| | | | | | | Presented By Global X ETFS | | | | Axios Generate | | By Ben Geman and Andrew Freedman · Aug 25, 2022 | | ☀️ Welcome back! Today's newsletter, edited by Mickey Meece, has a Smart Brevity count of 1,153 words, 4.5 minutes. 📬 Did a friend send you this newsletter? Welcome, please sign up. 🎶 This week in 1999 the singer-songwriter Meshell Ndegeocello released her third album "Bitter," which has today's beautiful intro tune... | | | | | | 1 big thing: BlackRock and ESG blowback intensifies |  | | | Illustration: Aïda Amer/Axios | | | | Wall Street giants have a Texas-sized problem: making good on flashy vows to make clients' investments greener while limiting political and financial fallout in red states, Andrew writes. Catch up fast: Texas Republican Comptroller Glenn Hegar released a list of 10 companies and 349 investment funds that will be barred from doing business with the state because they "boycott energy companies." - The list, released yesterday, follows the enactment of a state law prohibiting most state agencies and local governments from contracting with such firms.
- BlackRock, Credit Suisse and UBS are on the banned list, along with sustainable investment funds from other banks.
Why it matters: At stake are trillions in investments and the future of the fossil fuel industry that is fueling global warming. The intrigue: Consumers and regulatory agencies are pushing investment firms like BlackRock to take climate-related risks into account when managing money. What they're saying: "Some financial companies no longer make decisions in the best interest of their shareholders or their clients, but instead use their financial clout to push a social and political agenda shrouded in secrecy," Hegar said in a statement. Yes, but: The 10 companies banned from doing business with the Texas government have considerable fossil fuel investments. - "This is not a fact-based judgment. BlackRock does not boycott fossil fuels — investing over $100 billion in Texas energy companies on behalf of our clients proves that," company spokesperson Brian Beades told Axios.
- UBS also criticized Texas' action, saying it does not boycott energy companies, "Even under a broad interpretation of Texas law."
Between the lines: The Comptroller's move is unlikely to have much of an impact on Wall Street, according to Daniel Firger, managing director of Great Circle Capital Advisors, a climate finance consultancy. - The holdings of funds covered under the ban are far lower than those from states that have moved aggressively to limit their fossil fuel exposure, Firger told Axios.
Context: In a similar move last month, West Virginia barred five major financial firms, including BlackRock and JPMorgan Chase, from new state business after concluding they were boycotting the fossil fuel industry. The bottom line: "Long term, climate change is not going anywhere. And so the capital markets are going to have to deal with that fact, and at root, I think that's what this ESG fight is all about," Firger said. Axios Austin's Asher Price contributed reporting. Read more. |     | | | | | | 2. Unpacking California's big move on cars |  | | | Illustration: Eniola Odetunde/Axios | | | | Is California's rule to ban gas-powered car sales by 2035 an attainable climate policy or a (tail)pipe dream destined to fail? The former seems closer to the truth — but a lot must break right, Ben writes. Catch up fast: State regulators are slated to approve a measure today that would require new passenger vehicles to be fossil-fuel-free by 2035, effectively mandating a massive increase in electric car sales. The plan also sets interim levels, starting at 35% in 2026. Why it matters: California is the biggest auto market in a country where transportation is the biggest source of greenhouse gas emissions. Its policies also influence other states. What we're watching: EVs are growing fast in California, claiming 15% of new-vehicle sales in the first half of 2022, per the California New Car Dealer's Association. - "If automakers can pick up production, sufficient investments are made in charging infrastructure and the power grid, and financial incentives can be made more available, this milestone should be achievable — if not surpassable," Edmunds analyst Jessica Caldwell said.
