Jan 14, 2020

Axios Generate

Good morning. Today's Smart Brevity count: 1,287 words, 4.8 minutes.

And Friday brought the sad news that Rush lyricist and drummer Neil Peart succumbed to cancer. So let's pay tribute with a sample of his brilliance...

1 big thing: BlackRock's new climate strategy

Illustration: Sarah Grillo/Axios

BlackRock, the world's largest asset manager, vowed on Tuesday to make climate change a pillar of its corporate strategy and mission.

Why it matters: BlackRock has nearly $7 trillion in assets under management, and faces growing activist pressure to use its leverage to hasten the global transition to low-carbon energy.

The NYT's Andrew Ross Sorkin writes that the move "could reshape how corporate America does business and put pressure on other large money managers to follow suit."

Driving the news: CEO Larry Fink, in his annual open letter, writes that climate is a "defining factor in companies’ long-term prospects" and that "we are on the edge of a fundamental reshaping of finance."

The company announced a suite of new steps on climate and weaving sustainability into its investment products, including...

  • Offering "sustainable versions of our flagship model portfolios." They will "use environmental, social, and governance (ESG)-optimized index exposures in place of traditional market-cap-weighted index exposures."
  • Doubling the number of ESG-focused exchange-traded funds it offers over the next few years and new tools to help clients screen out fossil fuels.
  • Dropping companies that produce coal used in power production from its active investment portfolios. It applies to companies that derive more than a quarter of their revenue from thermal coal production.
  • More broadly, BlackRock is vowing more "sustainability integration" into its active investment portfolios.
  • A tougher posture on climate-related shareholder resolutions. "[W]e will be increasingly disposed to vote against management when companies have not made sufficient progress," it said. The company has faced criticism for voting against key shareholder resolutions that push companies to take stronger steps.

The moves come days after BlackRock joined the investor advocacy network Climate Action 100+.

The intrigue: The letter hints at why BlackRock will face continued criticism from activists who want more aggressive movement away from fossil fuels.

  • "Despite recent rapid advances, the technology does not yet exist to cost-effectively replace many of today’s essential uses of hydrocarbons," Fink tells CEOs.
  • "We need to be mindful of the economic, scientific, social and political realities of the energy transition," he adds.
Bonus: What they're saying about BlackRock

This morning I touched base with the Sunrise Project, which pushes financial firms to pull money away from coal, oil and gas.

Here's part of a statement from Sunrise senior strategist Diana Best...

  • “BlackRock beginning its shift of capital out of fossil fuels, including today’s divestment of coal in its actively managed funds, is a fantastic start and instantly raises the bar for competitors such as Vanguard and State Street Global Advisors," said Best.

But, but, but: She notes BlackRock will "still remain one of, if not the largest, investors in fossil fuels."

"So we will be looking for additional leadership from the company in, as Larry Fink said, ‘fundamentally reshaping finance to deal with climate change,' including additional shifts of capital out of fossil fuels," said Best, whose group is part of the wider BlackRock's Big Problem campaign.

2. Volkswagen's coming EV surge
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Data: Wood Mackenzie; Chart: Andrew Witherspoon/Axios

Volkswagen won't meet its electric vehicle targets, but it'll come close enough to become the world's largest EV manufacturer by decade's end, a new analysis finds.

Why it matters: The new projections from the consultancy Wood Mackenzie offer a piece of the puzzle as to how the increasingly competitive EV market will shake out this decade.

What it found: Wood Mackenzie's base case sees VW manufacturing 14 million vehicles by 2028.

That's well short of its plan to reach 22 million that's part of its wider climate goals, but would still "represent 27% of all global EVs, requiring 30% of battery cell supply," the firm said.

The big picture: It shows how legacy automakers will be huge players even as newer entrants — most notably Tesla — grab lots of attention. As of 2018 VW was only in 10th place when it comes to EV manufacturing, Wood Mackenzie said.

"VW views battery electric vehicles (BEVs) as the most effective means of CO2 reduction. Currently, there is very little overlap between the top ten automakers and top ten BEV makers. In fact, only three companies — Nissan, Hyundai and VW — appear on both lists," the consultancy said.

