Economy

Musk's Bitcoin broadside, plus the trouble with high-carbon ESG funds

24/7 Wall St. Staff

Published: May 14, 2021 9:16 am

By David Callaway, Callaway Climate Insights

Nobody knows for sure why Elon Musk ended his two-month flirtation with Bitcoin this week, but we do know that Tesla made about $100 million in profit in the first quarter from the cryptocurrency — about a quarter of its total profit.

His claim that he suddenly got religion about the environment seems about as sketchy as his recent Saturday Night Live appearance, and is more likely just another of his periodic market-timing attempts. The episode is a stark example of Bitcoin’s instability, which should worry all investors, as it has continued to creep into the financial mainstream.

As an environmental play, however, it couldn’t come at a more important time. After four years of muzzling by the Trump Administration, the Environmental Protection Agency stood up and screamed on Thursday that extreme climate change is hitting the U.S. hard this spring. It issued a massive report with indicator after indicator to show how heat waves, rising seas and melting ice are hurting just about every community.

As a market event, climate change still can’t compete with the inflation storyline, or even the Bitcoin storyline. Tesla (TSLA) and the other electric vehicle stocks, along with the renewable plays, continue to get pounded this week after a big year in 2020. But like Bitcoin, they will bounce back, and it won’t be because of Elon Musk.

Climate risk is yet to be priced into most markets, even though it is literally staring us in the face.

More insights below. . . .

How ESG fund holdings could be WORSE for the environment

. . . . A new study has found environmental, social and governance funds have holdings that are actually worse for the environment than holdings of non-ESG funds, writes Mark Hulbert. Covering a period of eight years, the study found companies in ESG funds have a higher carbon intensity than their peers, and what’s worse, they did not improve over time.

But what possibly could cause ESG managers to go out of their way to invest in companies that are downright worse in their ESG performance? Could the managers actually be that nefarious?. . . .

Read the full column

ZEUS: Climate emergency in the old betting shop

. . . . When I moved to London 25 years ago, one of the most striking differences I noticed in the urban neighborhoods was the presence of the old betting shops.

Either William Hill or Ladbrokes brands, the shops had no windows to the outside, and once you walked in you were enveloped in the smoky, solitary study of the day’s racing form. Though you could bet on anything, including U.S. politics, the old betting shops were a testament to the bygone era — before mobile Internet — of cheap cigars, horses, betting slips, and delayed feeds from the track.

So I was struck by news last week that some of the old William Hill shops might be remodeled, along with other boarded-up stores in downtowns in the UK, as climate emergency centers. The idea that such monuments to pollution and poor health (as well as fun) could be reborn to help the environment seems a very English act of practicality.

The pandemic and the climate emergency have redrawn the lines of how society moves about, from wearing masks to social distancing, to stadium vaccine centers, and the proliferation of electric vehicle charging stations, the look of where and how we live is changing rapidly. . . .

Read the full ZEUS column

Thursday’s subscribers insights: Utilities seek cut of the solar pie

. . . . A legal battle is brewing between utilities and municipalities over electric companies’ attempts to charge fees to customers who installed solar panels on their homes. Renewable energy, they argue, is hitting their bottom line. Read more here. . . .

. . . . A scarcity of minerals for renewable energy projects is causing a gold rush in Canada for banks seeking to fund new mining efforts as part of a grand U.S.-Canadian supply chain. Read more here. . . .

UK peatlands need urgent attention, scientists warn. “Clear markets beyond corporate social responsibility need to be identified…Lack of evidence of financial return is a major barrier to private investors.” https://t.co/DlhOZ0Likn via @financialtimes

— Ben Caldecott (@bencaldecott) May 12, 2021

Latest findings: New research, studies and projects

How climate change is impacting the ocean and what we can do about it

The ocean is a massive carbon sink, protecting us from the worst of climate change. But rising air temperatures are melting glaciers, while warming seas are bleaching coral. Action like coral reef restoration is already underway — and research has found some corals to be more resistant to higher temperatures, Douglas Bloom writes for the World Economic Forum. And there are now calls to designate Marine Protected Areas for 30% of the ocean by 2030. The ocean is inextricably linked to our climate, and Bloom that scientists say the seas have absorbed 90% of all the warming that has taken place in the past 50 years. Read more from the WEF’s Virtual Oceans Dialogue.

More of the latest research:

• How Effective is Carbon Pricing? — a Machine Learning Approach to Policy Evaluation
• It takes two to dance: Institutional dynamics and climate-related financial policies

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