Stiglitz says rate hikes that are too steep may worsen inflation

Carolynn Look, Bloomberg News

Central banks that hike borrowing costs too aggressively to tame supply-driven inflation risk exacerbating price gains, according to Nobel laureate economist Joseph Stiglitz.

As activity restarts following pandemic lockdowns and countries like China struggle to restore normality, the global economy is enduring something “we’ve never done before,” the Columbia University professor said in an interview in Lindau, Germany. 

“Raising interest rates doesn’t solve the supply-side problems,” he said. “It can even make it worse, because what we want to do right now is invest more in the supply-side bottlenecks, but raising interest rates makes it more difficult to make those investments.”

Policy makers are counting on tighter monetary policy taming the fastest inflation in a generation and keeping expectations about the future trajectory of prices in check. Stiglitz isn’t so sure.

With the US economy and others showing clear signs of “market power” -- where companies can raise prices without losing business -- standard economic models suggest rate hikes can lead to even more inflation, he said.

He cited the US housing market, where there’s evidence that landlords pass higher interest costs on to tenants through rents, stoking price growth.

“How will raising interest rates lead to more food, more energy, and solve the chip supply problem? Not at all,” Stiglitz said. “They won’t go at the basic source of the problem -- and the real risk is that will make things worse.”

Royal Bank CEO asks workers to come to the office more

Kevin Orland, Bloomberg News

Royal Bank of Canada is asking employees to come to the office more often, an early sign that the country’s big banks may follow their US rivals in cutting back on remote work. 

While many types of work can be done productively from outside the office, “technology can’t replicate the energy, spontaneity, big ideas, true sense of belonging and fun” of being together in person, Royal Bank Chief Executive Officer Dave McKay said in a memo to employees Tuesday. 

While McKay’s memo didn’t include specifics about how often employees will be expected to show up at the office, Royal Bank spokesman Rafael Ruffolo said in an email that hybrid arrangements will involve working in person two to three days a week for most office jobs. Those practices already are in place for some teams and regions, and the bank is aiming to have any new arrangements in place by the end of September, he said.

“For hybrid to continue to work effectively, we need to get the balance right and be a bit more deliberate about when and how we organize on site,” McKay said in the memo. “That’s why, as we move into the fall, I’m asking our leaders and colleagues to come together more often in person to work and collaborate.”

Bankers in Toronto, Canada’s financial capital, have typically faced less pressure throughout the COVID-19 pandemic to return to the office than their counterparts on Wall Street, where leaders like JPMorgan Chase & Co. CEO Jamie Dimon and Goldman Sachs Group Inc.’s David Solomon have been vocal proponents of in-person work. 

Many of Canada’s financial institutions have started bringing workers back into the office on a regular basis in only the past six months. Bank of Nova Scotia began to allow workers to come back to the majority of its Canadian offices on a voluntary basis in March, and started a phased return the following month. Manulife Financial Corp. also began a full return in April, while Toronto-Dominion Bank started allowing employees back in offices around the same time and aimed for workers to officially transition to new working models by June.

Royal Bank, Canada’s largest lender by assets, has about 89,000 workers around the world, according to the memo.

“We’re a relationship-driven bank,” Royal Bank’s McKay said. “To put it another way, direct human connection is core to our culture and how we bring our purpose to life for all those we serve.”

'Boomerang employees' are going back to the old jobs they quit

Charlie Wells, BNN Bloomberg

Forget return to office. In this economy, many employees are returning to previous employers, breaking taboos about workplace loyalty and bucking assumptions about the so-called Great Resignation.

Their numbers are up. In the US in the first quarter of this year, 4.2 per cent of all new hires for companies that advertised jobs on LinkedIn were boomerangs, compared to 3.3 per cent in 2019, the social-media firm said.

Their reasons for returning are varied. What’s more, their returns are being brandished by firms large and small, who are boasting everywhere from social media to Slack that the grass isn’t always greener on the other side.

So-called “boomerang employees” embody the economic ambiguity of the moment. Earlier this month, the Bureau of Labor Statistics showed the US labor market added 528,000 jobs in July, beating forecasts more than twofold. Yet just the week prior, data showed that the US economy shrank for a second straight quarter, amplifying concerns about a recession.

