BlackRock launches Circular Economy fund in conjunction with the Ellen MacArthur Foundation
In a milestone partnership for the asset management industry, BlackRock have partnered with the Ellen MacArthur Foundation to launch a circular economy fund.
The circular economy is an approach that aims to stamp out the ‘take-make-waste’ model of the linear economy by reducing pollution, keeping materials in the economy and preventing deforestation.
The fund named ‘BGF Circular Economy’ will invest in the preservation of materials and eradication of waste by seeking out stocks from a pool of 800 companies that display characteristics supporting the circular economy.
While impact and ethical investing has been a theme for the past decade, upcoming climate control targets are now creating numerous opportunities outside of traditional ethical investments, such as renewable energy.
“Investors have a vital role to play in scaling the circular economy. They can, for example, allocate capital, provide services and engage with companies on their strategies. At the same time, the circular economy presents new opportunities to create value for investors, while addressing major global issues including climate change, biodiversity loss and pollution,” said Dame Ellen MacArthur.
Working with fund manager Evy Hambro and his team at BlackRock, the Ellen MacArthur Foundation highlighted specific areas of the circular economy, such as addressing the 30% waste of nutrients throughout the value chain, as targets for investment.
On Ellen MacArthur Foundation suggestions the BlackRock team are to undergo a qualification process for a wider strategy that is centred on the tiering of risk that allocates 40% of the fund to the top ten holdings. This ground-breaking approach to structuring a fund based on risk-tiering is the first time BlackRock have employed such a model.
The fund has outlined three categories of companies they have set out to invest in. These are ‘Adopters’, ‘Enablers’ and ‘Beneficiaries’ of the circular economy.
Adopters
Adopters are those companies that have made a contribution to the circular economy an integral part of their company. An example is Adidas who plan to make 11 million pairs of trainers from recycled plastic from the ocean.
Enablers
Those companies that facilitate the circular economy through their service. This may be a resale or sharing platform that enables individuals and businesses to keep materials in circulation and avoid waste.
Beneficiaries
Beneficiary companies stand to benefit from increased activity in the circular economy, for example companies whose existing products benefit from the move away from hard plastics.
The fund was launched with $20 million seed assets provided by BlackRock and will now seek further backing from the wider market.
Commenting on the overall process of launching the fund and interactions within BlackRock, Hambro said the reception for the thematic approach to the circular economy was meet enthusiasm while the Ellen MacArthur Foundation were positive on the prospect of the launch tasing awareness throughout the asset management industry.
IAG supports net zero carbon emissions by 2050
International Airlines Group announced on Thursday that it will commit to achieving net zero carbon emissions by 2050.
The owner of British Airways is the first airline group worldwide to do so.
Shares in International Airlines Group (LON:IAG) were up during Thursday morning trading.
International Airlines Group said that it will “contribute to both the UK government’s commitment to a net zero carbon economy by 2050 and the United Nations’ objective to limit global warming to 1.5 degrees”.
Over the past few weeks, people have joined across different timezones, cultures and generations in an attempt to unit against the growing climate crisis.
International Airlines Group said that British Airways will offset carbon emissions for all of its UK domestic flights from 2020. The company also said that it would invest $400 million in sustainable aviation fuel in the next 20 years and replace old aircrafts with more carbon efficient versions.
“Today aviation represents two per cent of global CO2 emissions,” Willie Walsh, IAG’s Chief Executive, said in a company statement.
“We’re investing in new aircraft and innovative technology to reduce our carbon footprint in an industry where there’s no current alternative to jet fuel,” the Chief Executive added.
“In addition to our own initiatives, there must be a global solution and we’re participating in the new United Nations’ aviation offsetting scheme which allows our industry to invest in carbon reduction in other sectors.”
“Aviation’s dependency on fossil fuels means that it’s essential that governments support its efforts to decarbonise by providing incentives to accelerate investment in new technologies. Global warming needs a global solution and all these initiatives will help limit the world’s temperature increase to 1.5 degrees”.
