#354
Eye Of Sauron
Published:
Sep 19, 2020
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Smoke from the West Coast traveled across the US this week and is now well on its way to Europe. From our HQ in NYC - the sky was hazy and the sun resembled the Eye of Sauron.
Climate change risk has plagued US insurers over the last several years and the severity is growing. A task force led by several US financial regulators issued a 200-page report warning that climate change poses “serious emerging risks to the U.S. financial system.” Many central banks in other countries are conducting climate “stress tests,” and, in Europe, many companies are now reporting their climate risks.
Such disclosures are not required in the U.S., but BlackRock, the world’s largest asset manager, says it sees climate change as a clear systemic financial risk. Banks like Morgan Stanley, Citi, and Bank of America have agreed to tally the greenhouse gas emissions financed by their lending portfolios.
This past week, we participated in the Copenhagen Fintech Week, where the focus of the discussion was the fintech community’s role in sustainability and climate change. While some think that "it'll start getting cooler" in California, the picture below would suggest otherwise. Perhaps Sauron has left Mordor to take advantage of some cut-price New York commercial real estate and taken up residence on the top floor of the Freedom Tower?
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Eye Of Sauron
Climate stress tests will eventually influence European bank capital - French and UK banking regulators are among the first to require stress tests for climate change, which will make banks more aware of how climate risk can increase other types of risk, including credit, market, business and reputational risk. Greater awareness should help to drive banks’ sustainability objectives, and while the French and UK stress tests will not formally test banks’ capital adequacy, Fitch expects that climate-change risks will eventually feed into prudential capital requirements across Europe. Read more
Federal report warns of financial havoc from climate change - The costs of wildfires, storms, droughts and floods impact everything from insurance and mortgage markets to pension funds and other financial institutions. Those observations are not entirely new, but they carry new weight coming with the imprimatur of the regulator of complex financial instruments like futures, swaps and other derivatives that help fix the price of commodities like corn, oil and wheat. It is the first wide-ranging federal government study focused on the specific impacts of climate change on Wall Street. Read more
Amazon exec discusses company Climate Pledge Fund - This episode of the Axios Re:Cap podcast digs into how Amazon hopes the fund will help achieve its goal of being carbon neutral by 2040, and whether the plan is more substance than spin. Read more
Industry News
Uniswap now valued at more than $5b - The decentralized protocol for automated liquidity provision on Ethereum launched their token this week. The supply of 1b tokens is owned by more than 50k addresses. Read more
Who wants to be a SPAC millionaire? - Chamath Palihapitiya, the former Facebook executive, had an extremely awkward exchange with Andrew Sorkin on CNBC this week, over how much he was making in fees through his SPAC / Opendoor deal (“$70m in fees”). Read more
German fintech startup backed by Peter Thiel taken down by coronavirus - Monedo, formerly known as Kreditech, once the largest German fintech startup backed by the likes of Peter Thiel, JC Flowers and media giant Naspers, has filed for bankruptcy after the impact of the pandemic took its toll on the company. Read more
UBS chairman maps out Credit Suisse merger - UBS chairman Axel Weber has used external management consultants to examine the potential for a deal but no formal discussions have taken place. The planning comes at a time of upheaval for both banks, with each undergoing leadership change and coming under pressure to cut costs, as the coronavirus pandemic prompts renewed interest in bank consolidation across Europe. Read more
Even Fidelity’s $230b star manager has Robinhood anxiety - Will Danoff has been wondering why billions of dollars keep flowing out of the Contrafund, the giant mutual fund he manages at Fidelity Investments. Performance isn’t the problem. He’s up 21% this year, trouncing the S&P 500’s 6.2% return. His conclusion: Today’s kids want something sexier. Read more
SWIFT to create new cross-border real-time rails - SWIFT said its platform will improve interactions between financial institutions, optimize speed and provide transparency and predictability from one account to another anywhere. The move has the potential to provide instant transactions between 4b accounts serviced by financial institutions across SWIFT’s network. Read more
Kraken wins bank charter approval - Headquartered in Cheyenne, Wyoming, Kraken Financial is the first digital asset company in U.S. history to receive a bank charter recognized under federal and state law, and will be the first regulated, U.S. bank to provide comprehensive deposit-taking, custody and fiduciary services for digital assets. Read more
Square launches payroll feature that could boost its banking business through the Cash App - Square is letting some small business employees get a portion of their earned wages ahead of time. The payments company also announced an “instant payments” feature, which lets businesses fund payroll immediately using money in their Square balance. Both products push users towards direct deposit through the Cash App, which has taken off as customers use it more like a bank account this year amid the pandemic. Read more
Brazil’s Nubank buys Advent-backed broker Easynvest as part of plan to become full-service financial provider - The move illustrates growing competition among the country’s five biggest lenders - which account for more than 80% of Brazil’s deposits – with newer platforms such as those from XP Inc, BTG Pactual and Guide already luring billions of reais in savings. Read more
Goldman Sachs takes what it learned from a $100m acquisition to upgrade the Marcus app - The bank released the first version of a personal finance management tool that gives Marcus customers a top-down view of all their financial accounts, as well as insights into spending and a monthly snapshot of their budget. Read more
Some of the UK's biggest banks sign a government-backed pledge to improve collaboration with fintech companies - Barclays, HSBC, Lloyds, NatWest and Santander have already signed the pledge, the key principles of which require them to provide clear guidance to technology firms on the onboarding process. Read more
Revolut saga spotlights concerns over digital banks’ service standards - Being repaid the £150,000 in dollars and euros that he had lent to a relative 10 years ago should have been good news for Richard Walker. Instead, it was the beginning of an eight-week digital in-app chat nightmare this summer. Read more
Is an algorithm less racist than a loan officer? - Digital mortgage platforms have the potential to reduce discrimination. But automated systems provide rich opportunities to perpetuate bias, too. Read more
Law & border: the Brexit trade game - In this Bloomberg game you get to decide how to survive as a northern England manufacturer whose sales form part of the £300b of exports that go to the EU from Britain each year. Now the U.K. has left the bloc, will you still be able to deliver? Read more
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