FT : Broad ESG funds lose out to ‘greener’ vehicles in Europe

Broad ESG funds lose out to ‘greener’ vehicles in Europe
Gap between Article 8 and Article 9 inflows is wide, data show

Investors in Europe are deserting funds that align with broad environmental, social and governance principles, but vehicles that target specific “sustainable” investment goals are seeing positive inflows, data show.

In the nine months to the end of September mutual and exchange funds classified as Article 9 products under the EU’s Sustainable Finance Disclosure Regulation had net inflows of €32.8bn, while Article 8 products had outflows of €173bn, research from Refinitiv Lipper shows.

Article 8 funds, sometimes dubbed “light green”, have to show they generally promote environmental or social characteristics. In contrast, Article 9 funds target a sustainable outcome as a specific objective.

“The current discussion around ‘greenwashing’ and the missing clear standards for the categorisation of funds by the respective SFDR article might be reasons why the European fund industry witnessed outflows from Article 8 products since these products are somewhat in-between products as they support ESG criteria but do not have a formalised ESG-driven investment approach,” the Refinitiv Lipper report said.

“Run away from greenwashing — that would be the main theme there,” said Detlef Glow, head of Lipper Emea research at Refinitiv, although he added that €93.1bn, more than half the Article 8 outflows, had come from ESG-related money market funds rather than equity vehicles.

The ongoing demand for impact-oriented sustainable investment is all the more remarkable, though, when compared to the overall outflows of €333bn recorded by Refinitiv Lipper from the European fund industry at large in the first nine months of the year.


The above chart illustrating the trends includes flows to funds domiciled in the UK and Switzerland, which fall outside the EU and therefore include funds unclassified under the SFDR.

Of those that fall within the SFDR classification system, the data reveal some of the difficulties facing fund managers and investors, analysts say.

“Given how inconsistently and unsystematically . . . ESG values are determined and applied, it strongly suggests to me that there is huge potential for much better products that do the job better,” said Patrick Wood Uribe, chief executive of Util, a specialist ESG data provider.

Hari Bhambra, global head of compliance at Apex Group, a financial services provider, said the uncertainty created in relation to accusations of mislabelling was putting investors off.

“With increasing focus on greenwashing and concerns around the level of disclosures, investors may, currently, prefer to invest in a more definable investment objective or strategy.”

Fund managers also do not want to get caught out, as evidenced by the growing number of fund downgrades. Research from Morningstar showed that 41 funds downgraded to Article 8 from Article 9 in the third quarter of this year, adding that more were expected to follow suit in the coming months.

“At the moment, it remains very vague how the EU taxonomy principles may be applied to investments. Investee companies often struggle with unclear eligible activity breakdowns and the data coverage remains low, especially for smaller firms that don’t have the expertise or capacity for related disclosures,” said Kamil Sudiyarov, product manager with fund manager VanEck.

He said VanEck had consequently decided not to take up the option of indicating the degree of EU taxonomy alignment achieved by its environmentally sustainable Article 9 funds — “even those that were designed with the goals of the EU taxonomy in mind”.

WSJ : Nvidia Offers Alternative Chip for China to Clear U.S. Export Hurdles

Nvidia Offers Alternative Chip for China to Clear U.S. Export Hurdles
The advanced chip has lower bandwidth to comply with restrictions and replaces its banned A100 that is widely used by Chinese AI giants

HONG KONG— Nvidia Corp. NVDA 2.10% has begun offering an alternative to a high-end chip hit with U.S. export restrictions to customers in China, after the new rules threatened to cost the American company hundreds of millions of dollars in lost revenue.

Nvidia said the new graphics-processing chip, branded the A800, meets U.S. restrictions on chips that can be exported to China under new rules rolled out last month. The chip went into production in the third quarter, the company said.

The A800 replaces the A100, a chip widely used in servers and artificial-intelligence applications by China’s tech giants including Alibaba Group BABA -2.27% Holding Ltd., Tencent Holdings Ltd. TCEHY 0.97% and Baidu Inc. BIDU 0.20% According to a memo Nvidia sent to its channel distributors last Thursday, the A800 has the same computational performance but a narrower interconnect bandwidth, the capacity of a chip to send and receive data from other chips, crucial for training large-scale AI models or building supercomputers.

“The A800 meets the U.S. government’s clear test for reduced export control and cannot be programmed to exceed it,” the company said. Nvidia’s plans to offer the new chip was earlier reported by Reuters.

A Commerce Department spokesman said chips below the performance limits outlined in the latest U.S. restrictions were permitted for export to China, but said companies should conduct due diligence when transacting with Chinese entities.