Climate activist Greta Thunberg addressed world leaders recently on the topic of the climate crisis:https://platform.twitter.com/widgets.js Shares in International Airlines Group (LON:IAG) were trading at +0.5% as of 11:04 BST.“Right here, right now is where we draw the line. The world is waking up. And change is coming, whether you like it or not.” My full speech in United Nations General Assembly. #howdareyou https://t.co/eKZXDqTAcP
— Greta Thunberg (@GretaThunberg) 23 septembre 2019
UK GDP dips but looks set to sidestep recession
The UK economy (GDP) dipped by 0.1% during August, following a downturn in manufacturing and production activity, and a 0.3% hike in July, which was led by the service sector and irregularly high output from the TV and film sector (which was factored into manufacturing).
Despite this month’s drop, the UK economy looks set to avoid a technical recession, which is contingent on consecutive quarterly contractions in GDP. Following the figures for August, the UK GDP would have to perform an unlikely nosedive of 1.5% in September in order to achieve that gloomy threshold.
We’re not ready to fully rule that out, of course, with the tensions persisting on the international stage, as well as our self-inflicted diplomatic debacle, the mood as a whole is decidedly pessimistic. That being said, Capital Economics reported that the UK GDP could grow by as much as 0.4% during the third quarter, in spite of persistent warnings of grey skies in both the political and economic landscape.
ING Economist James Smith echoed the view that the UK was likely to avoid recession,
“UK GDP contracted by 0.1% in August, suggesting there is very little to cheer about in the UK economy at the moment.”
“That said, the economy will most likely avoid a near-term technical recession. Consumer activity is continuing to grow, even if confidence remains fairly depressed. Shoppers appear to have been less fazed by the ups-and-downs of the Brexit process than businesses.”
“But even so, economic growth is likely to remain fairly modest for the rest of this year, averaging around 0.2-0.3% per quarter. This means that the Bank of England is likely to remain cautious, although we still feel its probably too early to be pencilling in UK rate cuts.”
https://platform.twitter.com/widgets.js This quarter will close at the end of October, and fears not only over tariffs but also the potential impact of restricted free movements will have to be considered, especially in the context of the recently booming TV and Film sector, which is reliant upon the transit of talent and equipment across borders. The UK’s three month rolling growth rate is up to 0.3%. Elsewhere in political and macro economic news, there have been updates from; Hong Kong protester shooting and China’s strategy, the Supreme Court’s ruling, the collapse of Thomas Cook (LON: TCP), ECB stimulus, the bid for the London Stock Exchange (LON: LSE), Lloyds Banking Group PLC (LON: LLOY), Hilary Benn’s Brexit delay bill, Barclays (LON: BARC) and Deutsche Bank (ETR: DBK).Some better news for UK construction as sector output grew by 0.1%q/q in the 3 months to August, following a -0.9%q/q fall in the 3 months to July. Main boosts came from house building & construction of offices & the like. pic.twitter.com/ir5SGnZvyO
— Rupert Seggins (@Rupert_Seggins) October 10, 2019
UK indices nervously await GDP readings and Boris-Varadkar compromise
Moving gingerly rather than negatively, the pound Sterling and FTSE were both full of anticipation after the first bell. They both held off on their regular market-opening movements and awaited the outcome of both the August monthly GDP readings and the talks between Boris Johnson and Leo Varadkar.
July revealed a surprisingly positive story for the UK, but it is feared some of the miasma of stale market and political sentiments will have leached into GDP performance in August. Similarly, Boris Johnson will be speaking with Taoiseach Leo Varadkar in an attempt to revive some incarnation of his new (non) backstop chop suey, following the EU’s outright rejection – which was followed by a condemnation of the prime minister’s approach. Should the talks prove as fruitless as the others preceding it, expect indices to react negatively, as a the increased likelihood of a No Deal outcome never fails to make markets shiver.
Speaking on the market’s movements, Spreadex Financial Analyst Connor Campbell commented,
“On the day the latest trade talks between the US and China actually begin, the UK markets have a data-distraction to tide them over this morning.”
“After a better than forecast reading for July, August’s monthly GDP reading is set to act as a reminder, if it was needed, that the UK economy is struggling with the uncertainties of pre-Brexit. Analysts are expecting a dreary 0.0% reading, a sharp comedown from the previous 0.3% – let’s just hope it doesn’t turn negative.”
