Financiers and academics say Sunak’s green finance approach is too market-oriented
Chancellor Rishi Sunak has brought in a raft of green finance initiatives in an effort to de-carbonise the UK economy. However, in a letter sent to the Chancellor, think-tanks, academics, researchers and financiers have outlined their concerns, with all signatories agreeing that Sunak’s new measures rely too heavily on market mechanisms.
The Chancellor’s green finance plans include: making Taskforce on Climate-related Financial Disclosures aligned disclosures mandatory by 2025; the next Bank of England stress test taking place next June; and the FCA introducing new rules requiring premium listed companies to disclose climate risk consistent with the recommendations of the Taskforce on Climate-related Financial Disclosures.
Following criticism and counter-proposals by Labour last week, today the Chancellor and BoE Governor, Andrew Bailey, have been sent a letter co-ordinated by the New Economics Foundation and Positive Money. The letter calls for the government to update the central bank’s mandate, so it is able to support a ‘fair green transition’.
The letter has 120 signatories, including former Bank of England Monetary Policy Committee member Willem Buiter, former White House adviser Nouriel Roubini and the founding director of the UCL Institute for Innovation and Public Purpose, Mariana Mazzucato, among other academics and civil society leaders.
The letter argues that the Treasury and Bank of England’s green finance initiatives – the disclosures and stress tests – are ‘insufficient’, and it warns that reliance on these policies amounts to no more than “leaving it to markets to self-regulate when it comes to climate risk”.
It also argues that the approach being used applies the same logic applied during the 2008 crash and the subsequent policy response. It adds that there has been a continued mismatch between rhetoric and action on the BoE’s part, which it says has a corporate bond portfolio “currently aligned with this 3.5 degrees pathway, well above the Paris Agreement goals”.
Commenting on the measures currently being proposed, Positive Money’s Director, Fran Boait, said: “The Bank of England could be doing much more to support the green transition, but is held back by a restrictive mandate that is no longer fit for purpose. The Chancellor must expand the Bank’s remit at the earliest opportunity, to enable it to take obvious and urgent actions like ensuring its quantitative easing programme is aligned with the government’s climate objectives.”
Responding to these apparent failures, signatories offer four suggestions to improve Sunak’s green finance push. First, the letter suggest that the BoE should encourage private financial flows towards green, job-creating projects to support the economic recovery and the net zero transition. Second, it should climate-related financial risks into its collateral framework and asset purchases.
Third, the Treasury should permit the Bank to help capitalise a new Green Investment Bank (GIB) to support lending to sustainable projects. On the latter, signatories suggest that the BoE could reinvest the maturing proceeds of the Covid Corporate Financing Facility into a GIB, which wouldn’t increase the net debt burden of the government.
Fourth, the letter calls for green taxonomy to not just classify green activities but also carbon-intensive and other unsustainable activities. Through a transparent and consultative process – comprising perspectives from across civil society and academia – the UK could avoid definitions of what is considered ‘green’ from being shaped by industry lobbyists behind closed doors.
Concluding, the New Economics Foundation’s Chief Executive, Miatta Fahnbulleh, added: “The UK needs to be a global leader in green finance, but the measures announced lack ambition – and place too much faith in the efficiency and self-regulation of financial markets. The incalculable human cost that came with the 2008 financial crisis was a crude reminder of what happens when financial markets are left to their own devices. A business as usual approach is simply not an option for the people and places left behind and hardest hit by the last recession.”
“To build back better we need a financial system that provides the vital patient strategic finance to support jobs, businesses and local communities in line with a low carbon transition. Changing the mandate of the Bank of England will help reshape our financial system and harness its benefits to support a green and socially just recovery.”
Kainos shares surge on 23% revenue growth
Kainos shares (LON: KNOS) were up over 4% after the group released a trading statement for the six months ended 30 September.
The IT provider reported a 23% growth in revenue from £86.9m to £107.2m. Pre-tax profit surged 100% from £12m to £24m.
The group said it had a “very strong performance” during the pandemic and the contracted backlog grew 38% to £180.9m.
Kainos is building up a presence in North America and in the UK, the group had significant ongoing engagements in UK government’s digital transformation programme, including the support of the NHS as it responded to Covid-19.
Brendan Mooney, the group’s chief executive, commented:
“Against the backdrop of Covid-19, we recognise that our strong business performance during this period has been a result of the hard work and flexibility of our people, and the support and trust of our customers. We remain immensely grateful for their ongoing engagement.
“We operate in digital transformation markets that have delivered strong growth over many years, which has added to the resilience our business has demonstrated through the pandemic. We anticipate that Covid-19 will continue to accelerate the already strong demand from customers for digital transformation and Workday services as organisations adapt to the changes that the pandemic has brought.
