Business of Fashion : Beauty’s Place in the Metaverse

Beauty’s Place in the Metaverse
Across the industry, brands are experimenting in the metaverse by launching NFTs, digital storefronts and virtual products for avatars in worlds like Decentraland and Roblox.

KEY INSIGHTS
  • Beauty brands, which are often quick to embrace technological innovation, are experimenting with web3, NFTs and the metaverse.
  • Building beauty products for the metaverse, however, doesn't equate to just creating digital copies, but rethinking how the products appear online.
  • Brands that don't get involved now risk missing out on opportunities to develop strategies in this rapidly changing and developing space.

Beauty’s next wave of tech innovation is happening in the metaverse.

Much attention has been dedicated to fashion’s activity in the space, from luxury brands like Gucci and Balenciaga launching experiences in online virtual worlds to labels like Etro and Dolce & Gabbana presenting collections at Metaverse Fashion Week. But beauty has also been active: over the past two years, a number of brands, including Dior, Gucci, Clinique, Givenchy Parfums, Charlotte Tilbury, Nars and Guerlain have begun to embrace — or at least try out — the metaverse and web3, creating products for avatars and NFTs as well as virtual storefronts, experiences and games. In 2022 alone, L’Oréal filed 17 trademarks for virtual cosmetics and Estée Lauder partnered with Decentraland’s Metaverse Fashion Week.

Beauty and the metaverse share a number of qualities. Both are driven by a sense of fun and experimentation, said Audrey Depraeter-Montacel, managing director and beauty lead at Accenture. As well, the structure of communities in beauty, which are usually led by creators and the conversation they start with followers on social media, can easily translate to web3 spaces, where online discussion drives discourse. The beauty industry also has a history of being quick to adopt new technologies, such as augmented reality for virtual try-ons, and beauty consumers are used to seeing this sort of innovation from brands. Added to that, beauty purchases are hyper-personal, tied to identity and self-esteem and happen across a mix of physical and virtual channels that mimics the metaverse, says Depraeter-Montacel.

“Beauty is very much about creating worlds and an environment,” said Melissa Kelly, chief operating officer of creative agency M+A Group. “It ... lends itself to this kind of metaverse-and-NFT model.”

The potential for new revenue streams and methods for consumer engagement is there. But the metaverse is still underdeveloped. Brands, creatives, consumers and developers alike remain mostly in the dark about what exactly it will look like in the next few years — or even the next several weeks. Still, beauty brands recognise that it’s better to test it out than be left behind.

“It’s not going away, but how we use it is going to evolve,” said Kelly.

Beauty’s NFT Experiments

There are infinite possibilities for how beauty brands can show up in virtual spaces as identity and experience are stretched, said Alex Box, beauty futurist. Translating beauty into the metaverse isn’t as simple as creating digital counterparts for products. But that disconnect leaves more room for exploration, allowing brands to create digital products that tell a larger story about the brand or the product itself, she said.

For example, Box worked with Estée Lauder to build an NFT based on the company’s Advanced Night Repair product, tied to its March partnership with Metaverse Fashion Week. To create the piece, she thought about the product in its entirety — its history, ingredients and how the brand wants users to feel when they use the product, rather than just what it does. The resulting NFT wasn’t just a digital copy of the product’s packaging but acted as a filter that coated owners’ avatars in a glowing radiant effect.

“Instead of it being binary in its depiction, you could enter into the essence of what it is,” said Box. “You’ve got this 360, immersive communication tool that you didn’t have before.”

In getting started, brands should consider building their own virtual storefronts, which can be built on the blockchain or off, said Jordan Robinson, MA + Group’s director of metaverse. (MA + Group helped build virtual storefronts for Kylie Cosmetics and Armani Beauty.) This can also help brands avoid betting on one nascent platform.

Another potential first step is launching NFTs linked to loyalty schemes — which Kelly said have huge potential for building community in beauty specifically. Clinique did just that in 2021, giving winners of a contest a molecule-shaped NFT based on its Moisture Surge moisturiser and Black Honey Lipstick products. Along with the NFT, the new token owners received an assortment of physical products every year for a decade. Clinique saw a 60 percent rise in search traffic and 20 percent increase in social engagement following the debut, WWD reported in February.

The tactic has potential in indie beauty, too. Margarita Arriagada, founder of lipstick brand Valdé, saw NFTs as a way to find people who were loyal to and understood her luxury brand, whose lipstick starts at $199. Those who purchased a $1,200 special edition quartz-encased lipstick received a corresponding NFT and invitation to an online community, Valdé NFT Collective, which unlocks access to perks like a one-year supply of one lip shade, membership in Discord channels and special events.

Brands can also take what they learn in the metaverse and apply it to product development, said Gabe Miller, president of brand consultancy Landor & Fitch North America. British perfume brand Rook’s NFTs, for example, gave 30 customers access to a DAO (a decentralised autonomous organisation, which is a collective where members share ownership and participate through blockchain-based tokens) that, over the course of six months collaborated on the development of a new fragrance called “The Scent of the Metaverse,” now sold on Rook’s site; DAO members receive a portion of sales.

“You can use how people are expressing themselves in this world to see a trend that might be popping up,” said Miller.

Brands can also use NFTs and the metaverse to widen a consumer’s experience with the brand itself. Nars, for instance, launched an Animal Crossing partnership in January 2021, then an NFT based on its Orgasm Blush product that July and a project with avatar-based game Zepeto in September that tied the debut of a collection of virtual goods, including virtual makeup looks, shirts and roller skates, to the launch of its blush. The roller skates ended up being one of the best-selling items in the experience.

At the time, Nars just wanted to build brand awareness in the gaming world. Now it sees a real opportunity in making tools to enrich digital identities and foster creativity outside the bounds of reality. The brand is launching its first-ever fully immersive metaverse experience at the end of June. That has offline implications too.