“There’s likely little joy to be found in the manufacturing and industrial production figures either. The former is estimated to fall from 0.3% to 0.1% month-on-month, with the latter set to suffer a similar slide from 0.1% to 0.0%.”
“Ahead of this the pound pushed 0.1% higher against the dollar, straining to keep off its recent 5-week lows, but shed another 0.2% against the euro, leaving it at its worst price since September 5th. The FTSE, meanwhile, added a handful of points as it remained short of 7200.”
“The session’s UK data might not come to mean much, however, dependent on what kind of news leaks out of the impending meeting between Boris Johnson and Irish Taoiseach Leo Varadkar, the pair seeking to find a compromise on the issue of the Irish border after talks collapsed with the EU.”
Elsewhere in political and macro economic news, there have been updates from; Hong Kong protester shooting and China’s strategy, the Supreme Court’s ruling, the collapse of Thomas Cook (LON: TCP), ECB stimulus, the bid for the London Stock Exchange (LON: LSE), Lloyds Banking Group PLC (LON: LLOY), Hilary Benn’s Brexit delay bill, Barclays (LON: BARC) and Deutsche Bank (ETR: DBK).Brexit uncertainty weighs on house purchases, RICS
New data on Thursday revealed that house. buyer enquiries have fallen as Brexit uncertainty discourages people from house purchases.
The Royal Institution of Chartered Surveyors’ (RICS) UK Residential Market Survey for the month of September revealed that a more cautious approach from buyers is visible over the month, and the new buyer enquiries net balance dropped to -15%.
Additionally, in September, a decline was reported in home listings coming onto the market.
The new instructions net balance dropped to -37% for the month, which is the weakest reading since June 2016, according to the data. Indeed, as the nation has now entered the month of the extended Brexit deadline, uncertainty prevails. Just yesterday the UK Pound saw a slump to its lowest level in over a month amid an uncertain Brexit outcome. “There are good reasons for thinking the latest dip in both buyer enquiries and vendor instructions is a response to the endless wrangling about Brexit, as the October 31st deadline approaches,” Simon Rubinsohn, RICS Chief Economist, commented on the data. “Indeed, much of the commentary from respondents based further away from London and the South East remains relatively sanguine, which is also reflected in some of the metrics capturing expectations,” the Chief Economist continued. “However, unless there is a speedy resolution to the ongoing impasse it does seem inevitable that the stand-off between purchasers and sellers will deepen making it harder to complete transactions. This will not only be a direct hit on the housing market itself but could have ramifications for the wider economy as the normal spend on furniture, fittings and appliances that typically accompanies a house move is also put on hold.” Brexit uncertainty has also weighed on other sectors, with retailer John Lewis warning that a no-deal departure from the European Union will have a “significant” impact on its business.Balance sheet Vertu
A decline in interim profit at motor dealer Vertu Motors (LON: VTU) marks the progress that the company is making. It is highly cash generative and has a strong balance sheet.
In the six months to August 2019, revenues were nearly 6% higher at £1.6bn, with like-for-like growth of 2.3%. Underlying pre-tax profit fell from £18.1m to £17.1m, if the effect of IFRS 16 is excluded.
This has been achieved at a time when car sales are declining, and the used car market was also more difficult in the period – although it has got better since. Vertu has been particularly successful in growing is fleet sales. Aftersales revenues continue to grow and margins improved because of a change in the way that Ford parts are accounted for.
There was a boost in van sales because of regulatory changes on 1 September, so some second half sales were probably generated in the first half.