“We have maintained good progress on our early-stage investments, including our Artificial Intelligence and Machine Learning Practice, our Adaptive Planning acquisitions, with the Workday Extend platform (formerly Workday Cloud Platform) and the launch of our Intelligent Automation Practice. While these initiatives are at the beginning of their development journey, we believe that they have the potential to add significant growth opportunities in the future.”
Looking forward, Kainos remains confident for the second half of the year thanks to the contracted backlog.
Kainos shares (LON: KNOS) are trading +4.04% at 1.236,00 (1600GMT).
Moderna vaccine and Janssen trial lift stocks hardest-hit by COVID
US biotech firm Moderna (NASDAQ:MRNA) announced on Monday that its vaccine candidate has an efficacy rate of 94.5%. Similarly, Belgian company Janssen, a subsidiary of Johnson & Johnson (NYSE:JNJ), announced that it would begin its phase three UK trials on Monday.
“It is really important we pursue many different vaccines from many different manufactures,” said Prof Saul Faust, the director of the NIHR Southampton Clinical Research Facility, who will run the Janssen trial.
“We just don’t know how each of these vaccines is going to behave and we can’t be certain vaccine supply will be efficient and secure from one manufacturer”, he added.
Janssen said it will recruit 6,000 volunteers across the UK, and a total of 30,000 people internationally, to test the efficacy of its two-part vaccine. However, the company noted that results could take between six to nine months to be available.
Meanwhile, in the more immediate term, the Moderna vaccine candidate will provide a huge boost of hope to populations and COVID-suffering stocks alike. Quoted as having a 94.5% efficacy rate against the virus, and 100% effectiveness in combatting ‘severe’ COVID, the new vaccine will compliment the Pfizer offering announced last week.
At present, the UK government has no pre-orders for the vaccine, but says it is in discussion with Moderna, to try and access some of the stock, should UK health services choose to use it. The EMA has said it has already begun evaluating the first batch of data on the mRNA-1273 Moderna vaccine, on the back of similar reviews on the AstraZeneca and Pfizer candidates.
Following these exciting developments, the COVID-stricken equities that enjoyed a Pfizer-backed rally last week, had something a renaissance this Monday.
Having fallen towards the end of last week, air travel stocks IAG and Rolls Royce rallied by around 11% and 8% apiece. Likewise, hoteliers have boomed, as seen with both Whitbread and Intercontinental Hotels rallying over 8% respectively.
The longevity of these spikes is likely to be short-lived for now, given that the myriad logistical challenges are likely to remain a worry for consumer and companies – and mean we are still far from ameliorating pandemic-related risk factors.
Crucially, the Moderna vaccine does not require the -80oc degree storage that the Pfizer candidate does. Unfortunately, it was the latter vaccine that the UK government placed a 30-million-unit order for.
Antofagasta shares rally as it commits to ‘responsible mining’ Copper Mark
FTSE 100 listed mining blue chip, Antofagasta (LON:ANTO), watched its shares rally during Monday morning trading, as the company announced that two of its projects would be committed to the Copper Mark.
The Centinela and Zaldívar projects will now be assessed versus the Copper Mark’s assurance framework, which the company says is designed to demonstrate the industry’s responsible production practices, and contribution to the UN’s Sustainable Development Goals. It adds that:
“The Copper Mark goes beyond compliance and focuses on the continuous improvement of responsible production.”To be granted the Copper Mark, the Antofagasta operations will have to comply with 32 criteria within two years of having stated their commitment to abiding by the framework. These criteria, the company says, ‘relate to issues important to all stakeholders’, including greenhouse gas emissions, safety and health, tailings management, biodiversity, business integrity, gender equality and human rights. If the company are granted the Copper Mark, its status will be reviewed via an independent assessment of its compliance every three years.
Speaking on the announcement, company CEO, Iván Arriagada, said: “We are starting this important process at Centinela and Zaldívar and will then extend it to the rest of our Mining operations. Application for the Copper Mark is a voluntary process that allows an external independent entity to review our sustainability practices and indicate our level of compliance and whether there are any aspects we must improve.”
René Aguilar, Vice-President of Corporate Affairs and Sustainability added: “This external independent review will help us to continue improving our responsible mining practices. We are working towards becoming leaders of sustainability in our industry and the Copper Mark is a further and important step forward in this journey.”
Following the news, Antofagasta shares rallied by around 3%, to 1,160.00p. This is the company’s year-to-date high, but also more than 20% above analysts’ target price of 917.69p a share. Analysts currently have a consensus ‘Hold’ stance on the stock; a p/e ratio of 34.22; and a 71.91% “underperform” rating from the Marketbeat community.House prices dip ahead of stamp duty deadline
According to new data from Rightmove, housing prices in the UK are taking a dip from their record highs.
As sellers rush ahead of the stamp duty deadline, the property website found a 0.5% fall from October’s average asking price of £323,000.
