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Wall Street's climate retreat

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Climate hawks have long questioned the financial sector's commitment to sustainable investing. But few anticipated that JPMorgan Chase and State Street would quit Climate Action 100+, a global investment coalition that pushes companies to decarbonize. Meanwhile, BlackRock, the world's largest asset manager, has scaled back its ties with the group.

All together the moves amount an exit of almost $14 trillion from an organization intended to marshal Wall Street's influence to expand the climate agenda.

The retreat shocked the political landscape. Representative Jim Jordan, the Ohio Republican who compared the coalition to a “cartel“forcing companies to reduce their emissions, cried for more financial companies will follow suit. And Brad Lander, the New York City comptroller, accused the companies that 'cave in to the demands of right-wing politicians, funded by the fossil fuel industry'.

The companies say they are committed to the climate. JPMorgan said it has built an internal sustainable investment team that will focus on green issues. And BlackRock will maintain some ties to the coalition: It has transferred its membership to an international entity.

A recent shift by Climate Action has raised red flags. Last summer, the group shifted its focus from pressuring companies to announce their progress toward net-zero to getting them to reduce emissions.

State Street said the new priorities jeopardized its “independent approach to proxy voting and portfolio company management.” And BlackRock, which has become a political lightning rod for its embrace of climate considerations in investments, said these tactics would “raise legal considerations, especially in the US” (hence the transfer to an overseas division).

Political interest in environmental issues remains high. House Republicans, including Jordan, have opened an investigation into the company and other Wall Street giants to determine whether their support for environmental, social and corporate governance considerations for investments violates antitrust rules.

New York State Comptroller Thomas DiNapoli told DealBook he was “disappointed” by private asset managers pulling away from the climate group. (He announced Thursday that the state's public employee pension fund would do so limit investments in Exxon and seven other oil and gas companies for their sustainability track record.)

The SEC approves the deal to make Donald Trump's social network public. Shares of Digital World Acquisition Corporation, the blank-check company that agreed to merge with Trump's Truth Social, rose 16 percent On the news. At current prices, Trump's stake in the company after the merger is worth almost $4 billion on paper.

The Justice Department is reportedly planning to review the proposed sports super app. Antitrust officials will investigate the joint venture that according to Bloomberg, content from Disney, Fox and Warner Bros. Discovery would combine with potential harm to consumers and sports leagues. Company executives say the venture is intended to tackle cord-cutting and not enable collusion, but skeptics say it would reduce competition for sports rights.

A Chinese electric vehicle giant is reportedly building a factory in Mexico. BYD, which recently surpassed Tesla as the world's largest seller of electric vehicles, is assessing potential locations for a factory, according to The Wall Street Journal. That could allow the automaker to export to the U.S. without incurring high tariffs, but it would face stiff opposition from U.S. rivals.

Football superstar Kylian Mbappé plans to part ways with Paris Saint-Germain. Mbappé told this to the French club he will go away when his $215 million per year contract expires at the end of the season, it raises questions about which team could afford him. (Bets are on Real Madrid in Spain.) In other sports news: Rob Manfred said he will step down as commissioner of Major League Baseball in 2029.

The race to make progress in artificial intelligence is heating up. The latest: OpenAI on Thursday unveiled Sora, a product that can generate Hollywood-quality videos (mostly) from text prompts in seconds.

OpenAI's new tool, and others like it, will undoubtedly put more pressure on regulators to impose restrictions on AI, especially given the dangers the technology poses to the upcoming elections if it falls into the wrong hands.

Sora shows how quickly AI is advancing. Ten months ago, versions of the video-generating technology produced four-second clips that were blurry and choppy. OpenAI's product, on the other hand, creates 60-second content that resembles work from a major studio.

Sora is far from the only video from text generator out there; Google, Meta and others are also involved in the case.

That alarms AI watchdogs. “I am absolutely terrified that this kind of thing will affect a closely contested election,” Oren Etzioni of the University of Washington told The Times. Regulators are already wary of AI's potential for election mischief, given incidents such as a series of robocalls in New Hampshire with false comments masquerading as those of President Biden.