All the while, employees and employers are locked in a standoff over perks, pay, remote policies and the very meaning of work itself.

 

RETURN PERKS

“I just realized that startups don’t really offer a lot of family benefits that larger companies do,” said Rachel Bentley, a 31-year-old from Austin, Texas, who recently boomeranged back to Duo, a two-factor authentication company owned by Cisco Systems Inc., after stints at Microsoft Corp. and a smaller startup she joined in 2021. 

It was a mix of cultural comfort, pay and concern about the economy that drew Bentley back to Duo, whose employees she stayed in touch with on Slack even after she left the firm. It paid off: Bentley says by returning, she was not only able to rejoin colleagues she loves, but also double her pay. 

Others are doing the same, particularly at a moment when career risks — such as joining a startup in a new industry — may begin to lose their appeal. Although the job market is still strong, firms that once seemed like surefire bets in a stay-at-home economy are laying off staff or freezing hiring.

In June, crypto firm Coinbase Global Inc. said it would lay off 18 per cent of its workforce. Robinhood Markets Inc. said this month it would eliminate nearly a quarter of its staff. Even Apple Inc. laid off many of its contract-based recruiters, and firms from Peloton Interactive Inc. to LinkedIn Corp. have also recently shed staff. 

“The hard reality is that at 30, 40, or even 50, it’s really hard to change careers and maintain the lifestyle you’re used to,” said Adam Kail, founder and chief executive officer of Harrison Gray Search and Consulting in Grand Rapids, Michigan. “I’ve seen people switch careers drastically but in a short period of time realize, ‘I’m not as happy doing something I like more, but with my pay a third of what it was before.’”

MANAGER APPROVAL

In contrast to decades past, firms are now happy to take their old employees back. And they aren’t being quiet about it. LinkedIn is filled with posts from companies including Deutsche Bank AG, EY and Deloitte touting returning employees, often with elaborate blog posts, pictures and videos showing happy staff back at their companies. 

“On social media, you can very easily click back in and say, ‘Hey, I’d love to talk to someone again about maybe reengaging in employment with the firm,” says Dan Black, EY’s global leader for talent attraction and acquisition.

Social-media posts from boomerangs can help with recruitment in a still-tight labor market by showing the firm is a good place to work, according to Catherine Shea, an assistant professor at Carnegie Mellon University’s Tepper School of Business who co-authored a 2021 study on returning employees.

But Shea and her team found that boomerangs come with a cost. They analyzed two groups of employees at a US professional services firm: Workers who had boomeranged and similar workers who had never left. They found that boomerangs were paid more but performed on a similar level as employees who stayed. Still, boomerangs tended to spend more time on long-term projects, which might benefit firms because it indicates they have a deeper level of commitment to the company. 

Matthew Wragg, CEO of engineering and tech recruitment firm Gattaca, says he’s hired six boomerang employees in the past three months. 

“You’ve got that cultural cognizance,” he says. “They know the culture. They know the operating processes.” 

They also tend to change little between their first and second tours of the company, according to a study that John Arnold of the University of Missouri conducted with a team of other researchers. They examined some 30,000 boomerang and traditional employees over eight years. They found that in general, employees who performed well in their first stints also performed well in their second. Those who underperformed at first continued to underperform when they returned. 

STAGING A COMEBACK

This is why companies considering bringing back a boomerang candidate need to investigate carefully why he or she left in the first place, says Paul McDonald, a senior executive director at recruiter Robert Half. Red flags might be dissatisfaction with upward mobility, concerns about management, or poor cultural fit. Those issues are unlikely to have changed in the interim. On the other hand, salary, benefits and non-monetary perks are all issues that can be solved, within reason. 

Candidates looking to boomerang should carefully consider whether going back to an old employer is the right move, says Mark Royal, a senior director at consultant Korn Ferry. Some may look to jump back too soon without giving their new jobs enough of a try. 

Those who do decide to jump back should cast their time away in a positive light, he says.

“You want to be framing it in terms of what you’ve learned in the role you’re now leaving and what you can bring back to your former employer and why that will be valuable for you both,” says Royal.

The rise of the one-day workweek for office commuters

Jo Constantz, Bloomberg News

Despite calls from bosses at Peloton and other companies for employees to get back to their desks, the number of people commuting into the office once a week has soared, according to data from Basking.io, a workplace-occupancy analytics company. 

