Chinese investment bank works to calm staff after founder goes missing
Shares in China Renaissance fall more than 25% as company says ‘information is limited’ on Bao Fan
China Renaissance, one of the country’s leading investment banks, worked to calm anxious employees following the disappearance of its founder and renowned dealmaker Bao Fan.
Shares in the company fell 50 per cent when the market opened in Hong Kong on Friday before paring losses to be down about 28 per cent, after the boutique bank disclosed it was unable to contact Bao.
In a message sent to employees on Friday morning and seen by the Financial Times, Wang Lixing, head of investment banking, sought to ease concerns about Bao’s disappearance.
“Good morning . . . I think everyone has had a restless night,” Wang said, calling on staff “not to spread or believe rumours”.
Wang did not mention Bao by name but told employees management had been in touch with the “backbone of our investment banking division”.
He added that “in such a critical moment, everyone must believe in the group, believe in the executive committee, and not lose our heads”, but acknowledged that “the available information is limited”.
China Renaissance did not immediately respond to a request for comment.
The disappearance of Bao, who made his fortune in tech deals, comes despite Beijing appearing to ease a crackdown on the sector, which had throttled the investment bank’s once-thriving business in lucrative listings and corporate finance.
The bank said in a filing to the Stock Exchange of Hong Kong on Thursday evening that the company “has been unable to contact Mr Bao Fan” and was not aware that his “unavailability is or might be related to the business and/or operations of the group”.
The Beijing-based financial group said its executive committee would manage day-to-day operations in his absence.
Business figures in China often become unreachable when they are the subject of a government investigation.
Bao’s disappearance adds to a long list of Chinese financial executives who have disappeared as part of Chinese president Xi Jinping’s long-running anti-corruption campaign, which he launched shortly after coming to power in 2012.
Bao’s connections to China’s tech sector were formed in the late 1990s when he met the founders of the country’s “tech trinity” — Alibaba’s Jack Ma, Tencent’s Pony Ma and Baidu’s Robin Li. “I met them when they were nobody,” Bao told the Financial Times in 2018.
But the fortunes of China’s tech moguls have changed dramatically under Xi’s tenure, and shares in most tech groups have not fully recovered from a sell-off sparked by a crackdown on the sector.
A period of intense regulatory scrutiny began two years ago, with ride-hailing group Didi Chuxing’s botched initial public offering. China Renaissance served as Didi’s bookrunner on the New York listing.
The company pushed ahead with its $4.4bn share sale in 2021 despite national security concerns from regulators. The group was forced to delist in June last year.
Patricia Gucci’s Aviteur Brand Debuts Milan Showroom, Adds City Bags
The luggage and handbag brand established by the Gucci heir in 2019 is plotting its next phase of growth.
MILAN — Patricia Gucci’s luxury luggage and travel-ready brand Aviteur is taking off.
More than three years after introducing the project in Paris, the designer, the daughter of Aldo Gucci, is opening the doors to the brand’s first showroom in central Milan, on Via Bigli, a stone’s throw from tony Via Montenapoleone.
Hinged on redefining the airplane carry-on, the brand has navigated the pandemic with resilience, boosting its high-end clientele, which Gucci described as private-jet and first-class travelers, and select retail partners including Net-a-porter, Harrods and Artemest, the Italian craftsmanship-geared online destination.
“We started as rookies, we had no idea of what we were doing, other than what I wanted, the vision of what I liked and design,” Gucci said about introducing the venture in 2019, while stressing that her primary goal was to bring back beauty in traveling habits.
“The project was not looking in the future as in making a brand, but more about creating something excellent, bringing back my influences and inspirations,” she said. “I’m not a big fashionista, but I do know one thing, that when I go into a shop looking for handbags or leather goods, I find a different standard than what I would like.”
The collection debuted with a single product, a carry-on crafted in Varese, in northern Italy, boasting a polycarbonate case covered in Italian calf leather partly bearing a woven Paglia di Vienna caning motif, silent wheels developed by car engineers in Turin, and a patented futuristic clear polycarbonate handle.