“What happens in that metaverse app environment doesn’t necessarily stay there,” said Dina Fierro, Nars vice president of digital strategy and social engagement, who foresees a world in which brands have their own locations on every metaverse platform, just as they do on social media.

“We’re really at the beginning of an entirely new age of digital experience,” she added. “We see this as an opportunity to push the boundaries of consumer engagement.”

Beauty’s Virtual Future

As brands grapple with how to use the “newest arrow in [their] quiver,” as Miller calls it, he suggests they start by considering their own goals and objectives as a guide to why and how they should appear in metaverse spaces.

“It’s an important time for every brand to rethink what their purpose for being is,” said Miller. “What are they really trying to do? It’s an opportunity to reset and really crystalise what’s important to them.”

Then, in developing their strategy, brands need to hire people who understand both the long and short-term possibilities and limitations of different platforms, said Box.

“You don’t have to just do a digital double of a real-world product. We are actually moving into a space where you have the chance to rewrite the script,” she said. “It’s about having somebody on the team that understands the semantics.”

Development of the metaverse is early days, but waiting around means missing out on learning opportunities and relationship building. Brands shouldn’t just enter the metaverse because it’s an interesting prospect, but rather, because that’s where consumers already are and conversations are already happening.

“Beauty brands need this audience,” said Depraeter-Montacel. “This is their target.”

WWD : Chanel Maintains Double-digit Revenue Growth in 2022 Despite Russia, China

Chanel Maintains Double-digit Revenue Growth in 2022 Despite Russia, China Impact
Chief financial officer Philippe Blondiaux said the luxury house expects "healthy" growth in 2022, after a record 2021.

PARIS — Chanel maintained double-digit growth in the first five months of the year as a strong performance in the rest of the world compensated for the closure of stores in Russia and China, the company said Tuesday.

The French luxury house reported that revenues totaled a record $15.6 billion in 2021, up 22.9 percent at comparable rates versus 2019, fueled by strong demand across all product lines from its local client base. Meanwhile, its operating profit jumped 57.5 percent to $5.46 billion.

Philippe Blondiaux, chief financial officer of Chanel, said the company maintained a double-digit growth rate in 2022 so far, despite the war in Ukraine, which has prompted the company to suspend its operations in Russia, and renewed lockdowns in China designed to curb the spread of COVID-19.

The executive noted that Russia accounts for less than 1.5 percent of Chanel’s revenues. In mainland China, 31 percent of Chanel employees remain under lockdown. Five of its 16 boutiques there are closed, while 35 fragrance and beauty stores — roughly equivalent to a third of its network — are also shuttered.

“Obviously the situation in China is impacting us. But just to illustrate the confidence we have in our outlook for 2022, in spite of these difficulties, for the sole month of April at Chanel, we had a double-digit negative growth in China, but in spite of this, we had a double-digit positive growth for Chanel, consolidated,” Blondiaux told WWD.

He said this reflected strong business in Asia outside of China, citing Singapore, Taiwan, Malaysia and South Korea as standouts. “And the performance is very strong as well outside of Asia, in the U.S., in Europe, where we start to see the return of an international tourist business, in the U.K. as well,” Blondiaux added.

“In spite of the headwinds and uncertainties we are facing, we’ve maintained our momentum so far. We remain confident in delivering another year of solid performance and healthy growth for the Chanel brand and for the Chanel business, building off this obviously exceptional year 2021, and on our strong fundamentals,” he said.

In 2021, Chanel outperformed competitors such as Kering, which reported a 13 percent rise in organic sales versus 2019.

Luxury conglomerate LVMH Moët Hennessy Louis Vuitton saw overall revenues increase 14 percent at constant exchange rates, though its key fashion and leather goods division was up by 42 percent. Meanwhile, overall sales at Hermès International were up by a sector-leading 33.4 percent in comparable terms.

In terms of profitability, Chanel, which is privately owned and run by the Wertheimer family, saw a sharp improvement. It logged an operating profit margin of 34.9 percent, up from 20.3 percent in 2020.

Blondiaux said the results confirmed Chanel’s strategic pillars of harmonizing its prices across geographical regions, and refusing to sell ready-to-wear or leather goods online.

Chanel revealed in March it was hiking the cost of its four core handbag styles and spring rtw collection in several regions worldwide. Its classic 11.12 bag, for instance, now retails for 8,250 euros, compared with 7,800 euros previously.

This marked the sixth time that Chanel increased its prices since the start of the coronavirus pandemic and the second time in the space of six months, following an adjustment last November

Blondiaux said Chanel would continue to tweak its prices to take into account currency fluctuations and inflation, both of which have increased recently. “We usually revise our prices twice a year. That’s what we’ve always done and will continue to do,” he said. Nonetheless, he does not anticipate any blowback from Chanel customers.

“The pricing of everything we sell is based, we believe, on the exceptional creativity we demonstrate, on the exceptional creativity of our materials, exceptional savoir-faire, and I believe our customers understand that, as illustrated by the fantastic momentum we had in 2021 and, even more importantly, continue to enjoy in 2022 as well,” Blondiaux noted.

In a research note, Jefferies analysts Flavio Cereda and Kathryn Parker noted that Chanel raised prices of the small 11.12, also known as the Classic Flap bag, by an average 21 percent in 2020 and a further 30 percent in 2021, concluding that most of the sales uplift last year was driven by pricing rather than volume.

However, Blondiaux said the split was roughly equal. “Our growth in 2021 was fairly balanced, I would say, between volume growth and pricing and that’s true for more or less all our product lines,” he said.

