Al Gore’s ‘inconvenient truth’ for investors

One scoop to start: Rothesay, Britain’s largest pensions insurance specialist with more than £60bn in assets, is poised to launch 25- and 30-year fixed-rate mortgages in the UK in an attempt to offer greater certainty for borrowers as the threat of interest rate rises increases.

Overhaul global finance to cut greenhouse emissions

Al Gore’s 2006 film An Inconvenient Truth raised public awareness of the global risks of climate change. Now, the former US vice-president says the finance industry has to wake up to its own inconvenient truth: it needs total reform.

Last week, I sat down with the former politician turned climate activist, along with my FT colleagues Attracta Mooney and Patrick Jenkins, and Gore’s business partner David Blood, the former head of Goldman Sachs Asset Management. The pair co-founded Generation Investment Management, a specialist sustainable investment house, almost two decades ago.

Ahead of COP26 in Glasgow, 73-year-old Gore was unequivocal in his diagnosis, saying the world can no longer afford for the finance industry to continue its large-scale backing of carbon-intensive projects and those that erode biodiversity. (Just last week, the FT published a story about how the global finance industry has sunk $119bn into companies linked to deforestation in the five years since the Paris accord.)

And Gore’s recommendation? Reform regulatory capital requirements and global accounting standards, and improve disclosure to force banks, traditional asset managers, private equity firms and asset owners to overhaul how they deal with climate change risks.

Blood, for his part, weighed in on the investor dilemma as to whether the asset management industry should engage with or divest from companies to achieve climate change goals. The passive giants such as BlackRock, Vanguard and State Street Global Advisors “don’t have a choice until you change the index or you decide to get your clients’ approval to deviate from the benchmark,” Blood said. “They have to ramp up their engagement efforts quite significantly.” 

But active managers must vote with their wallets, he added.

“You can have engagement for a while, but unless you have a clear and present commitment to divest, your engagement isn’t credible. I don’t think you have decades to work with companies, I think you have a couple of years. And if they’re not going to actively show you the plan to decarbonise or to enhance their diversity or do different things with their communities, then you’re going to have to do something different. That will likely be moving your capital elsewhere.”

A short seller’s $1m ‘bounty’ on Tether 

Hindenburg Research has brought the tactics of an old-world sheriff to the ‘Wild West’ of crypto. The noted short selling firm founded by Nathan Anderson has offered a $1m “bounty” for exclusive details on the assets behind Tether, the $70bn crypto stablecoin, according to my colleagues Siddharth Venkataramakrishnan, Joshua Oliver and Robert Smith.

A year ago, stories about stablecoins might not have made big waves. But more recently worries about the risks posed by this type of crypto token are high on the agenda. Jon Cunliffe, Bank of England deputy governor for financial stability, warned in a speech last week that these coins — which are usually linked to the value of traditional assets, most often the US dollar — created a link between financial markets and crypto that could be strained in a crisis.

Meanwhile, earlier this year Fitch Ratings flagged the growing systemic risk of stablecoins and US Treasury Secretary Janet Yellen said in the summer that the US must “act quickly” to regulate this part of the crypto universe.

The attention from top officials raises the stakes in the controversy around Tether, the world’s largest stablecoin. Earlier this month, it agreed (without admitting or denying liability) to pay a $41m penalty to resolve a US regulator’s claims that it had falsely represented that its digital tokens were fully backed by dollars in the past. Hot on the heels of this settlement, a major customer contradicted Tether’s bedrock claim that it will issue new stablecoins only in exchange for hard currency.

Hindenburg, known for targeting companies such as electric truck start-up Nikola and sports betting company DraftKings, is now prepared to bet $1m that somebody, somewhere knows something more.

Tether slammed the bounty as “a pathetic bid for attention”. Keep your popcorn supplies topped up.

Chart of the week

Investors have pulled $9.4bn out of UK-focused equity funds this year after hopes that a Covid-19 vaccination drive would fuel a vigorous economic recovery were overshadowed by questions about slow growth, supply chain concerns and high inflation — exacerbated by the B-word. The net withdrawals come as depressed valuations of corporate Britain have fuelled a surge of interest from private equity and mean that funds invested in UK stocks are now heading for a sixth consecutive year of outflows, according to EPFR data.

News round-up

Hot demand for bitcoin ETF as ‘Wild West’ meets Wall St (FT)

Hedge funds make millions as shares in Trump media Spac jump (FT)

FTX lures blue-chip investors in funding round, valuing crypto group at $25bn (FT)

Lack of investment rigour risks creating an ESG bubble (FT Opinion)

Bitcoin exchange traded fund debuts on Wall Street (FT)

UK financial regulator faces probe over pension advice scandal (FT)

Against the herd: trader Mark Spitznagel on contrarian investing (FT Wealth)

Bond funds wrestle with human rights dilemma (FT)

Investor scepticism on ESG points to a maturing market (FT)

Sustainable investors ponder Chinese opportunities (FT)

And finally

“The power to move, but not to reclaim.”

It’s the final days of Leopoldstadt by Tom Stoppard at the Wyndham’s Theatre in London. It’s a play that follows a family over half a century who rediscover what it means to be Jewish. I highly recommend it.