A full 50 per cent of office visits globally were just once a week in the second quarter, up from 44 per cent in the first quarter, according to Basking.io. At the same time, fewer people made the commute four to five days a week, especially in large cities. 

Recession fears have many wondering whether a return-to-office crackdown might be around the corner. Major companies like Tesla Inc. and Goldman Sachs Group Inc. are at the forefront of this effort, and even bestselling author Malcolm Gladwell has said people need to be in the office to have a “ sense of belonging.” Yet, many employees still feel comfortable ignoring mandates in the tight labor market, with the demand for workers far outpacing the supply. 

“Even with most firms implementing a ‘three days in the office hybrid policy,’ most employees prefer visiting the office just once a week,” Eldar Gizzatov, Basking.io’s chief executive officer, wrote in the report. “The pandemic has accustomed people to work remotely and there is not a concrete reason in most professions to return to the offices.”

​While the number of days workers were in the office fell, the the duration of visits rose, according to ​​Basking.io, which analyzed Wi-Fi data from 100 offices of seven organizations around the world to measure changes in office space utilization.

Work-from-home habits are settling into industry-specific patterns. About 55 per cent of workers are in-person full-time, mostly those in frontline jobs like retail, food service, and manufacturing, according to separate research from Stanford economics professor Nicholas Bloom. Roughly 30 per cent have hybrid arrangements, typically managers and professionals, while 15 per cent of workers are fully remote, largely in support roles like payroll and information technology.

World's largest four-day workweek trial: This is how it's going

Daniel Johnson , BNN Bloomberg

The world’s largest-ever four-day workweek trial is nearing its midpoint and the organizers behind it are sharing some insight into how it is going.

Charlotte Lockhart, the managing director and founder of 4 Day Week Global, said there have been statistically significant improvements across a range of well-being indicators.

“Anecdotally, companies are suggesting there’s been an overwhelmingly positive experience with revenue and productivity levels, [that have] either maintained and in some cases improved,” said Lockhart in a video interview Aug. 8.

Improvements have been seen across well-being indicators, including stress, burnout, sleep, family and work-life balance and life satisfaction. Anecdotally, Lockhart said the reduction in working hours does not appear to have negatively affected productivity at this time and in some instances, said productivity has improved.

“Everything we're finding so far is backing up what we've always said which is interesting. But I think that the important thing with this research is that we will have empirical data that feeds into that,” said Lockhart.

The trial is being conducted in the U.K. through partnerships between 4 Day Week Global, and researchers at Cambridge, Boston College and Oxford University. Around 3,300 workers are participating in the pilot across 70 different companies, with all of them agreeing to have employees work 80 per cent of their usual hours, with no changes in compensation or productivity.

The trial began in June and will continue until November. It is based on a research framework created by Juliet Schor, an economist and sociologist at Boston College. 

1932

 

WHAT THE PILOT IS LIKE

Dr. Rupert Dunbar-Rees, the founder and chief executive officer of Outcomes Based Healthcare, said in a video interview on Aug. 17 that the company was looking for ways to improve productivity before it joined the world’s largest four-day workweek trial.

“The four-day week is really a culmination of that exercise of trying to improve our productivity and really think deeply about what we're doing and how we're doing it,” said Dunbar-Rees on the company’s efforts to drive productivity.

The U.K.-based company has 11 full-time employees participating in the trial who are working in a hybrid setting.

Implementing the shortened week was not without its challenges, however. Dunbar-Rees said that overall, it has been “fairly smooth.”

Early challenges included determining how the company would serve clients, while best positioning the trial for success. The company also had to navigate human resources policies, specifically if the eliminated workday should be counted as annual leave and what to do with part-time workers who are already working four-day weeks. 

During the adjustment period, Dunbar-Rees said being agile was a top priority.

“You always anticipate failure, but then you have to plan around the failure,” he said, comparing the adjustment to the company’s work of producing software for the National Health Service.

Despite minor challenges, employees benefit from reduced working hours, Dunbar-Rees said. He reported the change felt like a “proper three-day reset.”