Yes, but: Meeting the 2035 goal will put immense pressure on automakers to accelerate production of vehicles that they currently can't build enough of, Axios' Nathan Bomey reports. Shortages of battery components, including crucial raw materials, have hampered output, leading to long wait times, and EVs remain pricey. Read Nathan's whole story. | | | | | | | | 3. Here comes an LNG spending surge |  Data: Rystad Energy; Chart: Axios Visuals The global scramble for natural gas — intensified by Russia's war on Ukraine — is slated to bring a near-term surge in spending on new liquefied natural gas infrastructure, Ben writes. Driving the news: The firm Rystad Energy estimates that investment in new projects will peak at $42 billion of developments sanctioned in 2024. Why it matters: The new analysis shows one of the spillovers from the energy shocks rearranging global commodity flows and supply relationships. Regionally, it notes the U.S. is set to "solidify" its recently won spot as the top global exporter. The intrigue: Rystad's work also dives into a dynamic we've explored — the tension between the near-term thirst for gas and nations' longer-term climate goals. "[P]roject approvals after 2024 are forecast to fall off a cliff as governments transition away from fossil fuels and accelerate investments in low-carbon energy infrastructure," the analysts find. | | | | | | | | A message from Global X ETFS | | Reasons to consider a covered call strategy | | |  | | | | Seeking to retain equity exposure while mitigating downside risk? The time could be right for covered call strategies. Navigate volatile markets with the Global X Nasdaq 100 Covered Call ETF (QYLD) — it writes call options on the Nasdaq-100 Index, aiming to generate monthly income. Explore QYLD. | | | | | | 4. 🏃🏽♀️Catch up fast on tech finance | | 🏍️ Ultraviolette, an Indian electric motorcycle company, announced a Series D investment from EXOR Capital as the company looks to launch its F77 bike, Ben writes. - The investment is $10 million, per multiple reports.
- EXOR is a key investor in Stellantis and Ferrari, and Ultraviolette said via Twitter that their expertise gained from working with the automakers "will be integral in carving a distinct identity for Ultraviolette and the F77 across the world."
📊 Carbon Direct, an emissions management platform, raised $60 million from private equity firm Quantum Energy Partners and investment group Decarbonization Partners, the joint vehicle formed by BlackRock and Temasek, Axios' Megan Hernbroth reports. 🏡 Lunar Energy, a home electrification startup, emerged from stealth yesterday with a pocket full of $300 million — the result of two funding rounds led by SunRun and SK Group, Axios' Alan Neuhauser reports. | | | | | | | | 5. Cash haul means lots of decisions for oil players |  | | | Illustration: Sarah Grillo/Axios | | | | Oil-and-gas producers in the U.S. and worldwide are on strong financial footing, but huge cash windfalls mean tricky choices about how to balance priorities, Deloitte analysts say, Ben writes. The big picture: Deloitte's new report finds that high prices, capital "discipline" and other forces are producing some eye-popping numbers. - The global exploration and production industry could see total free cash flows of $1.4 trillion in 2022.
- The shale sector, long synonymous with heavy debt, is seeing a major turnaround.
- The firm notes that U.S. shale producers have had negative cash flow nine out of the last 10 years, but could be debt-free by 2024.
What we're watching: How the wider industry uses the money — and specifically how much they devote to energy transition amid competing pressures around shareholder payouts, core business and more. - The share of industry capital investment devoted to various "low-carbon" pursuits may reach 30% by 2030, up from 5% now, it finds.
- The industry can overcome initially lower profit margins on clean energy projects.
- "[E]ven with that investment, the industry's overall return profile could remain strong and close to previous highs," a summary notes.
Read the whole analysis. | | | | | | | | A message from Global X ETFS | | Reasons to consider a covered call strategy | | |  | | | | Seeking to retain equity exposure while mitigating downside risk? The time could be right for covered call strategies. Navigate volatile markets with the Global X Nasdaq 100 Covered Call ETF (QYLD) — it writes call options on the Nasdaq-100 Index, aiming to generate monthly income. Explore QYLD. | | | | 🙏Thanks for reading and we'll see you back here tomorrow. |  | | Why stop here? Let's go Pro. | | | | | | Axios thanks our partners for supporting our newsletters. If you're interested in advertising, learn more here.
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