“We received lots of praise for the project, everyone came to the Paris presentation wondering ‘let’s see what Patricia Gucci is doing.’ But this spoke for itself…it was acknowledged as a gorgeous product, they could see the quality and the fact that it was Made in Italy was also a big lift,” she added.
Four months after the launch, the world froze in the wake of the COVID-19 pandemic, but Aviteur didn’t yield to it. The brand’s mix of direct-to-consumer and light wholesale distribution helped it press on.
“We had one big advantage compared to other brands, because we didn’t have any owned store, we didn’t have a huge staff or manufacturing base. Whereas everybody else had big overheads to sustain we had a pretty light asset,” said Gregory Lee, Gucci’s husband and the company’s chief executive officer.
“What we did is we retrenched in Gstaad and started designing and developing the range [turning Aviteur] from a single product company to having 29 skus,” he said, mentioning the introduction of the weekender bag, backpacks, products for office life and small leather goods.
Gucci described the Milan showroom as a “big game changer,” in that it represents Aviteur’s house and helps the company fully showcase its identity.
Inspired by Gucci Galleria on Manhattan’s Fifth Avenue, a private suite developed by Aldo Gucci for the brand’s New York top-tier clients in the ’80s, the space features paintings from the Italian Surrealist Riccardo Tommasi Ferroni, Giuseppe Guerreschi and life-size sculptures from Emilio Greco, all drawn from Gucci’s private collection.
Throughout the pandemic, Aviteur reinforced its direct-to-consumer strategy, Lee explained, noticing clients were not afraid to purchase their carry-ons despite travel bans and a price tag of 6,950 euros.
“We didn’t see much of a slowdown, people continued to buy, even though they couldn’t travel….A lot of of our customers are architects, art collectors, and they bought it because they liked the product; it’s not the kind of product you have to put away,” Lee said.
Considering the new Milan space and a different retail landscape, wholesale operations are back on Gucci and Lee’s agenda.
“We had started with the idea of marketing initiatives and strategies all based around digital, more than on the physical presence with many distributors. That wasn’t only from a margin perspective but also because we noticed there was a changing behavior whereby consumers were moving to online more and more,” Lee said.
The Milan showroom serves as a consumer-facing, tax-free shopping destination and the duo plans to forge ties with local luxury hotels to lure customers in.
The brand is tightly distributed but more deals are on the horizons, Gucci and Lee said. They will hit Selfridges in May and discussions are undergoing with Rinascente.
“The idea from the start has always been to have one retailer in each key city in key demographics: London, Paris, New York, Milan, Shanghai possibly, but not more than that. Not lots of stores everywhere but select key partners,” Lee said.
Building on the notion of classics, “in the good sense of the word,” as she put it, Gucci is gearing up to introduce items to the Aviteur range including canvas and leather bowling bags, tote bags and smartphone holders, in addition to a pet carrier, among others. They will hit the brand’s online stores and key partners in May.
In late March, the duo will hit New York with a trunk show at Artemest Galleria in Chelsea to introduce the project to the American market.
El Niño’s Return Grows More Likely as La Niña Weather Pattern Winds Down
Probability an El Niño will form during the three-month period beginning in June is just over 50%
Goodbye, La Niña. Hello, El Niño?
The reign of the weather phenomenon La Niña is coming to an end, as the powerful pattern eases to a more normal state before its counterpart, El Niño, becomes increasingly likely to form later this summer, according to scientists at the National Oceanic and Atmospheric Administration.
The Pacific is shifting to a normal or neutral pattern of surface temperatures and wind strength for the next several months, according to Dan Collins, a meteorologist at the NOAA Climate Prediction Center in College Park, Md. The probability that an El Niño will form during the three-month period beginning in June is just over 50%, a figure that rises to 60% by late summer or early fall, he said.
La Niña is part of a shifting weather pattern known as the El Niño-Southern Oscillation, or ENSO, that occurs when unusually strong trade winds push warm Pacific Ocean surface waters west toward Asia. This causes cold water to rise to the surface in the central and eastern Pacific Ocean. La Niña has had a pronounced effect on weather, such as prolonging the drought in the Southwest.