Europe remained the region hardest-hit by the fallout from the coronavirus pandemic last year. Compared with 2019, sales were down 10.9 percent to $4.04 billion, while revenues in the Americas were up 52.6 percent to $3.53 billion, and Asia Pacific jumped 48.7 percent to $8.07 billion.

Fashion sales were up by double digits in all product lines, driven by leather goods and rtw. Revenues in the watches and jewelry division grew in the double digits across all regions, with precious jewelry posting “outstanding” results thanks to the continued strong performance of the Coco Crush line.

The performance of the fragrance and beauty division, which accounts for a larger than average proportion of revenues at Chanel, was more muted as travel retail remained impacted by restrictions.

Blondiaux said the segment recorded a positive top-line evolution in spite of a 66 percent drop in revenues in its duty-free business, and the negative impact of mask-wearing on makeup sales, thanks to strong demand from local clients, both in stores and online.

The group invested $758 million in 2021, down from $1.07 billion in 2000. The difference was due mainly to the purchase of Chanel’s New Bond Street flagship in London in October 2020 for more than $400 million, Blondiaux said, officially putting a figure on the acquisition for the first time.

He added that Chanel spent $293 million in 2021 on its boutique network, with openings including stores in Miami’s Design District; in terminal one of Seoul’s Incheon airport in South Korea, and in the Peninsula hotel in Hong Kong.

More than $200 million went into its new leather goods workshop in Verneuil-en-Halatte and the renovation of its offices on Rue Cambon in Paris. In addition, Chanel devoted $115 million to IT and digital investments, having expanded its arsenal of digital tools to help its sales staff stay in touch with clients during the pandemic, when its boutiques were closed.

Blondiaux said Chanel plans to invest more than $1 billion and hire more than 3,500 people net in 2022, while continuing to devote funds to its climate and sustainability commitments.

The company said it reduced its Scope 1 and Scope 2 greenhouse gas emissions by 5 percent and 58 percent, respectively, in 2021. However, its Scope 3, or indirect, gas emissions increased year-over-year as the company fine-tuned its data collection in order to develop a more comprehensive overview of its carbon footprint.

Chanel added that it sourced 92 percent of its electricity from renewable resources, versus 70 percent in 2020, as it works to shift to 100 percent renewable electricity on a worldwide basis by 2025.

But Blondiaux declined to comment on what further strategic initiatives might be announced by Leena Nair, the former Unilever executive who in January took over as chief executive officer, assuming a title previously held by Chanel co-owner Alain Wertheimer.

“It’s too early to say in which direction she will take the company, but for sure you will know more from her in the coming months or the beginning of next year,” Blondiaux said. “We’ve done already a lot in terms of diversity and inclusion, but that’s something where we need to be humble and continue to educate our team throughout the company.”

Chanel ended 2021 with a net cash pile of $560 million, down from $1.07 billion the previous year, reflecting a number of factors including cash flow, investment and the resumption of dividend payments to its parent company, the Cayman Islands-based Litor Ltd., which were suspended in 2020 in light of the exceptional trading conditions.

The company signaled there would be no change to its M&A strategy, which prioritizes vertically integrating suppliers and developing eco-friendly materials. Chanel Ltd. owns or has minority participations in 46 entities for fashion, including manufacturing sites and specialty workshops like embroiderer Lesage and shoemaker Massaro.

FT : Twitter shareholders vote against Silver Lake’s Egon Durban in board role

Twitter shareholders vote against Silver Lake’s Egon Durban in board role
Private equity co-chief offers resignation after investors issue rare rebuke amid Elon Musk takeover saga

Silver Lake co-chief executive Egon Durban tendered his resignation from the board of Twitter after the social media company’s shareholders on Wednesday issued a rare rebuke at a tense investor meeting.

The vote against Durban’s re-election to the board came after the two biggest shareholder advisers, Institutional Shareholder Services and Glass Lewis, this month cited concerns that he is on too many other boards. Durban serves on seven public boards, up from six last year, ISS said.

A Twitter spokesperson said that Durban had offered his resignation to the board in accordance with its corporate governance rules. The spokesperson added that its corporate governance committee would consider whether to accept his resignation, given the vote was not binding. Investors typically rubber stamp board member nominations. But BlackRock, Vanguard and other big asset managers tend to vote against board members when they serve at more than four companies.

Just nine other companies in the S&P 500 have one or more directors who serve on more than five public company boards, according to an analysis of securities filings by ISS Corporate Solutions. Silver Lake declined to comment.

Durban has been on Twitter’s board since March 2020, when Silver Lake invested $1bn in the company to help fund a $2bn share repurchase programme. His appointment was secured as part of a co-operation agreement between Twitter and activist investor Elliott Management, which had at the time been agitating for then-chief executive Jack Dorsey to be removed over concerns over the company’s sluggish growth.

Wednesday’s shareholder meeting comes amid a drama over Twitter’s future, after Elon Musk agreed a $44bn deal with the board to buy the social media company and take it private. Musk worked closely with Durban when trying to arrange a potential buyout of Tesla.

Musk, who wants to loosen content moderation rules on the platform, said this month that the deal was “temporarily on hold” as he sought information on fake accounts. Twitter executives have said they intend to close the transaction.

During the shareholder meeting on Wednesday, Twitter chief executive Parag Agrawal declined to address questions about the deal, but faced a deluge of queries from investors on content moderation issues, misinformation and political bias.

Shareholders endorsed the $30mn pay package for Agrawal, who took over from Dorsey in November, despite both proxy advisers opposing the plan over concerns of a “misalignment between CEO pay and company performance”.

Musk’s name was frequently invoked around free speech and content moderation issues during the meeting. One shareholder complained of “wokeness” inside Twitter, citing Musk and claiming the company’s diversity policies were discriminatory against men and white people, while another lambasted Musk’s approach to speech while proposing that a human rights and civil rights leader join as a director.