Cash engine
Net cash, excluding car stocking loans and leases, improved from £10.5m to £29.1m. There is a net cash position even if car stocking loans are included. Some cash is being used to buy back shares at below net asset value. There is also a growing dividend with the interim increased by 9% to 0.6p a share. A total dividend of 1.7p a share is forecast, which is a 6% increase. Net debt of £1.2m, including car stocking loans, or net cash of £22.5m excluding them, is expected at the end of February by Zeus. Vertu continues to invest in new dealerships and increasing capacity. The final outcome will depend on the level of further share buy backs.Asset rich
Vertu has property and equipment valued at £224.4m. NAV is £275.4m and even excluding intangibles, it is still £163.3m. Vertu is still trading at a discount of around one-quarter to that lower figure. Fixed asset disposals have at least raised book value or generated a gain, so these asset values appear realistic.Forecasts
Vertu had its strongest ever trading in September. Full year pre-tax profit is expected to decline from £23.7m to £23.5m, suggesting a stronger second half. At 33.225p, the shares are trading on less than seven times prospective 2019-20 earnings and a forecast yield of 4.9%. Vertu has shown that it can ride out the problems in the car market and limit the downside. The tough market could also provide opportunities to acquire dealerships and assets that do not have the strong balance sheet that Vertu has.Pound Slumps amidst Brexit uncertainty
The UK Pound has seen a slump to its lowest level in over a month amidst Brexit uncertainty. The Pound dropped to its lowest point against the Euro and Dollar since early September.
As the deadline for Brexit looms, the pound has fluctuated amidst speculation on Britain’s stance in the European Union.
Only a few weeks back, the pound surged to its highest value against the Euro in four months. This was after the Supreme Court concluded Johnson’s closing of Parliament was illegal. However, this was only a temporary surge.
Since Boris Johnson’s attempts to negotiate a deal with Angela Merkel, the Pound dropped by about half a cent against the Euro trading at €1.1132, whilst seeing a similar drop against the Dollar to $1.2225 today. David Madden, a currency analyst on twitter questioned whether there would be a further drop to 1.2205.
After the news came out stating a deal was “overwhelmingly unlikely”, the Pound traded 0.47% lower against the Dollar. John Goldie, a currency dealer at Argentex explained that “The pound has lost ground against all the major currencies over the course of the day so far – only the Canadian dollar has performed worse in the last week.” With much ambiguity left in the Brexit negotiations, the political climate may only add pressure to the Pound. Petr Krpata, the chief European currency strategist at the Dutch bank ING, said the pound could still fall below $1.20 against the dollar. “There is plenty of room for weakness,” he said. Whether Brexit gets pushed through by the end of October, there will still be much uncertainty in the exchange rate of the Pound. Amidst a revoke or no deal battle, the pound is still yet to face many fluctuations as seen in the last year. The Pound is set to face its toughest challenge later this month as PM Johnson attempts to strike a deal with the EU.Angela Merkel says Brexit deal ‘overwhelmingly unlikely’$GBPUSD pushes lower, next stop 1.2205? pic.twitter.com/OGhTdYJFvN
— David Madden (@dmadden_CMC) October 8, 2019
Hong Kong retracts on decision to bid for LSE
Plans for the takeover for the London Stock Exchange (LON:LSE) by the owner of the Hong Kong stock exchange have fallen apart as the group withdrew their £32 billion bid.
Almost four weeks from when the board of the London Stock exchange immediately rejected the proposed bid, the outcome of further negotiations showed determination not to let the London Stock Exchange fall into rival hands.
Charles Li, the chief executive of Hong Kong Exchanges & Clearing (HKEX) cited a line he attributed in a blog post “We only regret the chances we didn’t take”.
There were reports of many disagreements between the Hong Kong Exchange & the LSE’s shareholders. These included regulatory scrutiny, the feeble bid and the rising political tensions between China and Hong Kong.
However, this may prove beneficial for the London Stock Exchange in the long term. This clears the path for the LSE to go ahead with their proposed £21.9 billion deal to buy Refinitiv, a global provider of financial markets & institutions data.
Consequently, the shares in the London Stock Exchange slipped by 6% to 6995p.
This was around the same price as when the initial approach was made. However, shares recovered during the session as they moved up to 7,020p.
HKEX described this opportunity as “strategically compelling and would create a world-leading market infrastructure group”. However, the two boards failed to meet eye to eye.
The LSE Chairman, Don Robert described the challenges in this takeover. Political tensions in Hong Kong along with Chinese Governmental Pressure all added to the falling through of this deal.
Michael Hewson described the move “Even if HKEX had decided to up their offer, the deal was of questionable merit, given the problems in Hong Kong right now, along with the exchange’s management structure, which raised concerns about Chinese possible government influence.”
