Elon Musk’s Next Target

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Elon Musk is the latest standout to push back one of the hottest trends on Wall Street and in corporate America: ESG, the idea of ​​valuing companies by how they follow environmental, social, and governance principles rather than simply chasing profits. According to The Times’ Jack Ewing and DealBook’s Stephen Gandel, Musk has labeled the ESG a “fraud” after S&P Global, the manager of a popular ESG index, announced that Musk had kicked the electric car company Tesla from the index. described it.

Musk reported on twitter While S&P gave high marks to Exxon Mobil, one of the world’s largest fossil fuel producers, “Tesla was not on the list!” He added: “ESG is a scam. Armed by fake social justice warriors.”

ESG is facing a growing backlash. Earlier this month, former Vice President Mike Pence, a potential 2024 Republican presidential candidate, said he wanted to rein in the ESG, claiming it was raising left-wing aspirations over the interests of businesses and their employees. BlackRock, an outspoken leader in sustainable investment, said it would support fewer shareholder proposals on climate issues because many of them were too “prescriptive”. And earlier this year, private equity manager Steve Schwarzman accused, among others, the ESG of creating a credit crunch for energy companies, which he said contributed to rising oil prices.

Part of the problem is that the ESG is not well defined. Shortly after Russia’s invasion of Ukraine, two Citigroup stock analysts argued that arms manufacturers and defense contractors should qualify as ESG investments because their products help defend democracy and keep the peace. Others called it absurd.

For S&P, more than just its environmental track record at Tesla needs to be taken into account. S&P said It also took into account such things as allegations of racial discrimination and poor working conditions, and Tesla’s handling of investigations into Autopilot accidents. “Tesla is not an open and closed ESG case,” Jon Hale, who heads sustainability research at mutual fund monitoring firm Morningstar, told DealBook. “While it is clear that the company’s product is beneficial to the environment, Tesla is now a large company and also has an impact on employees and customers, and these issues concern ESG investors.”

What is the ESG for? Some of the ESG’s backlash overlaps with predictable political lines. However, there seems to be some confusion about the broader goals of the approach, even among its fans. The old approach to so-called socially responsible investment meant staying away from tobacco companies, arms manufacturers, and other businesses that profited in morally dubious ways.

In contrast, the ESG approach focuses less on whether a company’s products are good for society. A fundamental principle is that businesses whose managers place a broad emphasis on issues such as the environment and diversity produce solid returns on investment. This explains how Exxon can be included in an ESG index if it appears its leaders are taking serious steps to reduce its environmental impact, and how Tesla can’t, despite the millions of gallons of gas their cars don’t burn. The nuance here is easily lost on Twitter, for example, where Musk called Tesla’s removal “a clear case of wacktivism” in a later tweet.

Hedge fund Melvin Capital, torpedoed by the GameStop frenzy, is shutting down. Gabe Plotkin, who founded Melvin in 2014, wrote to his investors that “the next appropriate step” is to liquidate the fund’s assets and return their cash. Plotkin gained a reputation as one of the most successful portfolio managers to come out of Steve Cohen’s former hedge fund SAC Capital.

Wells Fargo’s efforts to increase diversity lead to fake job interviews. Seven current and former Wells Fargo employees said their direct bosses or HR managers had told them to interview Black and female candidates, even though it had been decided who to hire.

Homeland Security has suspended the disinformation board. Created group to assist against viral lies and propaganda, was “paused” weeks after it was created. It has drawn criticism for the government’s overreach, especially from the right, and its leader has come under attack online.

President Biden is using his defense powers to alleviate the baby food shortage. Biden said he would deploy DoD planes to speed up formula shipments to the US. His decision came because the shortage of formulas threatened to turn into a political disaster for the administration.

Male and female players representing the USA at international level will receive equal pay. The deal was reached six years after a group of stars from the World Cup-winning U.S. women’s national team launched a campaign to tackle years of pay discrimination.

Although inflation has intensified in recent months, the economy has slowed, fueled by consumer spending driven by government incentives and a hot job market. Now that growth engine seems to be stalling. DealBook turned to our colleague Peter Coy, a veteran journalist and author. a Times newsletter To understand what happens to corporate pricing power over the economy and why investors are so scared. Here are their thoughts.

About inflation: We hear a lot about the “greed” that companies cause inflation by raising prices. On The Argument podcast this week, I said that’s not quite the case. Companies are opportunistic. High inflation can give them protection to circumvent price increases. However, these increases are an effect of inflation rather than the main cause. And there is a limit to how hard they can push. Target and Walmart’s terrible earnings reports this week are pretty clear proof of that.

About retailer profits: Getting inventories right is incredibly difficult. When the shelves are empty, retailers over-order and then over-order. The good thing is, this can be good for consumers because retailers will have to lower prices to move the goods.

On the risk of recession: I wrote in my newsletter that the risk of recession is high. A low unemployment rate does not protect us against a recession. In fact, recessions often begin when the unemployment rate approaches its lowest point. The Federal Reserve has suddenly gone from dove to hawk, and investors are realizing too late that this will be pretty bad for stocks.

Floating stock market is also closing millions of amateur investors those who enter the trade in the bull market of the pandemic. Some scramble to adopt defensive positions, and others are totally paid off.

— David Cancel, CEO of Boston-based marketing firm Drift, how hard is it to be fired right now.

The Russian economy is currently surprisingly stable, given the country’s isolation since its invasion of Ukraine. The central bank has recently managed to cut interest rates from 19 percent to 14 percent. The ruble is at its highest in more than two years. And high oil prices buffered the impact of sanctions, which forced the government to sell crude at a large discount.

But the situation is likely to get much worse., Patricia Cohen and Valeriya Safronova of the Times write. Forecasters expect continued severe inflation and deep recession: Central bank forecasts an astonishing rate of inflation between 18 and 23 percent this year and a decrease of up to 10 percent in total production. “Really tough times are still ahead for the Russian economy,” said Laura Solanko, senior adviser to the Bank of Finland Institute for Emerging Economies.

Some Russian businesses and employees are feeling the strain. Ivan Khokhlov, co-founder of 12 Storeez, a clothing brand with 1,000 employees and 46 stores, is tackling the problem firsthand. With each new wave of sanctions, it becomes more difficult to produce our product on time.” The company’s bank account in Europe was blocked due to sanctions shortly after the invasion, while logistics disruptions forced it to raise prices: “As logistics deteriorates with Europe, we rely more on China, which has its own challenges.”

Russia cannot necessarily rely on oil and gas sales to support jobs. Europe’s promise to eventually turn its back on Russian oil and gas will force Moscow to look to places like China and India for its customers. But Daria Melnik, a senior analyst at Rystad Energy, said it will take time to return to Asia, and over the medium term it will take time for major infrastructure investments that will cause Russia’s output and revenues to plummet. A US effort to distance Russia from its central role in the global energy supply could further delay any recovery.



Russia-Ukraine war

  • Russian subsidiary of Google will file for bankruptcyHe said Russian authorities’ seizure of his bank account made his operations “undefended”. (CNBC)

  • After three years without a confirmed US ambassador in Kiev, the Senate has approved Bridget Brink as US ambassador. New US ambassador to Ukraine. (Policy)

  • The EU offers $9.5 billion To help Ukraine pay its bills in the short term. (WSJ)

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