JP Morgan enters green bond push with $1 billion debut debt deal

The San Francisco skyline is obscured in orange haze Wednesday.

AFP/Getty Images

JP Morgan Chase & Co. entered the green-bond world on Wednesday, offloading the bank’s first set of bonds specifically to fund projects with a sustainability bent.

While the banking giant has arranged debt with an environmental or social-good purpose for its clients and other companies, this was JP Morgan’s first $1 billion foray into issuing such bonds on its own behalf.

Many investors welcomed the move, not only because of the weight JP Morgan

carries in the market as the nation’s biggest U.S. bank by assets, but also because of a growing acceptance within the U.S. that a climate crisis threatens both environmental and financial instability.

Read: CFTC’s groundbreaking climate-change report sounds a bipartisan alarm on costly risks for U.S. financial system

JP Morgan’s bond deal hit as wildfires raged along the West Coast, with smoke from fires shrouding the San Francisco Bay Area on Wednesday in an eerie orange haze and underscoring how climate change threatens to make extreme fire events, power outages and forced evacuations the norm.

“The more the larger players come along, the larger the scale to move things along faster,” said Steve Liberatore, Nuveen’s lead portfolio manager for environmental, social and governance (ESG) criteria and impact investments.

But Liberatore also stressed that a key part of tackling the unfolding “climate disaster” is to mitigate it in an “economically beneficial way for the average person.”

That can mean achieving a lower cost of capital for renewable energy projects than what’s available for funding fossil fuels.

To that end, JP Morgan was able to pull in pricing Wednesday amid high investor demand, clearing the bonds at a spread of 48 basis points over Treasurys BX:TMUBMUSD10Y, after they initially were floated in the range of 65 basis points.

A bond spread is the level of compensation investors get paid above a risk-free benchmark to act as a creditor, with lower spreads often indicating high demand or a lower expectation of default.

“Generally, green bonds yield less, meaning the cost of financing is lower,” said Pri de Silva, senior corporate credit analysts at Aware Asset Management, adding that JP Morgan priced similar bonds in May that were trading on Wednesday closer to 58 basis points over Treasurys.

“From a funding perspective, I’d say there was a 10-basis-point advantage,” de Silva said, even though he noted the “sunk costs” involved in setting up the new green issuance platform, including providing the “belts and suspenders” to ensure there’s a process in place to track that only eligible projects are funded.

To that end, JP Morgan said proceeds from the debut green bond would finance a range of projects from green buildings to renewable energy, in a public filing.

Notably, the bank also listed areas that will be excluded from the funding from bond proceeds, including coal, oil, gas and nuclear energy projects, as well as activities that involve modern slavery, child labor and human rights exploitation.

Amid an overall corporate debt boom, the second quarter also saw a record $99.9 billion of “sustainability bonds” issued globally, according to Moody’s Investors Service, a category that encompasses green, social and sustainable bonds.

JP Morgan’s debut follows on the heels of Citigroup

and Bank of America
which issued green and social-good bonds earlier this year.

See: Bank of America sold a first-of-a-kind Covid-19 bond

“Banks are in a unique position to issue green bonds as they are interrelated with the broader economy,” said Brian Ellis, portfolio manager, Calvert Green Bond Fund.

“From an investor’s perspective, growth in green bond issuance provides increased opportunities for portfolio and project diversification, but also the ability to be more selective because there’s a larger group to choose from.”

JP Morgan declined to comment.

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Tesla tests the circuits for German energy market push By Reuters

© Reuters. FILE PHOTO: Logo of Tesla is seen at a branch office in Bern


By Vera Eckert, Christoph Steitz, Tom Käckenhoff and Edward Taylor

FRANKFURT (Reuters) – Elon Musk appears to be opening a new front in the European battle for electric car supremacy: the power behind the wheel.

Musk’s Tesla (O:) has recently acquired a licence that will enable the carmaker to trade electricity across western Europe and the company has also been surveying customers in Germany about potentially using Tesla electricity in their cars.

Such moves, consultants and energy industry executives say, could set the stage for the company – possibly with one or more partners – to take on established utilities in Germany, Europe’s biggest power market and autos heartland.

Tesla declined to comment about its energy market plans.

Generating and trading power could help Tesla lower the running costs of its cars at a time rival automakers, including Germany’s BMW (DE:), Audi (DE:), Porsche () and Mercedes (DE:), are churning out new electric models.

It could also step up competition to utilities such as Vattenfall () and EnBW (DE:), which are investing in electric mobility services too, but which like peers RWE (DE:) and E.ON (DE:) are lumbered with the cost of winding down fossil fuel and nuclear power plants.

Tesla already sells solar panels and the Powerwall battery storage system for homes, but now appears to be looking at selling electricity directly to customers and using the home storage systems to provide services to the grid.

In June, the company became a member of the Paris-based EPEX Spot power exchange, a platform used to trade much of western Europe’s intraday cross-border electricity.