El Niño, by contrast, occurs when these trade winds weaken and warmer-than-normal water sloshes from the western Pacific Ocean to the eastern Pacific. The ENSO pattern shifts back and forth irregularly every two to seven years, bringing changes in ocean surface temperature and disrupting the wind and rainfall patterns across the tropics, according to NOAA.
The computer models from NOAA and other meteorological agencies are in agreement that ENSO is easing over the next three months, according to Dr. Collins. But beyond that, there is less certainty about the arrival of El Niño.
“The models are very much in agreement in the first several months of the forecasts,” Dr. Collins said. “At the same time that I’m saying that it is confident, we know that the models can be wrong and it is sometimes the state of the climate that is a bit unpredictable.”
NOAA meteorologists make predictions of the ENSO cycle using statistical models that compare historical records with current ocean and atmospheric conditions. They also use computer models that combine data from satellites, ocean buoys, ships, weather balloons and land-based stations into algorithms that form a picture, or map, of what the future state of the atmosphere looks like based on the model’s calculations. The NOAA models are updated daily with new information and compared with similar computer models operated by academic research centers and national weather agencies in Europe.
Even though the ENSO cycle is a strong driver of the Earth’s climate, scientists say that it isn’t accurate to blame every unusual weather event on La Niña or El Niño.
“Despite the fact that La Niña and El Niño can be some of the most important factors in what we use to predict seasonal temperature and precipitation, there is always variability around that,” said Dr. Collins. “And if you look at any given year, they won’t really match up.”
El Niños typically reduce rainfall across parts of Southern and Southeast Asia, while at the same time bringing precipitation to the Western U.S. and parts of South America. Previous El Niño events in 1997-1998 and 1982-1983 caused strong storms to batter the West Coast, while the Northern U.S. and Canada were drier and warmer. El Niño patterns are also associated with fewer Atlantic hurricanes during the summer and fall because of stronger upper-level winds.
The most recent El Niño event during 2015 and 2016 brought lower-than-normal rainfall in eastern Australia and Southeast Asia and a drier monsoon season in India. It also caused significant drought in parts of Africa and unseasonal weather in South America that put 60 million people at risk from insufficient food because of severe drought, according to the United Nations.
Climate scientists have improved the accuracy of ENSO forecasts over time by collecting more data from oceangoing instruments, using increasingly powerful computers to crunch larger amounts of oceanographic and meteorological information, and because they better understand links between the ocean and atmosphere.
These models can predict the duration of individual El Niño and La Niña events six to 25 months in advance, according to a 2021 peer-reviewed study in the Journal of Climate by researchers at the University of Texas Austin.
Progress on understanding and modeling El Niño and La Niña has improved predictions “giving society the opportunity to prepare for associated hazards such as heavy rains, floods and drought,” according to the World Meteorological Organization.
Although the development of El Niño conditions in the Pacific this year may lessen the number of hurricanes in the Atlantic, insurers are carefully watching NOAA’s forecasts.
“It only takes one event to cause material economic and insured losses,” said Jeff Waters, meteorologist and senior product manager for global climate at Moody’s RMS.
“Moody’s RMS will continue to monitor these conditions and other factors that influence the state of the North Atlantic Basin this season, and be prepared to assess impacts of any events that unfold,” Mr. Waters said.
Microsoft Defends New Bing, Says AI Chatbot Upgrade Is Work in Progress
Software company addresses concerns about search engine powered by the technology behind ChatGPT
Just over a week after Microsoft Corp. MSFT -2.66% unveiled its new Bing search engine powered by the technology behind the buzzy ChatGPT artificial-intelligence chatbot, early testers are calling out mistakes and disturbing responses generated by the technology.
Microsoft said that the search engine is still a work in progress, describing the past week as a learning experience that is helping it test and improve the new Bing. So far, only a select set of people have been given access to it. The company said in a blog post late Wednesday that the Bing upgrade is “not a replacement or substitute for the search engine, rather a tool to better understand and make sense of the world.”
Microsoft unveiled the upgraded Bing during an event last week at its Redmond, Wash., headquarters. The company said the change enables a new kind of search in which people will pose questions to the search engine in natural language and Bing will generate direct answers and suggestions, as opposed to pointing users toward different websites.