Shareholders voted in favour of a proposal put forward by New York state’s pension fund requiring the company to publish an electoral spending report on any contributions to politicians or causes.

Shareholder proposals demanding companies publish more information about political spending and lobbying have been some of the most successful in recent years. Nine lobbying or political spending proposals passed in 2021, up from six in 2020, according to law firm Sullivan & Cromwell.

Separately on Wednesday, Twitter agreed to pay a $150mn fine over allegations from US regulators that it breached privacy rules by improperly using users’ phone numbers and email addresses.

In 2019, Twitter admitted that it had “inadvertently” used the personal information provided by more than 140mn users for “safety and security practices” to better target advertising between 2014 and 2019.

According to court documents, this violated a 2011 order over previous charges from the Federal Trade Commission that the company had put users’ privacy at risk.

The latest fine — together with compliance measures levied on Twitter, including limiting employee access to users’ personal data — “will help prevent further misleading tactics that threaten users’ privacy”, associate attorney-general Vanita Gupta said. The proposed settlement must be approved by a federal judge.

FT : Diagnostic tests a crucial tool in fight against antibiotic resistance

Diagnostic tests a crucial tool in fight against antibiotic resistance
Identifying conditions can prevent inappropriate drug use, but there are barriers to progress in poorer regions

Fear that antibiotics will gradually lose their effectiveness, blunting one of the 20th century’s most extraordinary medical breakthroughs, preoccupies policymakers worldwide.

But far less attention has been paid to the need for better diagnostic tools to ensure the drugs are used appropriately — or not at all. Overuse of existing antibiotics and a lack of new medicines is fuelling drug resistance that is estimated to have caused 1.3mn deaths in 2019.

“Investment in developing affordable, accessible and accurate diagnostics is a big missing piece in our aim to fight the continued emergence of antimicrobial resistance,” says Dr Hanan Balkhy, assistant director-general of the World Health Organization’s antimicrobial resistance division. In many cases, the tool for correctly diagnosing a patient’s illness either does not exist or “if it does exist, it’s very costly”.

Sexually transmitted infections are a “huge area of need” for diagnostics, according to Daniel Bausch, director of emerging threats and global health security at global diagnostics initiative Find.

This is particularly the case, he says, for differentiating gonorrhoea and chlamydia. “[These] are two of the most common sexually transmitted infections,” he notes. “Right now, [they] are often treated with an empirical approach [lacking a clear diagnosis] of giving you antibiotics that can cover both but . . . don’t cover everything that can cause that syndrome.”

It is an approach that has dangerous consequences. “We don’t really know if we’re treating the gonorrhoea or treating the chlamydia, which means we risk producing growth of antibiotic-resistant organisms,” Bausch warns.

Sepsis, where the body has a life-threatening reaction to an infection, is another area in need of improved diagnostics, says François Franceschi, serious bacterial infections project leader at the Global Antibiotic Research and Development Partnership. This would enable doctors to prescribe the right antibiotic rather than using “broad-spectrum” drugs that target a wide range of bacteria.


However, while the need for better diagnostics is agreed upon, many barriers stand in the way of their development.

These are partly technical. Antibiotic resistance is “not like Covid, where it’s one virus, even with its variants,” says Bausch. Instead, the profile, or pattern, of drug resistance varies between countries. “Zambia, for example, might not be the same resistance profile as in the UK, which isn’t the same resistance profile in Senegal or Switzerland or wherever you want to look, because it’s all changing in response to what antibiotics are used.”

Balkhy says the WHO is convening global networks of laboratories, using standardised processes, in order to consolidate expertise. The aim is partly to foster innovation “so that we do have point-of-care diagnostics and they are as accurate as we need them to be”. 

In these efforts, the WHO is collaborating with many partner organisations including Find, the Global Fund to Fight Aids, Tuberculosis and Malaria, and the Centers for Disease Control in the US. “None of us can do this alone, and I think that’s extremely important to acknowledge,” Balkhy adds.

But, even where appropriate diagnostic tests do exist, they are not routinely available in poorer regions of the world, Bausch points out. “It doesn’t matter if you have the best shiny new tool unless people can actually get to use that tool, in terms of it being affordable and that they have access to care.”

Franceschi notes that the development of diagnostic tools that can function in poorer regions of the world is made particularly challenging by high temperatures and the intermittent availability of electricity. The need to ensure that innovations are “translatable to low- and middle-income countries” is paramount, he says.

But “the obvious return on investment is still lacking,” Balkhy says. “And we’re trying to work really hard on that.”


Bausch suggests that, in order to persuade companies to research and develop diagnostics, it is vital to show the industry what the market wants, and will pay for, through “target product profiles”.

Prepared by experts and often published in medical journals and shared with the industry, these profiles would “guide [companies] and say: here’s what we need”.

However, while the importance of this kind of active “market shaping” is clear, it is not straightforward, Bausch says. The enthusiasm of companies might wane on being told that a diagnostic test must cost no more than $2 or $3. “That’s where industry may say either ‘we could do it, but not at that price’, or ‘why would we do it at that price because there’s nothing really to be gained for us?’”

Subsidies may be needed, at least initially, he suggests.

Ultimately, though, it is incumbent on campaigners for improved healthcare in poorer countries to make the case that a market can be created, Bausch believes. “Of course, you can’t instantly turn it on,” he acknowledges. “And it’s not a decision that comes from us. Each sovereign nation and ministry of health is going to decide how they invest.”

It is, he says, part of a broader “perennial challenge in public health” to make the argument to those who control funding that an investment in diagnosis and prevention can result in savings many times that initial outlay.