Since Rishi Sunak introduced the stamp duty holiday over summer, the housing market has seen a boom.
“Given the ongoing mini-boom, prices might have been expected to rise again this month,” said Tim Bannister, Rightmove’s director of property data.
“But instead we have a slight dip, which could be a result of some new sellers pricing more realistically to have a better chance of agreeing a sale in time to benefit from the stamp duty savings on their onward purchase.”
The stamp duty holiday is expected to end at the end of March. Rightmove has said that sellers should be more realistic when pricing their houses to ensure they are sold before the end of the deadline.
Bannister said: “We know from a recent Rightmove study that sellers are twice as likely to sell if they agree a sale based on the first price at which their property goes on the market, something that’s even more important now as we move towards the end of March and the end of the stamp duty holiday.
“If your initial asking price is too high, then you’re less likely to get an offer even after you’ve cut your price back to a more realistic level.”
Vodafone shares rise on “resilient” H1 results
Vodafone shares (LON: VOD) surged on Monday’s opening after the group described a “resilient” financial performance during the first half of the year.
Group revenue declined by 2.3% to €21.4bn amid lower revenue from roaming, visitors and handset sales.
The mobile firm says that on the back of its half-year results, it has “increased confidence” in its full year outlook.
Vodafone has increased its guidance to between €14.4bn and €14.6bn for its 2021 financial year. This is up from last year’s guidance of €14.5bn.
The group saw deepening customer engagement, with mobile contract customer loyalty improved year-on-year for an 8th successive quarter and also launched 5G in 127 cities.
In a statement, chief executive Nick Read said: “Today’s results underline increased confidence in our full year outlook. We are reporting a resilient first half performance and we continue to see good commercial momentum across the Group. The results demonstrate the success of our strategic priorities to date, namely increasing customer loyalty, growing our fixed broadband base, driving digitisation to simplify the company and capture significant cost savings, and deliver 5G efficiently through network sharing.
“COVID-19 and the reduction in roaming revenues, through the significant reduction in international travel, is currently obscuring our underlying commercial progress, with Q2 service revenue growing by 1.5% excluding roaming. We are now two years into our longer-term strategy to transform Vodafone into a business that enables a digital society, generating both sustainable growth and attractive returns. We are executing at pace, but there remains more to be done to achieve our goals.
“Now, more than ever, the connectivity services we provide are critical for society and the demand is growing for our services. I am proud of how our dedicated employees have worked tirelessly around the clock to keep everyone connected,” he added.
Vodafone shares (LON: VOD) are trading +3.82% at 124,08 (0948GMT).
FTSE 100 continues to rise on vaccine hopes
The FTSE 100 rose on Monday’s opening bell thanks to the weekend’s positive vaccine news.
The blue-chip index climbed 0.6% to 6,357 points as it was boosted by top risers IAG, Rolls Royce, and Standard Chartered.
HSBC, Barclays, Natwest, and Lloyds also rose significantly this morning.
The FTSE 250 also picked up on Monday thanks to rising shares in Cineworld, Carnival, and easyJet.
“The European markets awoke to another dose of vaccine positivity this Monday, temporarily inoculating them to the horrifying covid-19 numbers coming out of the US,” said Connor Campbell from Spreadex.
“To top it off, the Dow Jones is on track to open at a record high. With the futures pencilling in a 300 point rise, the Dow is set to start the week at 29,770, finally making good on the all-time high intraday levels struck this time last week. This surge comes despite US covid-19 cases passing 11 million over the weekend, with a recent record of 184,000 new daily cases.”
In Asia, markets are on track to hit record highs. Markets in Japan and South Korea surged by around 2% whist China’s SSE increased by around 1%.
Michael Hewson, chief market analyst at CMC Markets, commented: “The optimism of last week appears to be rolling into this week, with markets in Asia seeing another positive session, helped by the weekend news of a signing of a new Asia Pacific trade deal, and the latest China data.”
Arcadia denies administration but is “taking all appropriate steps”
Arcadia could be taking out a £30m loan to deal with the impact of the second lockdown.
According to Sky News, the retail empire which owns brands including Topshop and Dorothy Perkins, has been hit hard by the pandemic and could be on the brink of administration.
A spokesperson told the Sunday Times it was not going into administration but simply “taking all appropriate steps”.
“It is not true that administrators are about to be appointed. Clearly, the second UK lockdown presents a further challenge for all retailers and we are taking all appropriate steps to protect our employees and other stakeholders from its consequences,” said the spokesperson.
During the first lockdown when non-essential retailers in England were closed, Arcadia furloughed the vast majority of its 15,000 workforce.
The group avoided collapse earlier this year thanks to securing a company voluntary arrangement (CVA).
The retailer was hit by the closure of 50 Debenhams stores due to the Arcadia concessions. Arcadia has an estimated 350 concessions in Debenhams stores, which together create an estimated £100m in combined annual sales.
