A $14 trillion exit
Climate advocates have long questioned the financial industry’s commitment to sustainable investing. But few would have expected JPMorgan Chase and State Street to withdraw from Climate Action 100+, a global investment coalition pushing companies to decarbonize. Meanwhile, BlackRock, the world’s largest asset manager, has scaled back its ties to the group.
All told, the moves represent a nearly $14 trillion exit from an organization designed to channel Wall Street’s influence to expand the climate agenda.
The withdrawal shook the political landscape. Rep. Jim Jordan, an Ohio Republican who likened the coalition to a “cartel” forcing companies to reduce emissions, said more financial firms should follow suit. And Brad Lander, New York’s comptroller, accused the companies of “giving in to the demands of right-wing politicians funded by the fossil fuel industry.”
The companies are committed to climate protection. JPMorgan said it has built 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 organization.
A recent change from Climate Action raised alarm bells. Last summer, the group shifted its focus from pressuring companies to disclose their net-zero progress to reducing their emissions.
State Street said the new priorities affected its “independent approach to proxy voting and portfolio company management.” And BlackRock, which has become a political lightning rod for considering climate considerations in investments, said these tactics would “raise legal concerns, particularly in the U.S.” (hence the transfer to a foreign division).
Political tension over environmental issues remains high. Republicans in the House of Representatives, including Jordan, have launched an investigation into the company and other Wall Street giants to determine whether their support of environmental, social and corporate governance considerations in investments violates antitrust rules.
New York State Comptroller Thomas DiNapoli told DealBook he was “disappointed” that private asset managers had withdrawn from the climate group. (He announced Thursday that the state’s government employee pension fund would limit investments in Exxon and seven other oil and gas companies because of their sustainability records.)
Here’s what’s happening
The SEC approves the deal to take 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 on the news. At current prices, Trump’s stake in the post-merger company is worth nearly $4 billion on paper.
The Justice Department is reportedly planning to review the proposed sports super app. According to Bloomberg, antitrust regulators will examine the joint venture, which would combine content from Disney, Fox and Warner Bros. Discovery, for potential harm to consumers and sports leagues. Company executives say the effort is intended to combat wiretapping, not to facilitate collusion. But skeptics say it would reduce competition for sports rights.
A Chinese electric vehicle giant is reportedly considering building a factory in Mexico. According to the Wall Street Journal, BYD, which recently overtook Tesla as the world’s largest seller of electric vehicles, is exploring potential locations for a factory. That could allow the automaker to export to the U.S. without high tariffs, but would face strong resistance from American competitors.
Football superstar Kylian Mbappé is planning his departure from Paris Saint-Germain. Mbappé told the French club that he would leave when his $215 million-a-year contract expires at the end of the season, raising questions about which team could afford him. (Betting odds are for Real Madrid of Spain.) In other sports news, Rob Manfred said he will step down as commissioner of Major League Baseball in 2029.
New pressure to tighten the reins of AI
The race for advances in artificial intelligence is becoming increasingly intense. The Latest: OpenAI on Thursday unveiled Sora, a product that can generate (mostly) Hollywood-quality videos from text prompts in seconds.
OpenAI’s new tool and other similar tools will undoubtedly put more pressure on regulators to put limits on AI, especially given the dangers the technology poses to upcoming elections should it fall into the wrong hands.
Sora shows how quickly AI is advancing. Ten months ago, versions of the video-making technology produced four-second clips that were blurry and choppy. In contrast, OpenAI’s product creates 60-second content that resembles the work of a major studio.
Sora is far from the only video-to-text generator on the market; Google, Meta and others are also involved in the case.
This alerts AI guards. “I am absolutely terrified that something like this could impact a closely contested election,” Oren Etzioni of the University of Washington told The Times. Regulators are already concerned about AI’s potential for voter fraud, given incidents like a series of robocalls in New Hampshire that spoofed fake comments disguised as President Biden’s.
