Austria announced a full national lockdown that could last three weeks in response to rising coronavirus cases, days after announcing a lockdown just for unvaccinated people. Austria’s rising case count is the worst in Western Europe but other countries — notably the Netherlands, Germany, and the U.K. — also are confronting rising infections. Applied Materials
AMAT,
+1.77%
fell in premarket trade, as the microchip-equipment maker recorded worse-than-forecast earnings and revenue, and also forecast current-quarter revenue below estimates. Home-furnishings retailer Williams-Sonoma
WSM,
+4.26%
offered a revenue outlook above Wall Street estimates and beat on third-quarter numbers, but still saw pressure as the stock has more than doubled over the last 12 months. Human-resources-software maker Workday
WDAY,
-0.60%
recorded revenue slightly ahead of Wall Street estimates and said it would pay $510 million for VNDLY, a provider of vendor-management technology.The market

The Austrian news briefly unsettled markets, though stock futures
ES00,
-0.25%
were mixed as the open approached, with the Nasdaq-100
NQ00,
+0.31%
contract higher and on track for a fresh record. The yield on the Treasury
TMUBMUSD10Y,
1.531%
slipped to 1.55%, and the euro
EURUSD,
-0.67%
weakened on the Austria news.Random reads A look at the pre-Pilgrim roots of Thanksgiving. An artificial-intelligence lab says it has taught morality to a computer. Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern. Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.



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