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Searching for safe havens in climate as markets plunge
Welcome to Callaway Climate Insights. We're back in London this week in time for a British summer heatwave and financial and political crises.
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Damaging floods close all entrances to Yellowstone National Park: High water in the Gardner and Yellowstone rivers have destroyed roads, bridges and riverbank houses. NBC Montana reports a rainfall record of 2.18 inches Monday. Record flooding has closed the park for the first time in 34 years.
LONDON (Callaway Climate Insights) — No investor is safe as the global markets enter a dangerous new phase in their adjustment to higher interest rates and war- and Covid-caused inflation. We think the impact of the crypto crash on small investors adds an ominous new wrinkle to the latest financial crisis.
But the performance of many climate-focused stocks and indexes suggests that if not a so-called safe haven, the environmental, social and governance (ESG) play is at least a small buffer against the worst of the coming capitulation.
Most climate investments are down, but not nearly as much as the S&P 500 (SPX) or Nasdaq (COMP), off more than 21% and 31% respectively. The Invesco Solar Index (TAN) is down 10% year-to-date, for example. The KraneShares Global Carbon ETF is down 8%. The iShares Global Clean Energy ETF is down 12%.
While many institutional climate investments are drying up as the markets worsen, some money is moving in, recognizing that the renewable boom that follows this crisis is going to be even bigger given the lessons learned about oil markets. A few stocks in the Callaway Climate Index are even up for the year (See chart below), mostly the miners and raw material makers of electric battery and solar components.
That’s not to recommend charging into the group, or anywhere near it at this critical time, for that matter. But it might help stop the carping about ESG stocks being a fading fad. The results suggest otherwise.
More insights below . . . .
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. . . . As with the rest of the financial markets, stocks in climate change-related sectors have had a rough 2022. In fact, only five of the 50 names in the Callaway Climate Insights index are up for the year. Perhaps not surprisingly, companies involved in the raw materials needed to make batteries and solar cells are leading. Mining companies Sociedad Quimica, Vale and Livent — which produce key battery materials lithium and nickel — are all on the list. Solar component makers JinkoSolar and Daqo New Energy round out the few happy winners. The CCI index itself stands at 74.64 through June 13, off 25% for the year. . . .
Auto dealers go ‘all in’ on EVs; an interview with NADA chief Mike Stanton
. . . . How are car dealers preparing for a new world of electric vehicles? National Automobile Dealers Association President and CEO Mike Stanton and spokesman Jared Allen tell Bill Sternberg that massive investment in new dealerships prepared to handle heavy car batteries and cheaper cars — along with internal combustion engines — and the historic grand creativity of the dealers themselves will land them a major new place in the EV world. Here’s how they plan to do it. . . .
Tuesday’s subscriber insights: The case against EV tax credit caps
. . . . The CEOs of GM, Ford, Stellantis and Toyota are pressing Congress to lift the cap on the number of vehicles sold in relation to EV tax credits. And it should be — why limit the number of cars sold by the most popular brands? Read more here. . . .
. . . . The business of solving global warming giveth and it taketh away. At the same time as U.S. climate czar John Kerry is saying that the energy transition is likely to be the biggest market the world has ever seen, green entrepreneurs such as Elon Musk are losing billions. As VCs begin to pull back their checkbooks, this one might take a while to decide. Read more here. . . .
. . . . One thing you can guarantee in any business or business climate: That the lawyers are going to make a buck — even outside territorial waters. Case in point: A court in Massachusetts finds that a patent dispute can be considered as being on land despite the machinery being many miles offshore. Read more here. . . .
. . . . By now, everyone is aware that China is the world’s worst polluter. However, Beijing is making fast progress at reversing its abysmal record. And here’s another incentive: Its currency will suffer if global warming is not halted. Read more here. . . .
Editor’s picks: France fries; plus, U.S. chipmakers could grow greener
U.S. chipmakers could grow greener
A $52 billion plan to boost U.S. chipmaking also presents a chance to make the industry more environmentally sustainable, according to an analysis from S&P Global Market Intelligence. The CHIPS for America Act, which became law last year but remains unfunded, would provide federal funds to increase U.S. chip production. Efforts within the industry to reduce emissions have been complicated by the difficulty of replacing fluorinated compounds critical to chipmaking. The report notes that in the U.S. and developed Europe, chipmakers Nvidia (NVDA), Broadcom (AVGO), Texas Instruments (TXN), Advanced Micro Devices (AMD), and Applied Materials (AMAT) are the only five companies without a net-zero target among the 30 largest technology, media and telecom businesses by market capitalization. The S&P analysis notes that while chipmakers are faced with the immediate issues of solving supply-chain crises, the funding and development phase of building up domestic chip fabrication foundries presents the opportunity to invest in greener, sustainable technologies.
Milan botanical garden becomes an ‘energy park’
One of the highlights of this year’s Milan Design Week is energy generating sculptures created in the Brera botanical garden. Italian studio Carlo Ratti Associati and architect Italo Rota have used over 500 meters of copper pipe to create energy-generating sculptures for its Feeling the Energy installation. The sculptures let visitors experience and create different types of sustainable and renewable energy. The copper pipes are bent to create arches and sculptures that support solar and kinetic energy generation devices, according to a report in dezeen.com. The installation features six sculptures: the Energy Carousel, Garden Orchestra, The Leading Logo, Powering Vibrations, Blinds in the Sun and Solar Garden. The report notes that as well as powering the lights in the evening, “some of the installations are also used to cool the botanical garden down by the use of evaporative cooling, using water vaporizers that are activated by sensors to mist the paths when people walk past them.”
Data driven: Made in the USA
. . . . Today is Flag Day. The Flag Manufacturers’ Association of America estimates that 150 million U.S. flags are sold in the U.S. each year, and says 94% of American flags are actually made in the U.S. The holiday commemorates the date in 1777 when the United States approved the design for its first national flag, according to Brittanica.com. The Continental Congress passed legislation that stated: “Resolved, that the flag of the United States be thirteen stripes, alternate red and white; that the union be thirteen stars, white in a blue field, representing a new constellation.” Flag Day is not an official federal holiday, but Pennsylvania celebrates the day as a state holiday. . . .