The move by the HKEX to take over the London Stock Exchange was brave. The bid at £32 billion was surely undervalued. As the HKEX already owns the London Metal Exchange as bought in 2012, it seems the reluctance of the LSE to make this deal happen has both political and financial motivations.
The HKEX joins a long list of failed takeovers by foreign investors of the LSE. Whilst institutions such as NASDAQ, Intercontinental Exchange of the USA & Deutsche Boerse have all bid for the LSE, it seems there is still a reluctance for an international merger with an overseas stock exchange.
In current affairs, there have been updates to Facebook (NASDAQ: FB).
GVC upgrades full year profit guidance, shares up
GVC (LON:GVC) upgraded its profit guidance range on Wednesday.
Shares in the sports betting and gaming group were up during trading on Wednesday morning.
The owner of the Ladbrokes brand increased its core profits forecast, predicting that they will now lie in the range of £670 million – £680 million for the full year.
Online gaming revenue increased 12% in the third quarter, GVC added.
“I am delighted that the Group’s financial performance has allowed us to upgrade our full year EBITDA expectations again,” CEO Kenneth Alexander said in a company statement.
Indeed, the profit guidance upgrade is GVC’s second this year.
In addition to the Ladbrokes brand, which is one of the most recognised in the UK, GVC also owns Coral and bwin.
The Coral brand has become synonymous with UK betting, whilst bwin is one of the leading online betting brands in Europe.
“Online momentum remains strong across all major territories, with NGR up 12% in the quarter despite the prior period containing part of the World Cup,” the CEO added.
“This performance continues to be driven by our industry-leading technology, products, brands, marketing capability, and people.”
“The launch in September of the BetMGM app in New Jersey, powered by the GVC technology platform, is a key milestone, and our US sports-betting joint venture with MGM Resorts remains very well-placed to capitalise on the US sports-betting opportunity. The integration of the Ladbrokes Coral businesses is progressing well with the migration of the Ladbrokes, Coral and Gala online brands due to commence in Q4 and complete by the end of H1 2020.”
GVC added that it is in the process of finding a successor to its current Chairman Lee Feldman. It said that it expects to make an announcement before the end of the year.
Shares in GVC Holdings plc (LON:GVC) were trading at +2.95% as of 11:04 BST Wednesday.
Trump imposes new visa regulations further fueling trade war
Donald Trump has just played his next hand in the economic feud between China & USA as a response to the treatment of Muslims in the Xinjiang Region.
The US President announced Chinese tourists would face further regulation in an escalation of the trade war.
Furthermore, the US Government plans to blacklist over 28 public security entities & officials following breaches of surveillance & detention legislation.
“The US calls on the People’s Republic of China to immediatly end its campaign of repression in Xinjiang, release all those arbitrarily detained & cease efforts to coerce members of Chinese Muslim minority groups” said Secretary of State Mike Pompeo.
A spokesmen from the Chinese Ministry replied aggressively saying “We strongly urge the U.S. to immediately stop making irresponsible remarks on the issue of Xinjiang” and to “stop interfering” in “China’s internal affairs, and remove relevant Chinese entities from the list of entities as soon as possible”
This is an interesting move by Trump, and the timing seems contentious. High stakes trade talks are meant to be commencing in Washington on Thursday.
Whilst the two biggest economic superpowers go head to head in a damaging trade war, it seems that no party is willing to give any middle ground.
This decision may also affect the ability for Chinese businesses to invest in the US, whilst US Exports to China may stagnate.
Following this legislation, many US stocks faced sharp drops as investors faced a period of uncertainty.
Notably, the S&P 500 dropped 1.6% to 2,893.06. Whilst the Nasdaq Committee fell slightly further by 1.7% 7,823.78.
The impact of the US-China Trade war seems to have affected future forecasts for GDP between the two nations, with GDP slipping by 0.7% & 1% respectively between 2021 – 2022.
Whilst Trump seems to be meddling with Chinese Foreign Affairs, he has also had a say in the battle of sovereignty between Hong Kong & China.
In an attempt to advocate humanitarian rights for Muslims in Xinjiang he may have just further hindered opportunities to settle this enduring trade war. However it will be seen on Thursday as to how negotiations commence in Washington.