Nvidia’s new chip is a response to the Biden administration’s sweeping new rules restricting exports of American chip technology to China, which U.S. officials say is aimed at slowing the country’s military advance. The rules unveiled by the Commerce Department last month blocked an array of semiconductor technology from being shipped to China without a license, including advanced chip-manufacturing equipment and cutting-edge chips used for AI and supercomputing.

Those rules expanded on earlier restrictions placed on Nvidia’s China exports of the A100. In August, the company disclosed that export restrictions on its A100 chips would cost it $400 million in lost sales. About a quarter of Nvidia’s $26.9 billion in revenue in its most recent fiscal year came from China and Hong Kong, the company said.

The company is preparing for high levels of demand for the new chip, according to people familiar with the matter, with the company set to start giving quotations in China as soon as Wednesday, the people said. Shipments are expected to start in the coming weeks and potential buyers include U.S. companies such as Dell Technologies Inc. for products they sell in China, these people said. A Dell spokesperson confirmed the company is evaluating Nvidia’s A800 offering.

Where the A100 can send 600 gigabytes of data per second, the A800 can send 400 gigabytes. The change is akin to reducing the lanes of a highway from six to four, and would have the largest impact on the performance of supercomputers, which string thousands of graphics-processing chips together. Simpler tasks that require only one or a few chips, such as AI inference—running an AI model after it has been trained—will be minimally affected.

The U.S. restrictions on advanced chip exports announced last month limited the interconnect bandwidth of chips that could be exported to China without a license to less than 600 gigabytes per second, alongside other performance thresholds.

WSJ : Chip-Making Juggernaut TSMC Eyes Multibillion-Dollar Arizona Factory Expan

Chip-Making Juggernaut TSMC Eyes Multibillion-Dollar Arizona Factory Expansion
New facility would produce cutting edge 3-nanometer semiconductors

Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip maker, is preparing another multibillion-dollar factory investment in Arizona, people familiar with the plans said.

TSMC TSM 3.60% plans in the coming months to announce it will build a cutting-edge semiconductor plant north of Phoenix, beside another chip factory that the company committed to in 2020, according to people familiar with the expansion plans. The scale of the investment is expected to be roughly similar to the $12 billion it committed two years ago, the people said.

The company’s big bet on making chips in the U.S. comes after Washington agreed to provide semiconductor makers lucrative grants to bring advanced manufacturing back to American soil.

TSMC’s new facility would manufacture so-called 3-nanometer transistors, some of the tiniest and most lightning-fast currently possible, the people said.

The expansion is a sign of the chip maker’s long-term optimism about demand even in the face of a market upheaval this year. Demand for some chips has cratered following two years of sky-high growth fueled by the pandemic, which shifted workplaces and classrooms to people’s homes and juiced buying of all kinds of electronics. Many chip companies, including TSMC, have cut back on near-term capital-spending plans and started reining in costs to cope with the downturn.

Despite the near-term industry gloom, chip executives still expect global sales to about double to over $1 trillion a year in the next decade, underpinning huge investments in manufacturing capacity. Their spending plans are also being helped by factory-building incentives in both the U.S. and Europe, which hope to shift the industry’s center of gravity away from Asia.

Intel Corp. and memory maker Micron Technology Inc. also are trying to balance near-term savings with investments to satisfy long-term demand.

The U.S. this year allocated about $39 billion for chip-making grants expected to be doled out starting next year, in addition to creating tax breaks on semiconductor-manufacturing equipment. European countries are putting incentives in place in a bid to double the continent’s share of global production to 20% by 2030. Large chip factories typically take several years to build and fully equip, so companies trying to meet future demand need to make their pricey investment decisions far earlier.

TSMC has said it plans to hold a ceremony in Arizona in December to install the first batch of production equipment in the plant it announced two years ago. The company said back then that it would produce 5-nanometer chips there. It is now gearing up to also produce more advanced 4-nanometer chips with larger capacity at the facility, according to people familiar with the matter. The plant is expected to start mass production in 2024.

TSMC didn’t respond to a request for comment.

The subsidies governments in the U.S. and Europe are offering to chip makers are largely a reflection of political leaders’ recognizing that semiconductors are vital not just to national security—they are used in advanced weapon systems—but also to everyday life. China’s development of an increasingly advanced chip industry has caused concern in Western capitals. The U.S. has responded with increasingly expansive controls on exports of advanced chips and chip-production equipment to China.

The U.S. and its allies also have grown concerned about the concentration of advanced chip making in TSMC’s homeland of Taiwan, a self-governing island that Beijing claims as part of its territory. TSMC has been building the most advanced facilities at home but also has explored production in other regions, in part responding to promised incentives.

The company is considering expanding its production facilities in Japan and is looking into building a multibillion-dollar plant in Singapore.