Part of the new AI legislation proposed by Gov. Kathy Hochul of New York, which broadly aims to criminalize some fraudulent uses of the technology, includes a requirement to disclose AI use 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 concerned about how his company’s products could be misused. Companies like Meta are also pushing for industry-wide steps like labeling AI-generated content.
OpenAI is not releasing Sora on a large scale yet as researchers and others test it first. The company will also watermark videos produced by Sora, identifying them as AI-generated. However, these can be removed and are difficult to detect.
It’s unclear how far companies are willing to limit the promising technologies. Lessons could be learned from their efforts to police political content: Katie Harbath, a former public policy executive at Metas Facebook, told the Wall Street Journal that tech platforms struggle with what is permissible and what punishments are acceptable . “A lot of them were more like, ‘It’s probably better for us to be as straightforward as possible,'” she said.
“A reminder that no one from @FTC will ever give you an ID number, ask you to verify your Social Security number, ask you how much money you have in your bank account, transfer you to or from a CIA agent Sending text messages will turn blue.”
– FTC Chairwoman Lina Khan responds to an article in The Cut by financial columnist Charlotte Cowles about how she was scammed out of $50,000 that has since gone viral.
The typo that sparked a “stunning” stock rally
In a week full of market-moving headaches — including the hotter-than-expected inflation report — the earnings release typo that briefly sparked a huge rally in Lyft stock still stands out.
“I can’t remember anything quite as egregious where our shares are basically up 60 percent in the after-hours,” Steve Sosnick, chief strategist at Interactive Brokers, told DealBook. “It was breathtaking.”
A summary: On Tuesday, Lyft told investors that its profit margin is expected to rise 500 basis points, or 5 percent, this year, well above market watchers’ expectations.
…Except the company later said the release should have been 50 basis points, or 0.5 percent. “This was a bad mistake,” Lyft CEO David Risher told Bloomberg, “but in a press release it was a zero.”
That “one zero” was a big deal. The company’s shares rose 62 percent in minutes, adding hundreds of millions to its market value, but then fell as the company clarified the figure. (It rebounded again on Thursday after a number of analysts raised their price targets on the stock.)
The initial surge was a reminder of the ubiquity of AI-driven electronic trading. and how technology can create a market frenzy. “The algorithms can read the data faster than humans,” Sosnick said. When bots read an extra zero in a winning announcement, they are programmed to strike. In the case of Lyft it was buy, buy, buy.
Wall Street has been increasingly dependent on algorithms for well over a decade. and sophisticated private investors are following suit. Advances in natural language processing, a branch of artificial intelligence, enable these programs to search for and act on market-moving events—including company press releases, news stories, social media posts.
Expect these systems to focus on Friday’s University of Michigan consumer sentiment report and next week’s Nvidia earnings report.
AI advocates want to go even further Leveraging generative AI, the technology behind chatbots like ChatGPT, to make these systems faster and smarter. (Of course, these systems still have significant flaws, including their occasional hallucinations – in technical jargon it’s called “making stuff up.”)
THE SPEED READING
Offers
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Barclays is reportedly receiving offers from private equity firms including Brookfield Asset Management and CVC Capital for its payments business, which could be worth $1.3 billion. (Bloomberg)
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The latest hedge fund to bet on Cocoa is worth $8.7 billion. (FT)
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A former BlackRock executive sets up shop at Lingotto, the investment firm backed by the billionaire Agnelli family, to make deals in esoteric assets. (WSJ)
politics
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Amazon argues that the National Labor Relations Board is unconstitutional, a legal argument recently made by SpaceX and Trader Joe’s. (NYT)
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“New York City sues TikTok and Instagram for getting kids ‘addicted’” (The Verge)
The best of the rest
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Aleksei Navalny, the Russian opposition leader, collapsed and died in the penal colony where he was being held, according to state media. (NYT)
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Boston faces a nearly $1 billion fiscal deficit as the office building crisis deepens. (Bloomberg)
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“The Insatiable Ambition of LeBron James” (WSJ)
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2024-02-16 12:50:58
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