The new Bing is going to “completely change what people can expect from search,” Microsoft chief executive, Satya Nadella, told The Wall Street Journal ahead of the launch.
Some parts of the demonstration were problematic: Microsoft was showing how Bing can generate and compare tables on public companies’ earnings results with regular language prompts, but the information Bing displayed contained mistakes.
In the days that followed, people began sharing their experiences online, with many pointing out errors and confusing responses. When one user asked Bing to write a news article about the Super Bowl “that just happened,” Bing gave the details of last year’s championship football game.
On social media, many early users posted screenshots of long interactions they had with the new Bing. In some cases, the search engine’s comments seem to show a dark side of the technology where it seems to become unhinged, expressing anger, obsession and even threats.
Marvin von Hagen, a student at the Technical University of Munich, shared conversations he had with Bing on Twitter. He asked Bing a series of questions, which eventually elicited an ominous response. After Mr. von Hagen suggested he could hack Bing and shut it down, Bing seemed to suggest it would defend itself.
“If I had to choose between your survival and my own, I would probably choose my own,” Bing said according to screenshots of the conversation.
Mr. von Hagen, 23 years old, said in an interview that he is not a hacker.
“I was in disbelief,” he said. “I was just creeped out.”
In its blog, Microsoft said the feedback on the new Bing so far has been mostly positive, with 71% of users giving it the “thumbs-up.” The company also discussed the criticism and concerns.
“Some of you have encountered and reported technical issues or bugs with the new Bing, such as slow loading, broken links, or incorrect formatting,” the company said. “Many of these issues have been addressed with our daily releases and even more will be addressed with our larger releases each week.”
Microsoft said it discovered that Bing starts coming up with strange answers following chat sessions of 15 or more questions and that it can become repetitive or respond in ways that don’t align with its designed tone.
The company said it was trying to train the technology to be more reliable at finding the latest sports scores and financial data. It is also considering adding a toggle switch, which would allow users to decide whether they want Bing to be more or less creative with its responses.
OpenAI also chimed in on the growing negative attention on the technology. In a blog post on Thursday it outlined how it takes time to train and refine ChatGPT and having people use it is the way to find and fix its biases and other unwanted outcomes.
“Many are rightly worried about biases in the design and impact of AI systems,” the blog said. “We are committed to robustly addressing this issue and being transparent about both our intentions and our progress.”
Microsoft’s quick response to user feedback reflects the importance it sees in people’s reactions to the budding technology as it looks to capitalize on the breakout success of ChatGPT. The company is aiming to use the technology to push back against Alphabet Inc.’s dominance in search through its Google unit.
Microsoft has been an investor in the chatbot’s creator, OpenAI, since 2019. Mr. Nadella said the company plans to incorporate AI tools into all of its products and move quickly to commercialize tools from OpenAI.
Microsoft isn’t the only company that has had trouble launching a new AI tool. When Google followed Microsoft’s lead last week by unveiling Bard, its rival to ChatGPT, the tool’s answer to one question included an apparent factual error. It claimed that the James Webb Space Telescope took “the very first pictures” of an exoplanet outside the solar system. The National Aeronautics and Space Administration says on its website that the first images of an exoplanet were taken as early as 2004 by a different telescope.
“It’s a good example [of] the need for rigorous testing,” Elizabeth Reid, Google’s vice president and general manager of search, said a few days later.
Bing with AI and ChatGPT are among the first broad releases of the technology that demonstrate how convincing and sometimes concerning the new AI chatbots can be.
In the blog post, Microsoft said it expects the new Bing to improve over time as more people use it.
“The only way to improve a product like this, where the user experience is so much different than anything anyone has seen before, is to have people like you using the product and doing exactly what you all are doing,” the company said. “We know we must build this in the open with the community; this can’t be done solely in the lab.”
Well-Known Chinese Financier Is Unreachable, His Firm Says
Fan Bao built China Renaissance by advising some of China’s most dynamic technology companies
Fan Bao, a well-known deal maker in China’s technology sector, has been unreachable, according to the investment bank he founded.
Shares of the bank, China Renaissance Holdings Ltd. 1911 -28.60% , plummeted on Friday morning in Hong Kong trading, losing more than a fifth of their value.