>>> US Close Dow +1.02% S&P +0.56% Nasdaq +0.49% Russell -0.05%

Closing Stock Market Summary

Today's trade had a positive disposition as market participants awaited midterm election results. The stock market's prevailing expectation is that the results will ultimately lead to a legislative gridlock environment that will make it near impossible to approve new tax hikes, large stimulus plans, and stepped-up regulatory pressure.

The latter assumption fueled some bargain-hunting along with reports about how the stock market typically performs well in the 12-month period following a midterm election (average gain of 14.7% since 1950, according to LPL Research).

The stock market took a noticeable turn lower around 1:00 p.m. ET, however, in a move that coincided with cryptocurrencies taking a noticeable turn lower. The cryptocurrency market was extremely volatile today amid reports that FTX was encountering a liquidity crunch. Early selling interest was tempered, though, after Binance said it had signed a letter of intent to acquire FTX.com, pending due diligence, to help cover the liquidity crunch.

Selling pressure picked up again in a big way as the day progressed, triggering concerns about possible margin calls that ostensibly might have precipitated some selling of stocks to cover those margin calls. 

Bitcoin and Ethereum were down 11.2% and 16.6%, respectively. The afternoon selling effort took the S&P 500 below the 3,800 level but buyers showed up there and helped get the market back on a winning track.

Treasury yields were a supportive factor for the equity market today. The 10-yr note yield, which tested 4.24% overnight, settled the session at 4.13%. The 2-yr note yield settled at 4.66%. The U.S. Dollar Index was unable to hold an early gain and fell prone to continued selling pressure, dropping 0.4% to 109.64.

For the S&P 500 sectors, Materials (+1.7%) enjoyed a first place spot thanks to earnings-driven gains in DuPont (DD 66.28, +4.54, +7.4%) and Mosaic (MOS 52.89, +2.97, +6.0%). Meanwhile, consumer discretionary (-0.3%) was the lone sector in negative territory. 

Semiconductor stocks were a bright spot in the market. The PHLX Semiconductor Index was up %. NVIDIA (NVDA 146.02, +3.01, +2.1%) was a winning standout for the group after The Wall Street Journal reported that it has come up with an alternative chip for its Chinese customers that does not violate U.S. export controls.

D.R. Horton (DHI), Hanesbrands (HBI), Capri Holdings (CPRI), Roblox (RBLX), The Trade Desk (TTD), MSG Entertainment (MSGE), SeaWorld Entertainment (SEAS), Nomad Foods (NOMD), and Olaplex (OLPX) are set to report earnings ahead of Wednesday's open.

Looking ahead to Wednesday, market participants will be digesting the results from the midterm elections and will receive the following economic data:

  • 7:00 ET: Weekly MBA Mortgage Index (prior -0.5%)
  • 10:00 ET: September Wholesale Inventories (prior 1.3%)
  • 10:30 ET: Weekly crude oil inventories (prior -3.12 mln)

Economic data today was limited to the October NFIB Small Business Optimism Index, which came in at 91.3 after the prior reading of 92.1.

Dow Jones Industrial Average: -8.7% YTD
S&P Midcap 400: -14.5% YTD
S&P 500: -19.7% YTD
Russell 2000: -14.5% YTD
Nasdaq Composite: -32.1% YTD

>>> US After Hours Summary: Busy earnings session, DIS -7.3% is main headline; U

After Hours Summary: Busy earnings session, DIS -7.3% is main headline; UPST -25.6%, AMRS -22.8%, CARG -20.4%, AFRM -16.9%, EBS -13%, PUBM -11% also lower; RAMP +15.4%, DV +11.4%, AXON +8%, OSUR +7.5% higher on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: RAMP +15.4%, ARRY +14.7%, DV +11.4%, HCAT +8.5%, AXON +8%, OSUR +7.5%, BIRD +7.1%, SFM +7.1%, ABCL +6.2%, ICHR +4.9%, NTRA +4.9%, XP +4.6% (also increases share repurchase program by R$1 bln), GXO +4.5%, HALO +4.2%, NVTA +3.6%, NEWR +3.5%, IAC +3.1%, IOSP +3.1%, BLNK +2.6%, PR +1.8%, NVAX +1.7%, AKAM +1.3%, SEER +1.1%, CTOS +1%, EOLS +0.9%, CLNE +0.6%, GEN +0.6%, OVV +0.6%, ANGI +0.5%, FNF +0.4% (also initiates dividend program), NHI +0.2%, PRI +0.1%