Franceschi, meanwhile, sees a glimmer of hope in a recent decision by the WHO to publish a list of essential diagnostics alongside its longstanding list of essential medicines. “I think this is a very positive development,” he says. “Finally, it has been recognised that diagnostics are part of global health.”

WSJ : Kissinger vs. Soros on Russia and Ukraine

Kissinger vs. Soros on Russia and Ukraine
The notable nonagenerians offer dueling visions of world order at the World Economic Forum.

Davos, Switzerland

Two American immigrants, both survivors of life under Nazi rule still making waves in their nineties, set the terms of debate at the World Economic Forum. Henry Kissinger, who celebrates his 99th birthday this week, made a virtual appearance to urge against attempts to defeat or marginalize Russia, calling on Ukraine to accept the territorial losses of 2014 to end the war. A few hours later, George Soros, in person at the forum at age 91, warned that victory in the war against Vladimir Putin’s Russia was necessary to “save civilization” and urged the West to provide Ukraine with everything it needs to prevail.

Their prescriptions are radically different, but their perceptions have much in common. Both men believe that American values and interests make the defense of peace in Europe a primary goal of American foreign policy. Both see themselves as defenders of what is best in Western civilization. Both see the war as a major shock to the world system and fear the consequences of a long military struggle. Messrs. Kissinger and Soros both believe that Russia is ultimately a secondary problem for American policy, and that the future of U.S.-China relations is of much greater significance in the long run.

Where they disagree is on the nature of the order and civilization they seek to conserve. Mr. Soros, much like the Biden administration, sees the dominant issue in world politics as a struggle between democracy and totalitarianism. Democracies are obliged by law to respect the rights of their citizens at home, and must conduct themselves under the restraints of international law abroad.

Totalitarian rulers reject such limits at home and abroad, and Mr. Putin’s invasion of Ukraine is as lawless as his treatment of dissidents at home. His attack on Ukraine is an attack on the fundamental principles of international order, and if that attack succeeds, international politics will return to the law of the jungle by which, as the Athenians once told the Melians during the Peloponnesian War, “the strong do what they can and the weak suffer what they must.”

The Kissinger position is less ideological. There always has been and always will be many types of government in the world. America’s job is to create and defend a balance of power that protects our freedom and that of our allies at the least possible risk and cost. We do not have a mission to convert the Russians and Chinese to the gospel of democracy and we must recognize that rival great powers have rights and interests that must be respected. Russia, as Mr. Kissinger told the Davos audience, is and will remain an important element in the European state system, and an enduring peace must recognize that unavoidable fact.

Looking at history, the one thing that seems clear is that neither approach yields an infallible guide to success. The French and British leaders who tried to appease Hitler in the 1930s made very Kissingerian arguments about the need to respect German national interests. The neoconservatives pushing George W. Bush to invade Iraq made Sorosian arguments about the totalitarian nature of Saddam Hussein’s regime. As Messrs. Kissinger and Soros would both agree, mechanistically applying any theory of history to the messy realities of international life is a good way to get into trouble.

When Winston Churchill, a man who demonstrated both Sorosian and Kissingerian characteristics through his long career, was asked about postwar planning in 1942, he replied with words Western leaders should remember today. “I hope these speculative studies will be entrusted mainly to those on whose hands time hangs heavy, and that we shall not overlook Mrs. Glasse’s Cookery Book recipe for jugged hare—‘First catch your hare.’ ”

Our hare is not caught. Far from asking for terms, Mr. Putin may be preparing for a war of attrition—and a long war holds many perils for the West. Russia’s new tactic of threatening the world food supply by blockading Ukrainian ports reminds us that Mr. Putin still has some cards up his sleeve and many Europeans appear to fear a Russian gas embargo more than Russia fears a European boycott.

Ukraine cannot fight a long war without enormous help from the West, economic as well as military. What will happen to its currency as Ukraine spends everything it has on a war of survival? How many $40 billion aid packages is Congress prepared to pass? How much economic aid is the EU ready to provide at a time when many EU economies are struggling with inflation and high fuel prices? If the war causes food shortages and even famines around the world and political instability spreads into such countries as Egypt, will the West be able to coordinate a global response even as it continues to aid Ukraine?

Henry Kissinger and George Soros may have dominated the Davos debates, but Mrs. Glasse will probably have the last word.

WSJ : SEC Proposes More Disclosure Requirements for ESG Funds

WASHINGTON—Regulators proposed new disclosure and naming requirements for investment funds that tap into public angst regarding climate change or social justice, in an effort to address concerns about “greenwashing” by asset managers seeking higher fees.

The Securities and Exchange Commission voted Wednesday to issue two proposals that aim to give investors more information about mutual funds, exchange-traded funds and similar vehicles that take into account ESG—or environmental, social and corporate-governance—factors. One of the proposed rules, if adopted, would broaden the SEC’s rules governing fund names, while the other would increase disclosure requirements for funds with an ESG focus.

The financial industry is split—between asset managers and those who buy their products—on the need for more SEC oversight of ESG funds. The Investment Company Institute, which lobbies Washington on behalf of asset managers, said it planned to review the proposals with its members closely but had a number of concerns, including about costs that it said investors will ultimately bear.

The boom in what advocates call green, or sustainable, investing has posed a growing challenge to regulators in recent years. Assets in funds that claim to focus on sustainability or ESG factors reached $2.78 trillion in the first quarter, up from less than $1 trillion two years earlier, according to Morningstar.

Though fees charged by such funds are typically much higher than what investors pay for low-cost index funds, there are few consistent standards for what constitutes an ESG stock, bond or strategy.

“What we’re trying to address is truth in advertising,” SEC Chairman Gary Gensler told reporters in a virtual press conference after the commission’s vote.

Hester Peirce, the lone Republican on the four-person commission, voted against both proposals, saying they would impose undue burdens on asset managers and nudge them toward capital-allocation decisions that only some investors favor.