Bonus: Tesla's uncharted territory
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Data: Money.net; Chart: Axios Visuals

Speaking of Tesla and EVs, the Silicon Valley electric automaker's stock soared past $500-per-share for the first time Monday.

Why it matters: It's a sign of recent good news for Tesla, which has a way of lurching from near-crises to successes and has been buoyed by several recent developments.

They include turning a profit in the third quarter, record deliveries in the fourth quarter, and the recent launch of deliveries from its new factory in China.

The intrigue: Via Axios Markets editor Dion Rabouin, short sellers who have bet against Tesla's stock price surrendered a total of $2.89 billion in net-of-financing mark-to-market losses in 2019, and have almost matched that total in less than two weeks of trading in 2020, according to data from S3 Partners.

Go deeper: Tesla stock closes at an all-time high over $524 (CNBC)

3. The gas glut's reckoning

EQT Corp., the largest U.S. natural gas producer, plans to take a fourth-quarter write-down of up to $1.8 billion.

Why it matters: EQT, which has major Appalachian operations, is the latest company to write down the value of U.S. assets amid a glut of supply and very low prices.

  • The plan disclosed in a regulatory filing Monday comes after Chevron last month announced an $11 billion write-down that was also focused largely on Appalachian gas holdings.
  • Another big company, Range Resources, last week warned of a "significant non-cash impairment" related to holdings in Louisiana, and also said it planned to cut overall spending in 2020 by over $200 million.

The big picture: Via Natural Gas Intelligence, "Operators across Appalachia are expected to slash spending this year and curb output in the years ahead as prices are earthbound on a glut of natural gas."

Go deeper: Largest US natural gas producer takes $1.8bn writedown (Financial Times)

4. Cory Booker leaves a nuclear gap in 2020 race

Sen. Cory Booker's exit from the 2020 White House race means the field is losing a nuclear advocate whose views clashed with some top contenders.

The big picture: The Washington Examiner's Abby Smith points out that Booker "didn’t hold back in his criticism of his Democratic counterparts skeptical of nuclear energy’s role in a low-carbon future."

  • Her item cites Booker's comments in a September HuffPost interview that highlighted his differences with Bernie Sanders and to a lesser degree Elizabeth Warren.

What he said: "As much as we say the Republicans when it comes to climate change must listen to science, our party has the same obligation to listen to scientists," Booker said.

5. NYT: Russian hackers hit Ukrainian gas company Burisma

Russian hackers from the military intelligence unit known as the GRU successfully targeted Burisma, the Ukrainian gas company that once employed Hunter Biden as a board member, the New York Times reports.

Why it matters: President Trump was impeached as a result of his alleged efforts to pressure the government of Ukraine to investigate Burisma and the Bidens over unsubstantiated corruption allegations, writes Axios' Ursula Perano.

The intrigue: "The timing of the Russian campaign mirrors the GRU hacks we saw in 2016 against the DNC and John Podesta," the co-founder of Area 1, the firm that detected the hack, told the Times. (The company has released a report detailing its findings.)

Our thought bubble, via Axios' Scott Rosenberg: Public awareness of the Burisma hack cuts both ways politically.

  • For former Vice President Joe Biden's campaign, it means document dumps could happen at any time, with accompanying media frenzy and potentially damaging revelations.
  • For the Trump campaign, it means that any such revelations will come pre-tainted with a Russian label.

Go deeper

6. Catch up fast: Coal, Aramco, offshore wind

Coal: Via Reuters, "U.S. coal-fired power plants shut down at the second-fastest pace on record in 2019, despite President Donald Trump’s efforts to prop up the industry, according to data from the federal government and Thomson Reuters."

Venture capital: Per Greentech Media, "Saudi Aramco’s corporate venture capital arm is preparing to launch a new $500 million fund to invest in energy efficiency and renewable energy solutions as well as new oil and gas technologies.

Renewables: Via CNBC, "A global coalition focusing on ocean energy was announced Monday, with its members saying they want to advance the 'sustainable deployment of ocean-based renewable energy' and, in addition, mitigate the impacts of climate change.

Members of the new Ocean Renewable Energy Action Coalition include Equinor, Orsted, Shell, and Siemens Gamesa.