“In terms of the plus side, certainly everyone on the team…they've been managing to do lots of things that they just would never have done and come back much more refreshed on a Monday,” said Dunbar-Rees.

“So people are doing eye tests and going to the dentist and doing endless amounts of life admin that would otherwise not get done,” he said.

The shortened workweek is not about cramming five days' worth of work into four, according to Dunbar-Rees

“Half of the solution to a sustainable four-day week has been about looking for efficiencies and productivity improvements,” he said.

Once key efficiencies are found, the other half of the solution involves identifying and eliminating low-value actions, which involves “ruthless prioritization.”

Dunbar-Rees said it is likely the four-day week will continue beyond the trial period.

“I don’t want to prejudge the outcome of the pilot, but I'd be surprised if we got to the end of this and said, ‘right let's go back to our old way of working,’” he said.  

BOTTOM-UP APPROACH

The trial’s operating principle dictates employees receive 100 per cent of their pay while working 80 per cent of total hours, with 100 per cent productivity. This allows companies to measure and support employees on an individual basis, according to Lockhart.

“How that [principle] is achieved is at the essence of what we talk about in our program, in that it needs to be bottom up,” said Lockhart.

Typically, organizations that dictate from a top-down perspective how employees will navigate the shortened week are the ones that become unsuccessful in adapting, according to Lockhart.

Inefficiencies exist and manifest in various ways, Lockhart said, commonly surrounding meeting times. 

“What we’re looking for, particularly, is to define productivity rather than busyness,” she said. 

 

TRIAL PROCESS 

Organizations that participate in the trial begin by working with the researchers to identify baselines, Lockhart said, in order to determine where the organization is ahead of the shift to the shortened week.

The next step is getting executives committed to making a pilot successful. 

“They don't necessarily have to make the reduced-hour work thing successful. All they have to do is commit to resourcing and empowering the pilot appropriately,” Lockhart said. 

After that, an organization can begin to determine how the pilot will work, while executives take an “empowering backseat,” she said. 

After a pilot is designed, flexibility becomes key, Lockhart said.  

POTENTIAL BENEFITS

John Trougakos, an associate professor of management at the University of Toronto, said productivity can be held steady amid reduced hours, as it incentivizes organizations to become more efficient and reduce wasted time.

He said it also leverages the benefits of increased employee rest times.

“I think that's the other side of the coin when it comes to the benefit of the four-day workweek. That one, it increases efficiency and two, people can work a lot more productively when they're feeling better and when they're more energized and when other elements of their life are in balance,” Trougakos said.

Reductions in employee burnout and sick days are among the reported benefits, according to Lockhart.  

“It's all about how you are empowering your people in their own jobs and giving them the autonomy that they need to do that, point number one,” said Lockhart.

“Point number two, you're removing the irrelevant busyness from people's lives. And so, what we find, statistically, is that people feel that they can do their job better in less time. So, that helps with the whole burnout thing.”

4 Day Week Global is a not-for-profit organization that has been working to support the adoption of a four-day work week since 2018.

SERIOUSLY?!

Tim Hortons offers coffee and doughnut as proposed settlement in class action lawsuit

Brett Bundale, The Canadian Press

Tim Hortons has reached a proposed settlement in multiple class action lawsuits alleging the restaurant's mobile app violated customer privacy, which would see the restaurant offer a free coffee and doughnut to affected users. 

The settlement, negotiated with the legal teams involved in the lawsuits, still requires court approval.

The coffee and doughnut chain would also permanently delete any geolocation information it may have collected between April 1, 2019 and Sept. 30, 2020, and direct third-party service providers to do the same.

"We think that it's a favourable settlement because it offers compensation that has a real value," said Joey Zukran, a lawyer with the Montreal-based law firm LPC Avocat Inc., which filed the class action in Quebec.

"Privacy cases across Canada are never guaranteed a win," he said. "Here we have some form of guarantee, some form of recovery ... as opposed to uncertainty that could last."

It's unclear how many customers used the app during the 18-month period ending Sept. 30, 2020, and would be eligible to receive a free hot beverage and baked good.

Restaurant Brands International Inc., the parent company of Tim Hortons, said in an investor presentation in May that it had four million active users during the three months ended March 31, 2022. 