One proposal would overhaul requirements regarding fund names.

Under a rule passed two decades ago, if a fund’s name suggests a focus on certain industries, geographies or investment types, it must invest at least 80% of its holdings in such assets.

Wednesday’s proposal would expand the scope of the so-called Names Rule to cover funds that suggest a focus on ESG factors, or on strategies such as growth or value. A fund that merely considers ESG factors alongside—but not more than—other inputs wouldn’t be permitted to use ESG or related terms in its name.

“A fund’s name is often one of the most important pieces of information that investors use in selecting a fund,” Mr. Gensler said.

Investment Company Institute Chief Executive Eric Pan said in an emailed statement that a fund’s name is “a tool for communicating to investors…not the sole source of information for investors about a fund’s investments and risks.”

The second proposal issued Wednesday would require funds that consider ESG in their investment processes to disclose more information. So-called impact funds that seek to achieve an ESG-related objective would have to disclose how they measure progress toward that goal. Funds for which ESG investing is a significant or primary consideration would be required to fill out a standardized table as well as additional information about the greenhouse-gas emissions produced by the companies or issuers in their portfolios.

“The proposal for some funds to disclose emissions related to their holdings seems to be unworkable—some of the information may not even be publicly available,” Mr. Pan said.

Mr. Gensler, however, likened such information to the nutrition facts printed on the back of a carton of skim milk.

“When it comes to ESG investing, though, there’s currently a huge range of what asset managers might disclose or mean by their claims,” he said Wednesday, adding that it can be difficult for investors to understand or compare funds. “People are making investment decisions based upon these disclosures, so it’s important that they be presented in a meaningful way to investors.”

The American Securities Association, a lobbying group that represents regional brokerages and financial-services firms, applauded the SEC’s proposals, saying it is appropriate to scrutinize ESG funds’ advertising, performance and fees.

“ASA supports efforts by the SEC to stop misleading and deceptive marketing gimmicks surrounding ESG funds,” the group’s chief executive, Chris Iacovella, said in an emailed statement.

The nature of ESG investments vary greatly. Some ESG fund managers only buy stocks of companies they believe to already have a small carbon footprint, while others might invest in firms that have publicly committed to doing better. Another strategy involves building a stake in a chronic polluter in hopes of winning seats on its board or forcing proxy votes that pressure the firm to change its ways.

The ambiguity has led to widespread concern among investors and regulators that the banks and asset managers who sell funds are “greenwashing,” or exaggerating, their environmental or social sustainability to bolster their own revenue.

Earlier this week, the SEC fined the investment-management arm of Bank of New York Mellon Corp. $1.5 million for misleading claims about the criteria it used to pick ESG stocks. BNY Mellon neither admitted nor denied wrongdoing.

Authorities are also probing Deutsche Bank AG’s asset-management arm after The Wall Street Journal reported last year that DWS Group overstated its sustainable-investing efforts. At the time, a DWS spokesman said the firm doesn’t comment on questions related to litigation or regulatory matters. A spokesman for Deutsche Bank declined to comment.

Commissioners voted 3-1 to open the two proposals to public comment for at least two months before the SEC decides whether to issue a final rule.

Ms. Peirce, the Republican commissioner, said the updates to the Names Rule risks changing the way some funds are managed as firms seek to avoid being captured by proposed criteria she characterized as subjective. The new disclosure requirements, Ms. Peirce said, would intensify pressure on funds to vote shares or compose their portfolios in accord with activist investors’ wishes.

“If demand for greenhouse-gas disclosures is becoming the norm, let the standards and expectations develop organically,” Ms. Peirce said. “Let investors shape industry practice through their investing decisions, not through regulatory mandates about what investors ought to be considering.”

WSJ : House Republicans Seek Information on Hunter Biden’s Finances

House Republicans Seek Information on Hunter Biden’s Finances
Finances of the younger Mr. Biden have been focus for Republicans for several years, including GOP-led Senate probe launched before 2020 election that looked at business deals in Ukraine

WASHINGTON—Republicans on the House Oversight Committee are laying the groundwork for a probe into Hunter Biden’s finances, part of efforts to keep the president’s son in the spotlight ahead of midterm elections.

The top Republican on the committee on Wednesday sent letters to numerous banks and the Treasury Department requesting more information about Hunter Biden and his associates. The letters, viewed by The Wall Street Journal, ask for financial records.

The probe has no Democratic support, and House Republicans have no enforcement powers. But should Republicans win House control in November, as many polls suggest, they would gain the power to hold hearings and issue subpoenas.

Lawmakers involved said the requests for information are a sign of where the GOP will focus its investigative authority. “We’re definitely laying the groundwork to come out of the gate in January,” said Rep. James Comer (R., Ky.), the ranking Republican on the oversight committee.

The White House declined to comment on the prospective probe into Hunter Biden’s business dealings.

A lawyer for Hunter Biden declined to comment on the Republican plans for a probe of his client’s finances.

Mr. Comer said investigating whether President Biden had any links with his son’s business dealings would be a priority. Hunter Biden hasn’t been charged with any criminal activity.

The Journal’s previous reporting found Joe Biden played no role in Hunter Biden’s enterprises or deals. The elder Mr. Biden said he hasn’t been involved in his son’s dealings.

Federal prosecutors have called several of Hunter Biden’s associates and other witnesses to testify before a grand jury looking into whether he violated tax or other laws, including those governing lobbying for foreign governments, through his business relationships in Ukraine, China, Kazakhstan and elsewhere, the Journal has reported.

Republicans have worked to turn these ventures abroad into a liability for Joe Biden. The then-GOP-led Senate launched an investigation before the 2020 election that looked at Hunter Biden’s business deals in Ukraine.

