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DOES THE WORD ‘SUSTAINABLE’ HELP US TO MAKE GOOD INVESTMENTS?

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David Casale

David Casale is a chartered engineer and director at London’s leading energy and environment merchant bank, Turquoise International. Here, David discusses why confusion in the cleantech industry is preventing the further drive of innovation and investment.

With recent figures from The International Energy Agency suggesting that the renewables industry is enjoying a continuous 5% year-on-year incremental growth, it seems that sustainability is not only gaining increasing global momentum, but also becoming widely known as a great business investment opportunity. Combine this with a predicted 14% increase in the number of renewable sector jobs before the end of 2014, and we see what an important part environmental ventures are playing as a long-term driver for economic growth.

China and America are leading the way globally; doing the ‘heavy lifting’ and committing to large-scale projects and innovative renewable technologies. This is not only generating significant return, but also driving wider capital investment as part of long-term fiscal planning.

David Casale

David Casale

However, other countries are seemingly falling behind. What’s more, private investments worldwide are still lower than expected, while the lack of widely-available loans for large-scale projects and uncertainty over long-term government support has resulted in a slowdown in some areas of the global renewables industry.

It seems, therefore, that despite excellent expansion figures, there is still considerable confusion in the industry; resulting in an imbalance of geographic investment and contributing towards us missing wider environmental targets – in some cases, by a long margin. Take the UK for example, where carbon budgets are set and incentives are highly prominent. As a society, we can’t afford the huge levy payments and, as a result, have a cap governing all expenditure (Levy Control Mechanism).

If, however, we were to approach the challenge from the other side – setting a budget and then allocating it to the most effective climate-friendly alternatives, the overall outcome may be somewhat different.

As the impacts of climate change become more apparent, society will become increasingly reliant on investment into reducing carbon emissions. Positively, engineers and developers continue to bring forward projects and ideas; however, something must change to bring investor confidence back and continue the global march of renewable development.

Time for an environmental reality check

Innovative businesses have led environmental technological advances for centuries, attracting investors to a return that reflects the risks taken. The principle is straightforward; provide new products and services that are better and cheaper but don’t harm customers, staff or the environment.

For a while, the sector boomed, before government involvement and global regulations began to disjoint the idea’s simplicity. In particular, the prioritisation of measuring carbon emissions and linking investment to their inaccurate representation.

While the dictionary definition of ‘carbon footprint’ is clear, the interpretation has been corrupted by commercial and political positioning, losing sight of the big picture. For example, the activity of purchasing a television would have no carbon footprint in the UK, according to some definitions, but if we manufactured one in the UK, its footprint would be revealed; taking into account extraction and transport of new materials, the manufacturing process, energy, waste and delivery.

‘Carbon footprinting’ maintains a misguided view of climate change as an accounting issue, slightly irrelevant, something to be dealt with later, when, in fact, it could be the biggest intergenerational pass-off of all time.

We need to educate society about the process by which it can interact with this challenge in a way which is respectful of the other issues that surround us but not dismissive of the potentially damaging long-term effects of carbon mismanagement. A carbon footprint, or focussing on ‘sustainability’, unfortunately does not help with that.

We need to get back to first principles, deal with the science and close the gap between scientific agreement and the public consensus. If society was able to achieve that, we could engineer a robust, project-based approach to a least-cost solution.

But how do we achieve this end goal? Simply put, we need to prioritise effective investment and support cleantech development. Investment confidence is key to this, so regaining belief while making investments count is key.

Securing investment – going beyond carbon footprinting

Investors around the world continue to increase their exposure to companies that rate higher on environmental factors. At the same time, there is a common perception that many sustainable businesses have solutions to problems that either do not exist or which no-one will pay to solve. So what can businesses needing capital do to improve their chances of securing investment?

There is no one-size-fits-all approach. Clean energy and environment is not a uniform sector, more a series of overlapping industry segments of which only some are of interest to any individual investor.

Company owners should be mindful of the level of reward they are looking for. The risk they are prepared to assume in return will have a significant impact on strategy, fundraising and exit timing.

Many companies do not have the luxury of choosing investors, but experience suggests small syndicates with diversity of approach, experience and connections work better than sole investors or large groups. Each will have an industry view and early understanding of their agenda will predict their behaviour once they are a part of the business.

Engaging skilled advisors is also important, choosing experts who have the experience to tackle specialist considerations; like conducting due diligence analysis and posing the correct questions to avoid future issues.

By following this advice, kick-starting wider investment and project funding is possible, which, in turn, will drive forward innovation and development; rather than simply ticking measurement boxes and disrupting stable growth.

The future

The climate change agenda requires society to decide what future it wants. From there, businesses and investors can go about efficiently delivering it. Clean technology innovation needs to reflect this, going back to basics and answering – who will buy it and what will they get in return?