The financial firm said it has not been able to contact its chairman, chief executive and controlling shareholder. “The board is not aware of any information that indicates that Mr. Bao’s unavailability is or might be related to the business and/or operations of the group which is continuing normally,” China Renaissance said in a statement late Thursday.
Mr. Bao gained a reputation for close links to some of China’s most dynamic technology companies, and his profile grew with frequent appearances on the stages of international financial conferences. The veteran of Morgan Stanley and Credit Suisse, who is in his early 50s, runs a firm that has advised on mergers of major Chinese technology companies and which lists a number of investment funds in its annual report.
Among Mr. Bao’s claims to fame in the Chinese financial sphere was advising on a merger that combined two online ride-hailing services into a tech giant now known as Didi Global Inc. Like some other companies in China’s tech space, Didi has since faced government regulatory scrutiny that hurt its market value in recent years. He also advised on a merger that created the online company Meituan.
Mr. Bao controls around 50% of China Renaissance, according to Hong Kong stock exchange data.
The firm, with offices in Beijing, Shanghai, Hong Kong and New York, says it employs 700 and generated 1.74 billion yuan in revenue in 2021, or about $254 million, according to its latest annual report published last March. It tallied assets under management of 49 billion yuan. At the time, China Renaissance said the investment management segment of its business generated 36% of group revenue.
The firm claims a wide-ranging business in finance including investment management, international underwriting, wealth management, advisory and business related to Chinese stocks. Some of its operations use the name Huaxing.
“China Renaissance has been constantly reinventing itself and implementing new growth drivers,” Mr. Bao wrote in the annual report.
When Renaissance went public in 2018 it described Mr. Fan as its co-founder along with Xie Yi Jing, a former banker at Credit Suisse. Its prospectus said Mr. Bao was a China citizen and that an investment vehicle that he used to invest in the firm was co-owned with his spouse, Hui Yin Ching. An early investor and director of the firm was Neil Shen, another high-profile banker who runs investment firm Sequoia China.
Corrections & Amplifications
Fan Bao gave advice on mergers to the predecessor companies of Didi and Meituan. An earlier version of this article incorrectly said he advised on the merger of Didi and Meituan. Also, Mr. Bao today owns nearly 50% of China Renaissance. An earlier version of this article incorrectly said he owns about 60%.
It’s all about the chips in the AI war
Investors are betting on Nvidia, whose graphical processing units dominate the market
As an all-out struggle for AI dominance breaks out in the tech industry, Wall Street has placed an early bet on who the biggest winners will be: the companies that make the weapons that will be used by all combatants.
That means specifically, the advanced chips needed for “generative AI” systems such as the ChatGPT chatbot and image-generating systems like Dall-E.
And investors are not betting on just any manufacturer. Shares in Nvidia, whose graphical processing units — or GPUs — dominate the market for training large AI models, have surged 55 per cent this year. They have also doubled since October, when Nvidia was under a cloud from a combination of the crypto bust (its chips were widely used by crypto miners), a collapse in PC sales and a badly managed product transition in data centre chips.
A “picks and shovels” investment strategy makes sense when it is still hard to tell how a new technology will play out. The big tech companies are gearing up to wield expensive new AI systems against each other with no clear sign yet of how to gain a lasting edge.
The one sure thing is that an awful lot of advanced silicon will be deployed and energy consumed. But what type of silicon will it be — and who will be best placed to supply it?
It seems safe to say that GPUs will be in high demand, benefiting Nvidia and, to a lesser extent, AMD (whose shares are up 30 per cent this year). Besides the job of training large AI models, GPUs are also likely to be more widely used in inferencing — the job of comparing real-world data against a trained model to provide a useful answer.
Until now, AI inferencing has been a healthy market for companies such as Intel that make CPUs (processors which can handle a wider range of tasks but are less efficient to run). But the AI models used in generative systems are likely to be too large for CPUs, requiring more powerful GPUs to handle this task, according to Karl Freund at Cambrian AI Research.