"I think people who receive this will think it’s paltry, but class action settlements are often paltry for the end consumer," said David Fraser, a privacy lawyer with McInnes Cooper in Halifax.

While the individual compensation may not seem like much, he said given the number of people potentially involved "it may be reasonable in aggregate."

Still, others may feel it's not high enough to "act as a disincentive to further mischief," Fraser said. 

"Any time you settle, there's going to be a compromise," he said, adding that the case "reflects how weird privacy harms are."

"If you used that app and Tim Hortons collected your location information without your adequate, informed consent but nothing has happened with that information, you actually haven't suffered what would be considered a tangible harm," Fraser said. 

"You're trying to compensate for the feeling of ickiness, the creepiness somebody might feel knowing that their information was collected without their knowledge or consent."

The proposed settlement comes after an investigation by federal and provincial privacy watchdogs found the mobile ordering app violated the law by collecting vast amounts of location information from customers.

In a report released last month, privacy commissioners said people who downloaded the Tim Hortons app had their movements tracked and recorded every few minutes — even when the app was not open on their phones.

The investigation was launched after National Post reporter James McLeod obtained data showing the app on his phone had tracked his location more than 2,700 times in less than five months.

In a statement, Tim Hortons said it's pleased to have reached a proposed settlement in the four class action lawsuits filed in Quebec, British Columbia and Ontario.

"All parties agree this is a fair settlement and we look forward to the Superior Court of Quebec’s decision on the proposal," the company said in a statement. 

"We are confident that pending the Quebec court’s approval of the settlement, the courts in British Columbia and Ontario will recognize the settlement."

The company said the allegations raised in the class actions were not proven in court and the settlement is not an admission of any wrongdoing.

Tim Hortons said it would be emailing customers Friday to inform them of the proposed settlement.

Tim Hortons said the retail value of a free hot beverage is $6.19 while the value of a baked good is $2.39, plus taxes, according to court documents. 

Customers would be provided with a credit for the items with a coupon or through the Tim Hortons app, documents said. 

Details on the distribution of the free hot beverage and baked good would be provided if the court approves the settlement, Tim Hortons said. 

A hearing has been scheduled in a Quebec court on Sept. 6 to consider the proposed settlement. 

Nordstrom plunges as 'vulnerable' middle-class shoppers tighten belt

Katrina Lewis and John Hyland, Bloomberg News

Investors are getting daily reminders this earnings season that retailers catering to US middle-income shoppers are some of their most exposed bets.

Nordstrom Inc. tumbled 20 per cent Wednesday in its biggest drop since November after slashing its full-year outlook, citing slowing customer traffic and demand at its off-price Rack stores. The slump brings the stock’s year-to-date decline to 18 per cent, narrowing the gap it had established over its department-store peers. 

“The common threads across Kohl’s, Macy’s and Nordstrom this earnings cycle is that they all talked about that middle being most under pressure, versus the low end,” Jefferies analyst Stephanie Wissink said on Bloomberg TV Wednesday. “The middle is the one that seems to be the most vulnerable right now.”

On Tuesday, Macy’s Inc. cut its full-year forecast for profit and revenue, citing tighter consumer budgets. While shares closed higher as the company’s more expensive chains -- Bloomingdale’s and Bluemercury -- outperformed, the stock is still down 29 per cent this year. Last week, Kohl’s Corp. dropped after warning that its middle-income customers are especially pressured in the current environment. 

Until now, Nordstrom’s shares had largely traded higher for the year, with management touting the resiliency of its higher-income customer base. The retailer’s fiscal second-quarter report debunked the magnitude of that advantage as weakness at its Rack stores, which made up about 30 per cent of revenue in the quarter, outweighed strength in its higher-end business.

“While we continue to think the higher income profile of Nordstrom’s average customer positions the company well in the current environment, clearly Nordstrom is not immune to the difficult macro backdrop,” KeyBanc Capital Markets Inc. analyst Noah Zatzkin wrote in a research note.

Nordstrom’s report reinforces how decades-high inflation is impacting shoppers -- and in turn retailers -- differently. Companies that cater to the highest and lowest ends of the income spectrum are holding up better than those that rely on middle-class consumers, though retailers across every price point are seeing signs of slowing spending. 