The Senate Republican investigation into the Bidens’ role in Ukraine found no wrongdoing, though the report said two Obama administration officials had raised concerns to the White House in 2015 about Hunter Biden serving on the board of a gas company called Burisma Holdings Ltd. because it created a perception of a conflict of interest. The younger Mr. Biden was paid around $50,000 a month for the role. He has denied wrongdoing but said he showed poor judgment in taking the Burisma board seat.

Addressing the report in September 2020, Andrew Bates, a spokesman for the Biden campaign, said before the report’s release that Sen. Ron Johnson (R., Wis.), the then-chairman of the Senate Homeland Security Committee who led the probe, was using committee resources to “subsidize a foreign attack against the sovereignty of our elections with taxpayer dollars.”

The Democratic-led House impeached President Donald Trump in 2019 for actions related to withholding aid to Ukraine while he was pressing Ukrainian President Volodymyr Zelensky to investigate whether Joe Biden, as vice president in the Obama administration, sought to remove a prosecutor to protect Burisma on whose board his son served—an allegation that wasn’t substantiated. Mr. Trump was acquitted by the GOP-led Senate.

Mr. Comer said that while the Senate investigation revolved around Burisma, the House GOP probe would be broader. “We’re investigating everything,” he said.

Mr. Comer said his probe would look at what the president’s son has done since President Biden took office in January 2021, specifically with the undisclosed buyers of Hunter Biden’s art and Hunter Biden’s work in 2017 to help CEFC China Energy Co., a now-defunct Shanghai energy and financial business that pursued projects around the world. Sens. Chuck Grassley (R., Iowa) and Johnson recently released bank records tracking these transactions.

The White House has bolstered its legal team in anticipation of showdowns over a variety of matters following the midterm elections should Republicans take control. Democrats now have slim control of the House and Senate. The White House recently added a leading Washington defense lawyer, Richard Sauber, who had been working as general counsel for the Department of Veterans Affairs.

It also recently brought on Ian Sams, a former spokesman for Vice President Kamala Harris’s presidential campaign, to handle related communications. “As we have since the transition, we are ensuring the White House is prepared for the issues we are facing or will face in the future, and we have built and continue to build a strong legal team to conduct our work and serve the public and the president,” Mr. Sams said in a statement.

Prosecutors from the U.S. attorney’s office in Delaware who are involved in the federal tax investigation have sought information and grand-jury testimony about the money Hunter Biden received from Burisma and how he used that money to pay some obligations.

Hunter Biden has said his tax matters were under investigation by the U.S. attorney’s office in Delaware, and said he was “confident that a professional and objective review of these matters will demonstrate that I handled my affairs legally and appropriately.”

In letters sent Wednesday morning to several banks where Hunter Biden and Biden family members have accounts, Mr. Comer requested any possible records, documents, and communications related to potential suspicious-activity reports,or SARs, generated for Hunter Biden, his business partners, and members of the Biden family.

Mr. Comer also wrote Wednesday to Treasury Secretary Janet Yellen asking for suspicious-activity reports, generated in connection with Hunter and James Biden, the president’s brother, if they exist. The letter seeks communications related to the Biden administration’s plan to restrict access Congress has to suspicious activity reports, which Mr. Comer said was only recently stopped.

The Treasury Department in a statement said it “provides SARs to Congress in a manner that enables robust oversight and that is consistent with how other sensitive law enforcement information is produced. Treasury has made SARs available for every request we’ve received, regardless of party, and will continue to do so.”

A Treasury spokeswoman said that when Mr. Biden took office, the department developed a protocol on handling SARs, which included the opportunity to view documents at the Treasury, though reports can also be taken to the Capitol.

The Treasury hasn’t immediately responded for comment on the Republican letters that were sent Wednesday to the department.

Rep. Maxine Waters, the California Democrat who chairs the Financial Services Committee, has raised the issue this year and introduced legislation mandating that reports be turned over within 30 days of a request. In a hearing last week, Ms. Waters said the reports are important for congressional investigations, citing as an example attempts to track the flow of illicit funds from Russia into the U.S. Her bill has drawn Republican support.

A Financial Services staff memo about the bill says restrictions from the Treasury Department “are unworkable given the complexity and amount of information contained in such materials, and severely impairs Congress’ responsibility to carry on its oversight work in a timely and effective fashion.”

Apart from Hunter Biden’s business dealings, Republicans have indicated they also want to probe Mr. Biden’s withdrawal of troops from Afghanistan, the administration’s management of the U.S.-Mexico border and how money to address the Covid-19 pandemic was handled.

>>> US Close Dow +0,60% S&P +0,95% Nasdaq +1,51% Russell +1,95%

Closing Stock Market Summary

The stock market made a rebound attempt today. There were some fits and starts in that attempt, but ultimately it was successful, gaining some steam after the release of the Minutes for the May FOMC meeting. Each of the major indices ended the day higher, yet the performance edge clearly went to the small-cap and mid-cap stocks over their larger peers.

The Russell 2000 increased 2.0% and the S&P Midcap 400 Index increased 1.9% versus gains of 1.0% for the S&P 500 and 0.6% for the Dow Jones Industrial Average. Some speculative trading action and short-covering activity bolstered the performance of the smaller-capitalization stocks, but to be fair, today's session had a predominately rebound-minded bias that saw the majority of stocks attract some buy-the-dip interest.

That interest was evident in the advance-decline line, which favored advancing issues by a nearly 4-to-1 margin at the NYSE and a better than 2-to-1 margin at the Nasdaq.

Notwithstanding the broad-based gains, the stock market did not exorcise its fundamental demons.