Part of the new AI legislation that Governor Kathy Hochul of New York has proposed – in broad terms criminalize some misleading applications of the technology – includes requiring disclosure of the use of AI in all political communications.

Tech giants are aware of the risks. OpenAI's Sam Altman said at the World Economic Forum last month that he was wary of how his company's products could be misused. Companies like Meta are also pushing for industry-wide steps, such as labeling AI-generated content.

OpenAI isn't yet widely releasing Sora, with researchers and others testing it first. The company will also tag Sora-produced videos with watermarks indicating they are AI-generated, although these can be removed and may be difficult to spot.

It is unclear how far companies are willing to go to restrict promising technologies. Lessons can be learned from their efforts to police political content: Katie Harbath, former director of public policy at Meta's Facebook, told The Wall Street Journal that tech platforms are struggling with what is permissible and what punishments are acceptable. “A lot of them were more like, 'It's probably better for us to be as distant as possible,'” she said.

— Lina Khanthe FTC chairman, in response to an article in The Cut by Charlotte Cowles, a financial columnist, about how she scammed out of $50,000 that has since gone viral.

In a week full of market-moving headlines — including the warmer-than-expected inflation report — the earnings release typo that briefly sparked a huge rally in Lyft's stock still stands out.

“I can't remember anything so egregious, where shares were up almost 60 percent after hours,” Steve Sosnick, the chief strategist at Interactive Brokers, told DealBook. “It was eye-catching.”

A summary: On Tuesday, Lyft told investors it expected its profit margin to grow 500 basis points, or 5 percent, this year, well above what market watchers expected.

…Except the company later said the release should have read 50 basis points, or 0.5 percent. “This was a serious mistake,” said Lyft CEO David Risher told Bloomberg“but it was a zero in a press release.”

That 'one zero' was a big problem. The company's shares rose 62 percent within minutes, adding hundreds of millions in market value, then fell when the company clarified the figure. (It emerging again on Thursday after a slew of analysts upgraded their price targets for the stock.)

The initial surge was a reminder of the ubiquity of AI-driven electronic trading. and how technology could create a market frenzy. “The algorithms are faster at reading the data than humans,” Sosnick said. When bots read an extra zero in an earnings release, they are programmed to strike. In Lyft's case, it was buy, buy, buy.

Wall Street has been dependent on algorithms for over a decade. with sophisticated retail investors following suit. Thanks to advances in natural language processing, a branch of artificial intelligence, these programs can combine and act on market-moving events (including company press releases, news stories and social media posts).

Expect these systems to focus on Friday's University of Michigan consumer sentiment report and next week's Nvidia earnings report.

AI advocates want to go even further, using generative AI, the technology behind chatbots like ChatGPT, to create these systems faster and smarter. (Of course, these systems still have significant shortcomings, including their sometimes hallucinatory – tech-speak for “making things up.”)

Offers

  • Barclays is reportedly receiving offers from private equity firms such as Brookfield Asset Management and CVC Capital for its payments business. valued at $1.3 billion. (Bloomberg)

  • The latest hedge fund bet sits on cocoaat a cost of $8.7 billion. (FT)

  • A former BlackRock executive joins Lingotto, the investment firm backed by the billionaire Agnelli family, to make money. deals involving esoteric assets. (WSJ)

Policy

  • Amazon claims the National Labor Relations Board is unconstitutional, a legal argument recently made by SpaceX and Trader Joe's. (NYT)

  • “New York City is suing TikTok and Instagram for 'addictive' children” (The edge)

The best of the rest

  • Alexei Navalny, Russia's opposition leader, collapsed and died in the penal colony where he was being held, state media said. (NYT)

  • Boston faces a tax deficit of almost $1 billion as the crisis in office buildings intensifies. (Bloomberg)

  • “The insatiable ambition of Le Bron James” (WSJ)

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