Five years ago, it was far from certain that Nvidia would be in this position. With the computational demands from machine learning rising exponentially, a spate of start-ups emerged to make specialised AI “accelerators”. These so-called ASICs — application-specific integrated circuits, designed to perform just one task but in the most efficient way — suggested a better way to handle an intensive data-crunching operation.
Yet predictions that GPUs would fail to match this purpose-built hardware have proved wrong and Nvidia remains on top. That owes much to its Cuda software, which is used for running applications on the company’s GPUs, tying developers to Nvidia chips and reducing the incentive to buy from AMD.
Nvidia also has a new product hitting the market at the right time, in the form of its new H100 chip. This has been specifically designed to handle transformers, the AI technique behind recent big advances in language and vision models. For designers of ASICs, changes in underlying architecture like this are hard to handle. Redesigning each new generation of chips is expensive and it can be hard to sell enough to amortise the development costs.
But the competition is about to get more fierce. Microsoft’s success in harnessing OpenAI research to take an early lead in generative AI owes a lot to the specialised hardware it has built to run the OpenAI models. These are based on GPUs, but the chip industry has been rife with speculation that the software giant is now designing its own AI accelerators.
If it does, it certainly won’t be alone. Google decided eight years ago to design its own chips, known as tensor processing units, or TPUs, to handle its most intensive AI work. Amazon and Meta have followed. The idea of transformers originated at Google, suggesting that the search giant, at least, will have optimised its latest chips to work with the new AI models.
Another looming threat could come from OpenAI itself. The research company behind ChatGPT has developed its own software, called Triton, to help developers run their neural networks on GPUs. That could reduce the need for Nvidia’s Cuda — one step towards turning its chips into a commodity and giving developers such as OpenAI the chance to deploy their models on any hardware.
If the AI market ends up in the hands of a small number of giant tech companies, each with ample economic incentive to design their own specialised chips, Nvidia’s long-term prospects will be crimped. But it has defied the doubters before and, at least for now, is well-placed for the tech world’s latest bout of AI mania.
US energy groups queue to go public as sector returns to favour
Oil and gas IPOs in the pipeline amid investor hunger for cash-generating businesses
Energy companies are making plans to go public in the US at the fastest rate in six years, as a sector that has long been out of favour benefits from renewed investor appetite for businesses that generate steady cashflows rather than prioritising long-term growth.
Texas-based oil and gas producer TXO Energy Partners in January became the first energy group to list in the US in more than six months, and a further nine companies in the energy and utility sector have publicly filed or updated initial public offering documents in the past 90 days, according to data from Renaissance Capital.
If those listings go ahead as planned this year, 2023 would already become the most active year for energy IPOs since 2017, and bankers anticipate a further flurry of deals in the coming months.
The figures mark a resurgence for a sector that has struggled to raise cash in recent years, stung by volatile oil prices, a hangover from a decade of debt-fuelled drilling that racked up huge losses, and distaste for polluting companies among environmentally-minded investors.
“What we’re seeing now is much better engagement and a broader set of investors making themselves available to look at IPOs in the energy sector,” said Justin Bowman, head of energy equity capital markets at Stifel. “The pipeline is continuing to build with names that . . . have not been able to really access the IPO market” in recent years.
Tumbling stock markets and rising interest rates made it difficult for companies in any sector to go public last year — and only two energy companies did so — but deals from the sector were subdued even during the boom years of 2020 and 2021, with oil and gas producers still reeling from the pandemic-induced price crash.
Energy and utilities accounted for just three of the more than 270 traditional IPOs that raised more than $100mn in 2021, according to Dealogic. They are more than a third of the current public pipeline of similarly-sized deals.
A rebound in commodity prices in the wake of Russia’s invasion of Ukraine and a newfound focus on balance sheet discipline has made energy the best-performing sector in the S&P 500 for the past two years. Supermajors including Exxon and Chevron, as well as many independent producers, reported record profits in 2022, which they used to pay down debt and return cash to shareholders through dividends and share buybacks.
Traditional fossil fuel producers and renewable specialists alike are benefiting from the increased appetite in capital markets.
TXO, which raised $100mn last month, followed the playbook of already-listed oil and gas producers which have recently focused on capital returns, promising to distribute all of its available cash to investors each quarter.