A month later, it surveyed German customers about their interest in energy services.

“What would encourage you to switch from your existing energy supplier?”, the survey said, according to a copy seen by Reuters.

“Would you buy a Tesla photovoltaic system and home storage (Tesla Powerwall) if you could switch to a specially designed Tesla electricity tariff?”, it added.

Tesla also asked potential energy customers whether they would allow the company to control when cars would charge.

This could allow it to coincide charging with cheap electricity rates during off peak hours, consultants and industry executives said.

It could also open the way for Tesla to use power stored by customers to help balance the electricity grid, an increasingly important service in Germany as it becomes ever more dependent on volatile wind and solar power.

Companies offering similar services in Germany include Shell-owned (L:) sonnen, virtual power plant operator Next Kraftwerke, and power aggregator Lichtblick.


Tesla’s interest in renewable energy was one of the factors that led it to choose Brandenburg state around Berlin as the site for a new factory, a person familiar with the company’s deliberations told Reuters.

In the first half of this year, some 65% of the electricity on the Brandenburg grid was generated from renewable sources, mostly wind. But like other areas in the north of the country, it often wastes energy because Germany’s networks are limited in how much green power they can transport over long distances.

Tesla’s Gigafactory 4 in Brandenburg will on its own require 100 megawatts (MW) of power and up to 400 MW if battery cell production is also launched, according to transmission grid operator 50Hertz.

Tesla is a long way from building up enough battery assets to deliver frequency regulation at grid scale, say specialists such as utility Axpo. But the company has made several steps to expand its energy activities in recent months.

In May, it applied for a UK licence to supply power, according to the Telegraph newspaper. It also uses a platform to bring users of its solar and Powerwall battery system into the electricity market in Australia.

“The next and obvious step for Tesla is to get into production, especially of renewable power,” said consultant Berthold Hannes, who has 30 years of energy advisory experience.

“Tesla could use its own locations, for example the roofs of plants or the sites of charging points, and alternatively, or in addition, it could take stakes in solar plants or wind parks,” he said.

Germany pioneered the solar power market, and is in the process of laying a policy framework that will make it easier for decentralised power generation and supply.

“Tesla’s long-term plan definitely includes tackling the energy industry in a bigger way, though it’s questionable whether it invests enough at the moment in that area,” said a former member of Tesla management, who declined to be named.

Thomas Deser, a portfolio manager at Union Investment, said it was unlikely Tesla would enter the German electricity distribution business on its own – “but it could do so with a competent partner from the energy industry.”

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Amazon’s new offerings make India centre of fintech push By Reuters

© Reuters.

By Sankalp Phartiyal and Nupur Anand

NEW DELHI/MUMBAI (Reuters) – Inc (O:) has added insurance and even gold to its menu of financial services in India, to expand its customer base and attract more subscribers to its Prime loyalty programme in a battleground growth market.

The push ramps up competition as financial technology (fin-tech) rivals and their deep-pocketed foreign backers struggle for profitability in a predominantly cash-based economy where about 190 million adults do not have bank accounts.

To boost online payments, Amazon launched its Amazon Pay digital wallet in 2016. It has since introduced a credit card, signed up to a state-backed payments network, and processes payments for movie and flight tickets as well as telephone and utility bills.

It began offering auto insurance in July and gold investment products in August – both a first for Amazon.

Its U.S. fin-tech efforts have been modest by comparison, stymied in part by merchant reluctance to use services offered by their biggest retail rival.

In India, however, where it has over 100 million registered users, Amazon is better placed to use financial services to win subscribers to its annual $13 Prime plan which offers faster shipping and music and video streaming, tech executives said.

To that end, the company aspires to make Amazon Pay the country’s payment method of choice, said Mahendra Nerurkar, head of Amazon Pay in India, which has signed up 4 million merchants.

“Apparently Chinese fashion designers are leaving the back pockets off jeans because no one uses them anymore (for wallets),” Nerurkar told Reuters. “We would love to make that happen in India.”

India’s digital payment market is set to more than double in value to $135 billion by 2023 from 2019, showed a study by professional services firm PwC and Indian lobby group ASSOCHAM.


A ban on high-value currency notes in late 2016 amplified a digital payment drive in India, with Amazon joined in the sphere by Alphabet Inc’s (O:) Google, Walmart Inc’s (N:) PhonePe, and Paytm, backed by SoftBank Group Corp (T:).

Later prospective entrants have faced tougher regulatory scrutiny. Facebook Inc ‘s (O:) WhatsApp, which boasts over 400 million users in India, has been awaiting approval to offer payment services for over two years as regulators wrestle with new data-localisation rules.

Yet for incumbents, profit has been elusive. Paytm, also backed by Alibaba Group Holding Ltd (N:), has booked losses running into the hundreds of millions of dollars. PhonePe has said it hopes to turn profitable by 2022.

Indeed, profit margins in the digital payments business are generally thin, so to make money, Amazon may have to rely on services such as lending and insurance, industry watchers said.