Still, value-oriented stores have posted solid results for the second quarter. Walmart Inc. rallied after forecasting that its earnings this year wouldn’t decline as much as it had projected, buoyed by robust back-to-school sales, lower fuel prices and more sales to wealthier customers seeking bargains. Warehouse club operator BJ’s Wholesale Club Holdings Inc. climbed to a record last week after reporting stronger-than-expected results.

Deep-discounters Dollar General Corp. and Dollar Tree Inc., which have outperformed other consumer stocks this year, will report earnings Thursday.

BNP Paribas Weighs Sale of Eastern Europe Assets to Raise Cash

Manuel Baigorri, Bloomberg News

A logo on a BNP Paribas SA bank branch in Marseille, France. Photographer: Theo Giacometti/Bloomberg , Bloomberg

(Bloomberg) -- BNP Paribas SA is considering a sale of its consumer finance business in central and eastern Europe as it continues to streamline its portfolio to raise cash, according to people familiar with the matter.

The French bank is working to gauge buyer interest for its BNP Paribas Personal Finance operations in markets including Romania, Hungary and the Czech Republic, the people said. A sale could value the assets at more than $500 million, the people said, asking not to be identified discussing confidential information.

Deliberations are in the early stages and no final decisions have been taken, according to the people. BNP Paribas could still decide against a sale, they said. A representative for BNP Paribas didn’t immediately respond to a request for comment.

BNP Paribas Personal Finance has a presence in 30 countries and counts more than 20 million clients, according to its website. Its services include credit, savings and insurance products.

Earlier this month, the French lender joined European peers in pledging higher profitability and bigger shareholder returns, despite a surge in costs that’s plaguing the industry. Led by Chief Executive Officer Jean-Laurent Bonnafe, the Paris-based bank has vowed to return 60% of profit to shareholders. 

In December, BNP Paribas agreed to sell San Francisco-based Bank of the West to Bank of Montreal for $16.3 billion.

©2022 Bloomberg L.P.

BlackRock, UBS among firms facing Texas ban over energy policies

Amanda Albright, Shelly Hagan and Danielle Moran, Bloomberg News

Texas banned BlackRock Inc., UBS Group AG and eight other finance firms from working with the state after finding them to be hostile to the energy industry. Bloomberg News' Shelly Hagan reports.

Texas is taking steps that could cost BlackRock Inc., UBS Group AG and eight other finance firms business with the state after finding them to be hostile to the energy industry.

Glenn Hegar, the Republican state comptroller, on Wednesday named the firms he considers to “boycott” the fossil fuel sector. The move ends roughly six months of suspense that led Texas municipal-bond issuers to avoid banks whose status was unclear amid the office’s probe into companies’ energy policies. Governmental entities should use the list as a “filtration system” when entering contracts, Hegar said in an interview. 

The comptroller sent inquiries to more than 150 companies in March and April, requesting information on whether they were shunning the oil and gas industry in favor of sustainable investing and financing goals. The survey was triggered by a GOP-backed state law that took effect on Sept. 1, 2021, and which limits Texas governments from entering into certain contracts with firms that have curbed ties with carbon-emitting energy companies. Texas is the nation’s top producer of crude and natural gas.

“The environmental, social and corporate governance (ESG) movement has produced an opaque and perverse system in which some financial companies no longer make decisions in the best interest of their shareholders or their clients, but instead use their financial clout to push a social and political agenda shrouded in secrecy,” Hegar said in a statement. 

The announcement is the latest salvo in Republicans’ escalating fight against financial companies that have stepped into political and social issues. On Tuesday, Florida Governor Ron DeSantis eliminated ESG considerations for the state’s pension funds, passing a resolution along with other officials specifying that investments “must be based only on pecuniary factors.”

HEGAR'S LIST

The other companies on the list are BNP Paribas SA, Credit Suisse Group AG, Danske Bank A/S, Jupiter Fund Management Plc, Nordea Bank ABP, Schroders Plc, Svenska Handelsbanken and Swedbank AB. In addition, the comptroller’s office also designated nearly 350 funds that are subject to the same investment rules.

BlackRock, the world’s largest asset manager, said in an emailed statement that the company disagrees with the comptroller’s assessment. 