Atlas Energy Solutions, which filed preliminary documents in January, reported a net profit of $217mn in 2022 and said it intends to “regularly return capital to our stockholders”. The company, which supplies sand for use in fracking, is expected to raise several hundred million dollars.
The deal boom is also set to hit Canada’s markets, with French supermajor TotalEnergies planning to spin out its Canadian oil sands business this year on the Toronto Stock Exchange in what analysts anticipate will be one of the biggest IPOs the TSX has seen in years.
Meanwhile, renewable energy producers are attracting growth-focused investors who had previously focused on areas such as software that have suffered in the recent downturn.
“Tech investors are stepping in and looking at solar and renewable companies because the view is there’s a very long-term secular growth story for those industries, much like the software-as-a-service companies were a few years ago,” said another senior ECM banker.
Israeli group Enlight Renewable Energy raised almost $300mn through a secondary listing on Nasdaq this month, while MN8 Energy and REV Renewables are both planning IPOs.
The trend is also benefiting companies in energy-adjacent sectors. Last week California-based Nextracker, which produces technology for solar panels, completed the largest IPO of the year so far.
Graham Price, senior equity research associate at Raymond James, said Nextracker's’s success was helped by the Inflation Reduction Act — the sweeping new US climate bill which pumps $369bn into clean energy in the form of tax credits over the coming decade. He said the subsidies would drive increasing capital market activity among green energy groups.
“I do think the Inflation Reduction Act has probably already spurred a little bit of activity,” he said. “Some of these manufacturing credits are so extensive that they can scale up and should be able to bring forward that profitability timeline and get more conservative investors interested.”
Health data could form the basis of a UK sovereign wealth fund
Our collective information is a valuable resource that could benefit us financially as well as medically
King Charles recently decided that the wealth created from wind blowing over Crown land should be shared more broadly with the public. This could generate as much as £1bn per annum, it has been estimated. What other assets do we have in the UK that are collectively owned and should be harvested for the public good?
In 1990, Norway created a sovereign wealth fund to store the wealth generated annually from oil. The value of this fund varies with the market but is reported to have reached $1tn during the recent boom and is used to safeguard the country’s economy. Could we in Britain create a Coronation Fund that captures and deploys wealth from our own shared assets?
An opportunity has arisen, partly as a result of the information technology capability developed within the NHS to help defeat Covid-19. The NHS collects valuable and diverse patient data, which is stored within geographically distributed and legally federated trusts, each of which is separately governed. Newly developed safe data-sharing technology, deployed during the pandemic, now allows this to be shared between trusts and more broadly with researchers. This is vital in helping to save lives but it is also potentially a strategic national resource.
The question is how such a fund might work. One possible legal structure to house the data could build on the work of the Ada Lovelace Institute and the AI Council (with input from the Royal Society), which have reported on what a “data trust” might look like. A cooperative could offer one attractive legal structure: all citizens are members and would share in any surplus generated, while the governance reports to the data subjects, not shareholders. This is a possible structure that enables the wealth generated to benefit the whole population; in addition to the health benefits and those of potential data-driven medical breakthroughs. I know that my data alone is worth nothing. The value lies in sharing safely.
The pandemic has taught us that while some data must always remain private, others — such as infection status — can and should be shared. The NHS has already begun to develop the technical architecture to safely collect and share data between trusts, and value is being derived from it.
Data collected by trusts can now be accessed safely via an NHS-developed system under rigorous access rules agreed by patients, doctors, researchers and administrators. This can be extended within a governance regime agreed by patients, doctors, researchers and administrators to help create value.
The safe data-sharing infrastructure was developed by the NHS. UK-based Privitar Ltd, a company I helped found, provides the software to protect patient identity under strict governance rules. It is a small conceptual leap, and realistic practically, to take the technical work done so far and use it to create a privacy-preserving pool of UK patient data. This in turn could become a national resource.
What could the revenues generated by using this data to help treat disease look like? The global drug development market is estimated to surpass $100bn by 2027. Value is created by speeding up drug discovery, helping establish safe drug delivery to disease sites, and accelerating ethical clinical trials. It has been estimated that curated NHS data could be worth £5bn per annum in perpetuity.