Growth concerns continued to persist, evidenced by some weaker-than-expected durable goods orders for April, no growth in weekly mortgage purchase applications, luxury homebuilder Toll Brothers (TOL 48.09, +3.55, +8.0%) acknowledging that demand has moderated over the past month, and Dick's Sporting Goods (DKS 78.14, +6.90, +9.7%) issuing FY23 EPS guidance well below the consensus estimate due to the expected impact of evolving macroeconomic conditions.

Those concerns, though, were set aside as market participants looked intent on forcing a rebound effort. That intention was most evident in the consumer discretionary sector (+2.8%), which has been the hardest-hit sector this year and which shook off the warning from Dick's Sporting Goods, unlike past sessions when it reacted decidedly negative to disappointing guidance.

Most sectors ended today higher. The lone laggards were the utilities (-0.06%) and industrials (-0.02%) sectors. The energy (+2.0%) and information technology (+1.2%) sectors fell in line behind the consumer discretionary sector as the best-performing sectors. Gains for the remaining sectors ranged from 0.04% to 0.9%.

Late in the day, the S&P 500 flirted with 4,000, stopping just short at 3999.33. The latter marked the high of the day and it was logged roughly an hour after the release of the FOMC Minutes at 2:00 p.m. ET. Market participants were presumably heartened by the notion that Fed members want to move expeditiously to the neutral rate in a bid to quell inflation pressures, and that moving there quickly could allow the Fed possibly to pause its rate hikes later in the year to assess the effects of policy firming.

It is highly debatable that a neutral rate in the neighborhood of 2.50% will be high enough to quell inflation pressures, but it was just enough of a carrot to create some trading excitement in the afternoon session. Notably, the 2-yr note yield barely budged after the release of the minutes, standing its ground at 2.50%. Meanwhile, stocks finished off their highs on some renewed selling interest over the last 45 minutes of trading.

Reviewing today's economic data:

  • The conditions for durable goods orders proved to be reasonably good in April, if not altogether as strong as expected. New orders for durable goods increased 0.4% month-over-month (consensus 0.6%) while new orders for durable goods, excluding transportation, rose 0.3% month-over-month ( consensus 0.6%).
    • The key takeaway from the report is that business spending continued to increase. That view was embedded in the 0.3% increase in non defense capital goods orders, excluding aircraft, which followed on the heels of a 1.1% increase in March.
  • Total applications declined 1.2% week-over-week, with purchase applications flat and refinancing applications down 2.0%

Looking ahead, market participants will receive the Second Estimate for Q1 GDP, Weekly Initial and Continuing Jobless Claims, April Pending Home Sales, and weekly EIA Natural Gas Inventories data on Thursday.

  • Dow Jones Industrial Average -11.5% YTD
  • S&P 500 -16.5% YTD
  • S&P 400 -14.6% YTD
  • Russell 2000 -19.9% YTD
  • Nasdaq Composite -26.9% YTD

>>>US After Hours Summary: NTNX -27.9%, SNOW -14.8%, NVDA -6.6% fall on earnings

After Hours Summary: NTNX -27.9%, SNOW -14.8%, NVDA -6.6% fall on earnings; TWTR +5.4% higher as Musk increases commitment in takeover bid;

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: MOD +14.2%, WSM +9.3%, SPLK +5.6%, GES +5.2%, ENS +3.1%, CHNG +2.4%, LU +1.9% (also also CFO to retire), ELF +1.5%, DXC +1.2%, SB +0.8%

Companies trading higher in after hours in reaction to news: TWTR +5.4% (Elon Musk increases commitment in takeover bid to $33.5 bln; also reaches settlement with DOJ and FTC, to pay $150 mln in civil penalties for alleged data privacy violations), RH +3.4% (in sympathy with WSM earnings), ENOB +2.7% (issues statement regarding arrest of co-founder), BBBY +2.2% (in sympathy with WSM earnings), W +1.9% (in sympathy with WSM earnings), FTI +0.6% (awarded significant contract by EQNR for Halten East development), LZB +0.4% (in sympathy with WSM earnings), ACAD +0.3% (stock offering), BREZ +0.3% (D-Orbit launches Infinite Blue aboard SpaceX's Transporter-5 mission), OEC +0.1% (to increase gas black production capacity), JXN +0.1% (announces new distribution relationship with The Pinnacle Group)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: NTNX -27.9%, SNOW -14.8%, NVDA -6.6% (also increases and extends share repurchase program to $15 bln), VSAT -5.7%, ZUO -3.5%, BOX -1.7%

Companies trading lower in after hours in reaction to news: BBIG -14.9% (delays distribution date for Cryptyde spin-off), DDOG -5.8% (in sympathy with SNOW earnings), MIRM -4.7% (stock offering), ADC -2.6% (stock offering), MRVL -2.4% (in sympathy with NVDA earnings), AMD -2.2% (in sympathy with NVDA earnings), MU -1.3% (in sympathy with NVDA earnings), CLOV -1.2% (names new CFO), TSLA -0.9% (Elon Musk increases commitment in takeover bid of TWTR to $33.5 bln), MTH -0.7% (adds $200 mln to existing share repurchase program), INTC -0.5% (in sympathy with NVDA earnings), AVGO -0.5% (in sympathy with NVDA earnings), HPQ -0.4% (Berkshire Hathaway discloses 11.4% stake), MLNK -0.3% (CFO to step down), UVV -0.2% (increases dividend), LGTO -0.2% (announces merger agreement with Southland), CEQP -0.2% (ENLC to acquire North Texas gathering and processing assets from CEQP for $275 mln), PYPL -0.2% (announces investment in Jetty, a financial service platform for renters), UNVR -0.1% (expands distribution agreement with ANGUS Chemical), ENLC -0.1% (ENLC to acquire North Texas gathering and processing assets from CEQP for $275 mln)