The carrot and stick isn’t working on a global level. We need the commercial aspects to stack up if we are going to have a fighting chance of changing the minds of the many and not just the few. Going beyond carbon footprint measuring and dropping sustainability from the rhetoric is a start; but, on the whole, we need to regain confidence in the science, take consumers with us and further drive investment to achieve wider sector growth.

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Why the future of VC investment will be more about ‘venture building’ than equity share

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Why the future of VC investment will be more about ‘venture building’ than equity share 1

By Shawn Tan, CEO of Skymind

We all know that historically the VC industry has been based on the belief that if one portfolio company goes bust, it doesn’t really matter. The bigger bet is that another portfolio company’s breakout success will override the losses of the rest. It isn’t surprising then that there are plenty of VC horror stories, which are not difficult to find.

Whether it’s the M&A bait and switch or sacrificing future profitability, the old ways of doing VC can be famously detrimental to entrepreneurs. For example, a founder who sells their startup for $1 billion could end up with less money in their account than someone who sold for $100 million.

It can take multiple funding rounds to reach the billion-dollar valuation, with each round chipping away at the founder’s stake in the company. Ultimately founders can end up with a tinier slice of a larger pie when the truth is that the bigger portion of the smaller pie could have been much more valuable.

Yet over the last decade, the VC market has exploded: Crunchbase shows more than $1.5 trillion invested into venture capital deals globally over the past decade. VC isn’t going anywhere, but I believe it is evolving, and in the future, VC investment will place more emphasis on venture building rather than equity share.

Forward-thinking VCs will seek out innovations that are good for society and not just their business value, mirroring a rise in environmental, social, and governance (ESG) focused investing. Last year, 38% of financial professionals were using or recommending ESG funds, with nearly a third of financial professionals planning to expand their use or recommendation of ESG funds over the coming year.

This symbolises a paradigm shift into a more socially responsible form of capitalism, where there is an emphasis on serving “stakeholders” like customers, employees and communities as opposed to only shareholders. Beyond genuine environmental concern, ESG investing can also be seen as a risk-management strategy. There is more long-term viability for companies that are run sustainably, from both consumer and regulatory standpoints.

As a result, VCs will be looking for disruptive and tenacious founders. They will actively seek out entrepreneurs set on creating technology with the most significant social impact, who have plans to get their ideas to market as quickly as possible. The future of VC investment will be about creating true partnerships with the companies they support, which is the heart of venture building.

Venture capital has historically been about placing a certain amount of money in a company and hoping for a certain return. On the other hand, venture building requires much more from the investor: time, energy, services and expertise, alongside capital. Venture building is about selecting business ideas, creating teams, sourcing funds, supporting the ventures and supplying shared services.

It is about working closely with the entrepreneurs to supply them with an entire suite of service support, from financial backing to corporate client introductions and talent acquisition. The quality and dynamics of networks play a unique role in the venture building model. The model relies on sourcing a specific and unique blend of expertise to turbocharge portfolio companies faster than competitors.

In an increasingly globalised world with large-scale challenges never faced before, we firmly believe that venture building with ESG credentials will become the gold standard for investing in the future. We are excited to be taking this approach at Skymind, and we hope that it won’t be long before others follow our lead.

About Skymind

Skymind is the world’s leading open-source enterprise deep-learning software company and the first dedicated AI ecosystem builder, enabling companies and organisations to launch their AI applications and bring their business cases to life.  We provide clients with supported access to Eclipse Deeplearning4j and other open source tools as well as global capital funding and talent development.  Skymind  is headquartered in London, UK, with offices across Asia and Europe. For more information visit the website. https://skymind.global/

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GameStop surges more than 18%, other ‘meme stocks’ also rally

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GameStop surges more than 18%, other 'meme stocks' also rally 2

By Sinéad Carew and Lewis Krauskopf

(Reuters) – GameStop and other “meme stocks” mounted a late-day rally on Monday, with shares of the video game retailer climbing nearly 32% at one point on little apparent news.

Shares of the videogame retailer, along with other stocks favored by retail investors congregating in online forums such as Reddit’s popular WallStreetBets, have roared back in recent sessions after a wild ride in which they soared in late January and tumbled early last month.

Along with GameStop, which pared gains to close up 18.3%, cinema chain AMC Entertainment finished up 14.6% and headphone maker Koss added 13.4%.

At one point, GameStop, which closed at $120.40, reached a session peak of $133.99. Its low for the day was $99.97.

Some analysts said a tick higher in short positioning from last week may have provided some fuel for the rally. A short squeeze – in which a flurry of buying forces bearish investors to unwind their bets against the stock – was a key catalyst behind GameStop’s late January run, when it gained as much as 1600% before reversing.