“It is likely that the next step for Amazon would be to distribute exchange-traded funds and mutual funds,” said Niren Shah, India head of Silicon Valley firm Norwest Venture Partners.

Others said Amazon’s sheer muscle does not necessarily mean it can succeed in a market as huge and complex as India.

“It’s not going to be easy to win over the Indian fin-tech market,” said a person who declined to be identified due to a business relationship with Amazon. “It’s competitive and varied, so it’s going to be a slow process.”

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United Airlines bids farewell to change fees in push for bookings By Reuters

© Reuters. FILE PHOTO: Passenger photographs United Airlines plane at IAH airport in Houston


By Tracy Rucinski

CHICAGO (Reuters) – United Airlines (O:) said on Sunday it is permanently eliminating change fees on tickets for U.S. travel effective immediately, the latest effort by a U.S. airline to try to stimulate bookings hit by the coronavirus pandemic.

Chicago-based United is among the major U.S. airlines that began implementing temporary waivers of change fees this year to give passengers more flexibility with their travel plans given the uncertainty surrounding the pandemic.

Now it is making the policy permanent for all standard Economy and Premium cabin tickets and also applying it to any ticket already booked through the end of the year. The standard change fee – charged to passengers who change their tickets – for domestic flights was $200.

In a video message to customers, Chief Executive Scott Kirby (NYSE:) said getting rid of fees is often a top request from passengers.

The move matches Southwest Airlines’ (N:) long-standing policy of not charging fees for ticket changes.

Rivals American Airlines (O:) and Delta Air Lines (N:) traditionally do charge for changes. Along with United, they were booking record revenues before the pandemic crushed demand, thanks largely to fees for things like checking luggage or choosing a seat.

In another change, beginning Jan. 1 United will allow customers to list for stand-by for free on a different flight on the same day of travel with the same departure and arrival cities if a seat is available.

Kirby called the moves a departure from decisions airlines had made in the past to survive difficult times, sometimes at the expense of customer service, saying United “won’t be following that same playbook as we come out of this crisis.”

Airlines are burning through millions of dollars daily because of the pandemic, but agree that restoring customer confidence and providing travel flexibility will be key to encouraging people to start traveling again and pave the path back to profitability.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Fed’s inflation push lifts S&P 500, Nasdaq to new highs By Reuters

© Reuters. FILE PHOTO: The Wall Street sign is pictured at the New York Stock exchange (NYSE) in the Manhattan borough of New York City

By Medha Singh and Devik Jain

(Reuters) – The S&P 500 and the Nasdaq rose to record highs on Thursday as the Federal Reserve sought to achieve inflation averaging 2% over time in an attempt to lift the U.S. economy out of a deep pandemic-driven recession.

Setting out the central bank’s aggressive new strategy at a virtual Jackson Hole symposium, Fed chief Jerome Powell said it would offset below-2% periods with higher inflation “for some time,” and ensure employment doesn’t fall short of its maximum level.

Eight of the 11 major S&P sectors were trading higher, with economically-sensitive financials leading gains. The communication services index, which houses Google-parent Alphabet (NASDAQ:) Inc and Facebook Inc (NASDAQ:), fell for the first time in four days.

“The strategy should be positive in the short term as it could reduce the potential for interest rate hikes,” said Nancy Davis, chief investment officer at Quadratic Capital Management LLC in Greenwich, Connecticut.

“At the same time, the statement acknowledges that Fed ‘has less scope to support the economy during a downturn by simply cutting the federal funds rate’.”

The S&P 500 and the Nasdaq have recovered their coronavirus-driven losses, largely driven by a tech-related rally at a time when the U.S. economy is struggling with its worst downturn since the Great Depression.

Data on Thursday showed weekly jobless claims hovered around 1 million last week, suggesting the labor market recovery was stalling.

At 10:52 a.m. ET, the was up 255.59 points, or 0.90%, at 28,587.51, on course to turn positive on the year for the first time since the coronavirus-driven crash in March.

The S&P 500 was up 15.09 points, or 0.43%, at 3,493.82, and the was up 10.94 points, or 0.09%, at 11,676.00.

Boeing (NYSE:) Co rose 3.1% after the European Union Aviation Safety Agency announced plans to begin flight tests of its 737 MAX plane, a move viewed as a key milestone toward its return to service.

Abbott Laboratories (NYSE:) surged 6.6% after the medical device maker won U.S. marketing authorization for a $5 rapid COVID-19 portable antigen test.

Cosmetics maker Coty (NYSE:) Inc shed 5.5% after posting a bigger-than-expected quarterly loss as demand for its beauty products took a hit from the closure of stores and parlors.

Advancing issues outnumbered decliners 1.36-to-1 on the NYSE, while declining issues outnumbered advancers 1.07-to-1 on the Nasdaq.

The S&P index recorded 34 new 52-week highs and no new low, while the Nasdaq recorded 52 new highs and 10 new lows.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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