“This is not a fact-based judgment,” the statement said. “BlackRock does not boycott fossil fuels -- investing over US$100 billion in Texas energy companies on behalf of our clients proves that. Elected and appointed public officials have a duty to act in the best interests of the people they serve. Politicizing state pension funds, restricting access to investments, and impacting the financial returns of retirees is not consistent with that duty.”

A spokesperson for UBS said the company also disagrees with the decision. “We provided their office with extensive information on our policies and practices, demonstrating that UBS does not boycott energy companies even under a broad interpretation of Texas law,” the statement said. 

A Schroders spokesperson said the company doesn’t boycott fossil fuels and has US$19 billion allocated to companies active in the energy sector globally.

A Credit Suisse representative said the company would look to engage with the comptroller to resolve the matter, saying it doesn’t boycott the energy industry.

“As we noted in our response to the Texas comptroller, Credit Suisse is not boycotting the energy sector as the bank has ongoing partnerships and strong client relationships in the energy sector,” the statement said.

Spokespeople for BNP, Danske, Jupiter Fund Management, Nordea, Svenska Handelsbanken and Swedbank didn’t respond to requests for comment.

State pension funds including the Teacher Retirement System of Texas will be required to divest from the companies, though the law includes exceptions, according to Hegar. Within 30 days, state entities like pensions will be required to notify the comptroller of any holdings on the divestment list. The teacher’s pension had US$201 billion of investments in 2021, according to the system.  

The list may be modified and the comptroller’s office said it will review information on an ongoing basis. 

ESG SHIFT

The dust-up has its roots in a shift by some asset managers and banks to prioritize policies that take ESG factors into account. The firms say they’re simply responding to customer demand for strategies intended to do good for the world while also enriching investors. Because of their contributions to pollution and greenhouse gases that help fuel climate change, oil and gas companies are often excluded from ESG funds.

Dozens of firms defended their policies in responses to Hegar’s survey, saying they don’t boycott the energy industry but are required to act in their customers’ interests. 

Hegar said in a statement that financial institutions are guilty of “doublespeak” as they “engage in anti-oil and gas rhetoric publicly yet present a much different story behind closed doors.”

BlackRock told Hegar in a May letter that it’s committed to helping clients invest in the energy industry. The firm said it oversees about US$310 billion of investments in energy firms worldwide, including in Texas companies. 

The money manager landed on the list after being targeted by conservative lawmakers from a bevy of states. In August, 19 state attorneys general, including Texas’s, wrote a letter accusing BlackRock Chief Executive Officer Larry Fink of pursuing sustainable investments instead of shareholders’ profits. 

To be sure, it’s unclear how the list will impact firms currently doing business with Texas and how exactly the statute’s provisions would be implemented. Lawyers will likely be wading through the details for months, examining allowed exceptions and parsing the fine print. One exception written into the new law says pensions aren’t required to divest from the banned companies if doing so would hurt their performance.

The law, Senate Bill 13, bars governments from entering into contracts of US$100,000 or more with companies unless the firms verify that they don’t boycott the energy industry. There are exemptions for that portion of the law, too. Municipalities can sidestep it if they determine that compliance would violate the government’s constitutional or statutory duties related to the sale of debt or management of funds.

Some Texas muni issuers had been skittish toward companies caught up in the comptroller’s probe, and now that the list is out, some underwriters that avoided being named by Hegar may find they’re freer to do business again.

The state’s public-finance market, one of the nation’s biggest, has also been roiled by a separate GOP-backed law targeting Wall Street for taking on policies around firearms. Bank of America Corp., Goldman Sachs Group Inc., and JPMorgan Chase & Co. haven’t underwritten a municipal-bond deal by the state or its municipalities since the gun law took effect in September.

Texas isn’t alone in attempting to punish Wall Street for pursuing ESG-focused initiatives. 

States including Oklahoma, West Virginia and Kentucky have passed legislation this year targeting companies that engage in “boycotts” of the oil and gas industry. In July, West Virginia said it wouldn’t award state banking contracts to five firms: JPMorgan, Wells Fargo, Goldman Sachs, BlackRock and Morgan Stanley. 