The number of GameStop shares shorted stood at 17.74 million, analytics firm S3 Partners said on Monday, with short interest accounting for about 32.6% of the float, compared with about 26% a week earlier, according to S3 Partners. Short interest peaked at 142% in early January, S3 data showed.

“We’re definitely seeing some of the shorts who came on over the past week probably covering and it’s helping boost today’s rally,” said Ihor Dusaniwsky, managing director of predictive analytics at S3. “Looking at today’s price movement, I’m sure these big red numbers are going to be chasing out quite a few shorts out of their positions.”

GameStop short sellers were down $331 million in mark-to-market losses on Monday, bringing year-to-date mark-to-market losses to $5.1 billion, according to Dusaniwsky.

More than 48 million shares in GameStop changed hands, with volume surpassing the 10-day moving average. So far the stock is up 539% year-to-dated. However, it was still below its Jan.28 peak of $483.

(Reporting by Sinéad Carew and Lewis Krauskopf; Editing by Ira Iosebashvili and Dan Grebler)

 

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Wall Street rallies on U.S. stimulus and vaccine hopes as bond markets calm

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Wall Street rallies on U.S. stimulus and vaccine hopes as bond markets calm 3

By Suzanne Barlyn

NEW YORK (Reuters) – Global equities markets rose and the S&P 500 on Monday had its best day since June 5, with investors taking lower U.S. bond yields in stride on optimism over the $1.9 trillion coronavirus relief bill and distribution of Johnson & Johnson’s newly authorized COVID-19 vaccine.

Wall Street’s rise follows a jump in European shares and solid gains on Asian stock markets.

Investor optimism that the J&J vaccine would further lift the economy is “giving a lift to all of the ‘go-to-work’ stocks” that benefit from businesses reopening, said Jim Awad, senior managing director at Clearstead Advisors in New York.

A stabilization of U.S. Treasury yields has also removed pressure from growth stocks, Awad said.

The Dow Jones Industrial Average rose 603.14 points, or 1.95%, to 31,535.51, the S&P 500 gained 90.67 points, or 2.38%, to 3,901.82 and the Nasdaq Composite added 396.48 points, or 3.01%, to 13,588.83.

The much-anticipated COVID-19 relief bill was passed in the U.S. House of Representatives on Saturday, and now moves to the Senate.

The pan-European STOXX 600 index rose 1.84% and MSCI’s gauge of stocks across the globe gained 2.01%.

Emerging market stocks rose 1.71%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.83% higher, while Japan’s Nikkei rose 2.41%.

Reports on manufacturing and factory activity showed strength in many developed economies on Monday, including a three-year high in the United States, which could keep inflation concerns on the radar.

Major sovereign bonds rallied on Monday as markets showed further signs of stabilization after their worst monthly performance in years.

Expectations of economic recovery and rising inflation boosted global benchmark bond yields in February to their biggest monthly rises in years. But the expected run-down of U.S. Treasury balances at the Federal Reserve has held down shorter-dated rates.

Benchmark 10-year Treasury notes last rose 8/32 in price to yield 1.429%, from 1.456% on Monday.

The coronavirus pandemic laid bare weaknesses in the financial system that should be addressed with new rules to prepare for the next shock, Fed Governor Lael Brainard said.

“We should not miss the opportunity to distill lessons from the COVID shock and institute reforms so our system is more resilient and better able to withstand a variety of possible shocks in the future,” Brainard said.

Gold prices rose as the retreat in U.S. Treasury yields helped to bolster its status as an inflation hedge, but a firmer dollar limited bullion’s advance.

Spot gold dropped 0.5% to $1,724.06 an ounce. U.S. gold futures fell 0.45% to $1,720.40 an ounce.

The dollar index rose to a three-week high as investors bet on faster growth and inflation in the United States, while the Australian dollar gained after Australia’s central bank increased its bond purchases in a bid to stem rapidly rising yields.

Bitcoin rose 6.70% to $48,719.02, with Citi saying the most popular cryptocurrency was at a “tipping point” and could become the preferred currency for international trade.

Goldman Sachs has restarted its cryptocurrency trading desk, a person familiar with the matter told Reuters.

U.S. crude recently fell 1.77% to $60.41 per barrel and Brent was at $63.45, down 1.51% on the day on fears that Chinese oil crude consumption is slowing and that OPEC may increase global supply following a meeting this week.

Wall Street rallies on U.S. stimulus and vaccine hopes as bond markets calm 4

(GRAPHIC – Germany 10-year: https://fingfx.thomsonreuters.com/gfx/mkt/jbyprddzype/Germany%2010-year.png)

(Reporting by Suzanne Barlyn; Editing by Lisa Shumaker and Sonya Hepinstall)

 

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