Companies trading higher in after hours in reaction to news: ADEA +2.8% (Frndly TV renews license for Adeia's Media patent portfolio), AFL +0.2% (increases dividend and increases share repurchase auth by 100 mln shares), CNS +0.1% (reports October AUM)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: UPST -25.6%, AMRS -22.8%, CARG -20.4%, AFRM -16.9%, EBS -13%, LCID -11.5%, PUBM -11%, AVID -10.6%, SG -10.2%, ARLO -10%, GDRX -9.9%, DIS -7.3%, JKHY -6%, OPK -5.9%, KIND -5.2%, VSAT -4.8%, DAR -4.5%, GO -3.7% (also names new CEO), GMED -3.6%, LMND -3.5%, AMC -2.9%, MASI -2.7%, HRTX -2.3%, PLUG -2.2%, DDD -1.6%, RVNC -1.6%, MODN -1.4%, WTI -1.2%, TWO -1%, OXY -0.9%, MARA -0.7%, PRA -0.3%, VVNT -0.3%, ENV -0.2%, MRC -0.2%

Companies trading lower in after hours in reaction to news: LCID -11.5% (enters into an "at-the-market" program; also additional investment of up to $915 mln by an affiliate of PIF), TDW -4.6% (commences 3,987,914 share offering), SNCR -3.6% (signs contract with CNSL to utilize the newly rebranded ConnectNX platform), COIN -1.8% (says it's in a strong capital position and does not have a liquidity problem), PAAS -0.9% (AUY terminates transaction with GFI, and confirms activation of the AEM-PAAS deal), GFI -0.5% (AUY terminates transaction with GFI, and confirms activation of the AEM-PAAS deal), AUY -0.4% (AUY terminates transaction with GFI, and confirms activation of the AEM-PAAS deal), REGN -0.3% (FDA approves PD-1 inhibitor Libtayo), BCS -0.2% (begins eliminating jobs across its investment-banking group, according to Bloomberg), AEM -0.1% (AUY terminates transaction with GFI, and confirms activation of the AEM-PAAS deal)

WSJ : Goldman Sachs, Eager to Grow Cards Business, Courted Credit-Card Technolog

Goldman Sachs, Eager to Grow Cards Business, Courted Credit-Card Technology Firms
Bank executives expressed interest in buying a fintech that could help it win more credit card programs

Goldman Sachs Group Inc. GS +1.06% has expressed interest in buying a payments-technology firm to further build out its credit-card capabilities, according to people familiar with the matter.

Goldman executives had discussed acquiring Deserve, a fintech credit-card platform that the bank already has close ties to, according to people familiar with the matter. Executives also sounded out another fintech credit-card platform called Cardless and a payments company called CoreCard Corp. CCRD +3.01% , the people said.

Outreach from Goldman’s executives to Deserve executives began last year, people familiar with the matter said. The most recent overture came last month, they said.

No official discussions are currently taking place between Goldman and the companies, the people said.

A Goldman spokesman said the bank has already built technology platforms that enable it to help card partners grow their businesses and serve their customers. “We have the ability to scale these businesses with our existing technology and are not currently looking for acquisitions in the space,” the spokesman said.

Goldman, long the epitome of high finance, has been trying to round out its investment banking and trading units in part by growing its cards business. But progress has been slow.

Goldman previously bid to take over the credit-card programs of JetBlue Airways Corp. and Macy’s Inc. but lost out, The Wall Street Journal previously reported. The bank successfully bid to take over the General Motors Co. credit-card program in 2020, but technology glitches delayed the rollout, the Journal previously reported. Goldman launched a credit card with Apple Inc. in 2019, and Apple encourages cardholders to use the card with Apple Pay.

Goldman recently announced a broad restructuring that included moving its card partnerships with Apple and GM into a new unit called Platform Solutions.

Bulking up its payment technology could help Goldman better compete against bigger banks when bidding on credit-card partnerships, people familiar with the matter said. Executives wanted to better prepare for what they believed would be a string of tech companies that would want to quickly launch credit-card programs embedded within their apps, the people said.

Goldman is CoreCard’s biggest customer by consolidated revenue, according to a recent regulatory filing by CoreCard.

Deserve currently powers credit cards for private student loan lender Sallie Mae, financial-services startup GloriFi, BlockFi’s crypto rewards credit card and others. Deserve’s platform can allow cardholders to view and dispute their transactions, make payments, redeem rewards, and change their contact information within partners’ apps, among other things. However, its services appear to consumers as though they are coming from the partner company rather than Deserve.

Goldman became an investor in Deserve in 2019, and a Goldman managing director is on Deserve’s board. The bank recently facilitated a credit line for Deserve.

Payments company Marqeta has also been courting Deserve, which could give it a better chance at winning bids for credit-card co-branded programs, according to people familiar with the matter.