Economy

Deutsche police raid adds teeth to emerging ESG campaign, plus the first EV pickup is here

By David Callaway, Callaway Climate Insights

Good morning and happy to be reporting back from California for the first time in three weeks, though I could do without the $6.79 a gallon gasoline. When we wrote last week about the Securities and Exchange Commission’s $1.5 million fine against BNY Mellon for misleading statements tied to its climate products, we said we expected this to be the start of a big summer campaign by regulators.

But even we didn’t consider police raids, which happened this morning in Germany at the famous headquarters of Deutsche Bank and its nearby asset manager, DWS Group. The raid is part of an existing investigation, which DWS said it has been cooperating with, sparked last year when a former executive accused the fund manager of inflating its environmental, social and governance credentials.

The surge in energy prices tied to inflation, and the war in Ukraine, has caused a dramatic re-evaluation of the promise of ESG investing strategies on Wall Street and in other financial centers this year. Ongoing investigations and a new round of fines, as well as coming disclosure requirements, are unlikely to stem the controversy anytime soon.

Nothing strips bare the false or misleading claims of financial product sales operations like a distressed market, which we’re seeing in spades right now. Goldman Sachs claimed last week that even the commodities behind the batteries craze, lithium, cobalt and nickel, are nearing the end of their bull cycle after investors overbought in their zeal for electric vehicles.

Germany’s regulators may harbor a more dramatic sense of how to execute a white-collar investigation. But fund managers everywhere certainly took notice this morning.

More insights below . . . .

Tuesday’s subscriber insights: Single question looms over EU oil embargo

. . . . The EU voted to go ahead with its oil embargo this week, but only on oil delivered by ship, not pipelines. The decision was a concession to Hungary, which is almost totally dependent on Russian oil for its energy. Estimates on how much of the 2.2 billion barrels of oil Russia delivers to Europe each day by ship range from two-thirds to “most,” and experts believe Russia will still find buyers for its oil in India and China. As we write, it’s being reported that OPEC is considering some sort of Russia ban as well. Any decision that moves the needle in the right direction is welcome, assuming “most” means most. . . .

. . . . The pickup truck is of vital importance to the U.S. auto industry. With the range of most American-branded cars being slimmed (and now being made in places such as Mexico), the backbone is in pickups and SUVs. Thus, Ford has been wise to lead the EV race in this sector, and in beating Tesla to the finish line on the first one sold to a buyer last week, scored a decisive victory. Read more here. . . .

. . . . Climate advocates worried about an upcoming Supreme Court ruling against the Environmental Protection Agency were briefly heartened last week when SCOTUS allowed a previous ruling to stand in favor of the Biden administration’s use of a social cost on carbon to help set an unofficial price for regulators. The cost, currently $51 a ton, is widely regarded as too low, but it’s better than the cost under former president Trump, which was $1. . . .

. . . . You have to hand it to the Japanese. Toyota is the top automaker (globally and in the U.S.). Their tire brands are the biggest. And they are electronics pioneers. And now Japan may have cracked a new form of renewable energy, from ocean currents (as opposed to tidal). Read more here. . . .

Editor’s picks: Wild weather this week, major Western states power line OK’d

Major western states power line for renewables approved

The Bureau of Land Management has issued final approval for construction of the 416-mile Energy Gateway South Transmission line, part of the Biden administration’s “efforts to modernize America’s power infrastructure in the West” and permit at least 25 gigawatts of solar, wind, and geothermal production on public lands by 2025. BLM says the project is expected to support 1,325 construction jobs and help integrate up to 2,000 megawatts of new renewable energy resources into the grid while also ensuring reliability of existing generation resources. The agency says PacifiCorp, PacifiCorp, a subsidiary of Berkshire Hathaway Energy (BRK.B),  will begin construction of the 500-kilovolt transmission line, which will run from the Aeolus Substation near Medicine Bow, Wyo., through Colorado, and ends at the Clover Substation near Mona, Utah. The project is part of PacifiCorp’s larger Energy Gateway Transmission Expansion, a multiyear plan to add approximately 2,000 miles of new transmission lines across the western U.S.

400 billion tons: The approximate total glacier loss per year since 1994

Ice, which covers 10% of Earth’s surface, is disappearing rapidly. And glaciers, NASA says, are sentinels of climate change. According to NASA’s Vital Signs of the Planet project, ice can take centuries to develop but can vanish in just a few years. “A glacier doesn’t melt slowly and steadily like an ice cube on a table. Once glacial ice begins to break down, the interaction of meltwater with the glacier’s structure can cause increasingly fast melting and retreat.” This matters because the widespread loss of glaciers can alter climate patterns in complex ways: A glacier’s white surface reflects sunlight, which helps keep the climate mild. But “when glaciers melt, darker surfaces are exposed, which absorb heat. This raises temperatures even more.”

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