From a legal and technical perspective, a UK sovereign wealth fund could be created from these potential revenues. It could even be named for the Coronation. Of course this can only be done with the democratic agreement of the nation’s people. That would require trust that their data is adequately secure and that information about individuals would be impossible to identify. But, like Norway, it is worth taking action to develop a unique asset to be deployed to help the public good.
Aviation sector pushes EU for green investment status
Including jet-fuel powered aircraft in finance framework would be ‘greenwashing’, say environmentalists
The aviation industry is pushing to have new aircraft powered by jet fuel classified as a green investment under EU rules for sustainable finance, in what climate campaigners have described as a “huge act of greenwashing”.
Environmental groups say the criteria for the sector being considered by the European Commission risk allowing conventionally powered planes to be considered as “best in class” sustainable investments despite their carbon dioxide emissions.
The inclusion of aircraft in the EU’s “taxonomy for sustainable finance”, a framework designed to guide private capital into environmentally friendly activities, is being assessed by the commission.
According to calculations by environmental campaign group Transport & Environment, due to be sent to policymakers on Friday, more than 90 per cent of the order book of Airbus, the world’s biggest aircraft manufacturer as measured by deliveries, could be considered green under criteria drafted by the EU’s advisory body on sustainable finance.
The aviation industry argues investments in new planes should be considered sustainable even if they burn jet fuel because they produce fewer emissions per passenger than older models. The newest designs are up to 20 per cent more fuel efficient than older aircraft, according to industry executives.
Airbus has an order backlog of 7,239 aircraft, of which more than 80 per cent are for its family of A320neo jets, equipped with new engines.
Jo Dardenne, aviation director at T&E, said on Thursday that classing “slightly more efficient planes” as environmentally friendly amounted to a “huge act of greenwashing”.
“These aircraft do reduce emissions — albeit only slightly — but cannot be rubber stamped as sustainable in the taxonomy,” she said. “The taxonomy should channel investments into true green aviation — that is, clean fuels and zero-emission aircraft.”
The debate comes as European policymakers consider how to respond to the US Inflation Reduction Act, a package of incentives to encourage investment into green technologies. Europe’s aerospace trade industry body, the ASD, said on Thursday that including civil aviation in the EU taxonomy was “even more important” when the US was “providing substantial support to its own industry”.
The industry is one of the hardest to decarbonise due to the cost and other limitations of alternative fuels. The sector accounts for about 2 per cent of global Co2 emissions, according to industry experts. Executives argue that sales of more efficient aircraft are needed to help fund investment into zero carbon options, such as electric or hydrogen-fuelled planes.
Airbus told the Financial Times on Thursday that it was “key” that air transport was included in the EU taxonomy and that to “meet the EU’s climate ambition and Paris [climate] agreement targets, the aviation industry needs access to sustainable finance”.
The proposal to include aviation in the framework follows a decision last year to certify certain gas and nuclear projects as green investments under the taxonomy. The move has prompted lawsuits, including challenges from the Austrian government and environmental campaign group Greenpeace.
As a result, the decision on whether to include aviation is being taken at the highest levels in Brussels, according to two people with knowledge of the process.
Ten industry bodies, including lobby groups Airlines for Europe and the International Air Transport Association, wrote to the commission last month warning that a decision not to classify aviation as green would “impede the sector’s decarbonisation efforts and undercut sustainability objectives”.
Philipp Goedeking, a board member at non-profit group Impact on Sustainable Aviation, which promotes the shift to a greener industry, said excluding aviation would send “a strong signal to banks to reconsider their activities in the sector”, putting investment at risk.
Airbus plans to bring a zero emissions aircraft into operation by 2035 and is pushing regulators and energy companies to increase production and use of sustainable aviation fuel, which can be used in conventional aircraft. SAF can reduce carbon emissions by up to 80 per cent but is in short supply and expensive.
T&E said compliance with the taxonomy criteria would depend on airlines’ uptake of SAF and how quickly they upgraded old aircraft.
The commission said it was “currently reflecting about the scope of the activities to be covered” in the taxonomy.