Arcadia cut approximately 500 head office job cuts earlier this year.
Earlier this year, Philip Green sold BHS to Dominic Chappell who was recently jailed for tax evasion. As a result, the Arcadia owner was forced to inject over £360m to fund the pension deficit.
Chappell was sentenced to six years for evading tax on his BHS income of over £2m.
“You are not of positive good character. Your offending occurs against a backdrop of successive bankruptcies,” said judge Justice Bryan at the time.
Tenzo joins forces with Innovate UK to launch food waste initiative
AI sales forecasting and restaurant analytics startup Tenzo has joined forces with the UK’s innovation agency Innovate UK to launch a £500k initiative to “continue its fight against food waste in restaurants and help restaurants survive and thrive as the world comes out of the pandemic”.
In the midst of what Young’s Pubs has called one of its “toughest years” in its 189 years of trading, the UK restaurant industry has suffered immensely in the face of the coronavirus pandemic. Widespread lockdown measures forced the majority of restaurants to close their doors to the public during the spring, and despite the initial success of the government’s ‘Eat Out to Help Out’ scheme, footfall appears to have taken a fatal blow amid ongoing virus fears.
Tenzo – launched in 2016 with “a mission to revolutionise the way restaurants and retailers use their data” – has said that it intends to use the funds to “develop the most cutting-edge sales forecasting platform for restaurants using the power of artificial intelligence and machine learning”.
The new tool will use AI to “improve the accuracy of daily restaurant sales forecasts by up to 50%” and will give operators item-level and hourly forecasts so that they know “exactly what needs to be ordered and prepared as well as when”.
Christian Mouysset, Tenzo CEO and co-founder, welcomed the news of the new project:
“The UK hospitality industry generates over 1 million tonnes of food waste each year, amounting to over 4.5 million tonnes in CO2 emissions and costing the industry over £3.2 billion in lost revenue.
“On top of that, restaurants operate on a 3-5% average profit margin, making it one of the least profitable sectors in the country. The ongoing pandemic and subsequent lockdowns have also had a significant financial impact on the sector; restaurants need to save on costs now more than ever.
“By 2025, Tenzo will reduce annual UK hospitality food waste by over 180,000 tonnes – over 800,000 tonnes of CO2 and save the industry close to £100 million in costs”.
Tenzo’s business model is notably ambitious, but reflects the growing trend towards sustainability initiatives across a wide variety of sectors, from manufacturing to restaurant dining:
“We want to be in the pocket of every decision-maker in every restaurant and store on the globe, giving actionable insights to the right person, at the right time, and on the right device. Through our insights and forecasts, we aim to help every brick-and-mortar business become less wasteful, reducing the impact that humanity is having on the planet, and creating more efficient businesses that grow faster”.
Tenzo is already being used in over 10 different countries, including by famous brands such as Nando’s and TGI Friday’s.
Oil prices fall again with demand not expected to recover until ‘mid-2021’
After a harsh year for oil traders, in which some blue chip equities hit twenty-year lows, the short-lived enthusiasm for a COVID vaccine has seen oil prices slump once again at the end of the week.
Speaking on Thursday, the IEA reiterated the sentiment of other sceptics, saying that, “It is far too early to know how and when vaccines will allow normal life to resume”. With this in mind, it said that the outlook remains poor for production and transportation, and in turn oil demand and prices.
Concisely summing up the prognosis for oil prices over the coming months, Reuters market analyst, John Kemp, said: “Coronavirus vaccines are expected to boost international passenger transportation and oil consumption, but the first significant impact will not be felt until well into the second half of 2021, based on futures price movements on Monday,”
Echoing the concerns of the IEA, OPEC‘s recent MOMR downwardly revised its projections for oil demand and prices. It stated that the demand would be ‘severely hampered’ by the ‘sluggishness’ of transportation and industrial fuel demand in OECD economies, until at least mid-2021.
It added that while a vaccine may offer some relief for these pressures, challenges including Brexit, geopolitical challenges, global debt levels, and social unrest due to COVID and rising inequality, all represent notable downside risks.
Speaking on the PEC MOMR, Oilprice.com Editor, Julianne Geiger, said: “OPEC forecast that oil demand will fall this year 300,000 bpd more than it thought last month. OPEC also said that this weak demand would continue into next year. Cutting next year’s demand outlook as well, OPEC now sees 2021 oil demand 300,000 bpd lower than it thought last month. This means it sees 2021 oil demand at just 6.2 million bpd over 2020 levels, and still under 2019 levels.”
On the Pfizer vaccine announcement, and the subsequent celebration by airlines, finance and oil, Brent Crude hit $43.80, its highest level since September. As markets close on Friday afternoon, it sits at $42.98, down by 1.26% from the previous day – while WTI Crude fell by 1.80%.