BLUE VS GREEN H2

Canada's plans to help European energy woes may not have room for Alberta

Wed, August 24, 2022 

The CBC’s Vassy Kapelos interviews German Chancellor Olaf Scholz, in Toronto, on Aug. 23, 2022 during the European leader’s first trip to Canada. Scholz said he would like to see more natural gas exports from Canada to address energy woes. (Evan Mitsui/CBC - image credit)

The Russian war in Ukraine has had the side effect of cutting off a large portion of natural gas to Germany, and Chancellor Olaf Scholz was in Canada to sign a deal with Prime Minister Justin Trudeau on hydrogen energy.

While there is a desire from Germany to find more natural gas in the meantime, there appears to be little appetite to add the necessary infrastructure — including a plant for liquefied natural gas on Canada's East Coast.

"We would really like Canada to export more [liquefied natural gas, LNG] to Europe," Scholz told host Vassy Kapelos on CBC News Network's Power & Politics Tuesday.

But Scholz said there are no business cases at the moment, and Trudeau said it would be a costly endeavour with little upside as Germany looks to quickly move into renewable energy to become more self-sufficient.

Alberta produces over 60 per cent of Canada's natural gas, and this creates an uncertain future for the hopes of increasing buyers around the world. Currently, the United States is the biggest foreign buyer of Alberta natural gas.

In a statement, Alberta's Associate Minister of Natural Gas, Dale Nally, pushed back on the cool reception to the resource.

"There is a clear business case to increase market access for Canada's LNG off the east coast, and not acknowledging it is another case of the federal government refusing to act in the best interests of Albertans, Canadian, and the world."

Chris Young/The Canadian Press

'Very little import capacity'

With roadblocks in the way of adding export capacity in Canada and a lack of plans to improve the intake of natural gas in Germany, experts say Alberta is caught in the middle.

"There's very much a limit on how much of that can be done because of the import capacity that exists, and in Germany in particular there's very little import capacity," said Sara Hastings-Simon, assistant professor at the department of physics and astronomy at the University of Calgary.

LNG Newfoundland and Labrador Ltd.

Alberta's vision for the natural gas industry does set sights on two or three large-scale liquefied natural gas projects to improve exports, though this does not solve the immediate need for energy Germany faces.

Nally criticized previous governments for not capitalizing on opportunities to make the most of natural gas.

"Alberta and Canada already missed the first LNG wave, we cannot afford to miss the second. Several LNG projects are already operating in the U.S. with more under construction. Canada only has one LNG export project currently under construction: LNG Canada on the West Coast, which is getting nearer to completion," he added in an emailed statement to CBC News.

Natural gas can have a role to play in developing hydrogen energy, however this also does not create the true green version that Germany said it's looking for. Hastings-Simon said this can also leave Alberta out of the equation for supplying hydrogen overseas.

Amit Kumar, a professor in the faculty of engineering at the University of Alberta, helped advise the Alberta government on its hydrogen plans, and agreed there are significant hurdles for the province, as a country such as Germany wants to move more quickly into a clean energy system.

"We should keep in mind there are different baskets of options for decarbonization, and hydrogen is one of them, and we should initially transition with what is commercially available and cheaper," he said.

The future for hydrogen

Developing hydrogen production capacity in Alberta has been underway for some time, but the future role it could play locally and internationally in supplying the grid remains a question.

"It provides an option and alternative to natural gas," said Kumar. "But my sense is in the longer term, it will be part of the decarbonization of our Alberta energy system, but it will be an option along with other options of decarbonization."

Jeff McIntosh/The Canadian Press

The province has plans for more commercial capacity for hydrogen energy created with the help of natural gas by 2030. But it will also be faced with wait times for regulatory reviews and the high upfront cost of adding production capacity for the resource.

"It's much more expensive, it's much less energy dense, there are potential safety issues involved with hydrogen, and the infrastructure that we have in place is certainly inadequate to use it commercially," added Richard Masson, executive fellow at the University of Calgary School of Public Policy.

"There's a long way for us to go from here to there."

Looking at how to balance the books by exporting different forms of energy also brings another challenge to the forefront.

While hydrogen seems like a futuristic option to give green energy, there are still significant plans in place in countries like Germany to utilize more wind and solar energy.

"It's not going to be a one-for-one replacement for Alberta's or Canada's energy exports," said Hastings-Simon. "I think if we have that expectation, we are going to be disappointed