Good morning from Hong Kong.
I spent last week at the Fortune Global Forum in Yunnan, China, but was unable to report on it due to restrictions on my visa. Thanks to Eamon Barrett and Clay Chandler for filling in.
I left Yunnan with one strong impression–that climate change is no longer a problem of the future, but one of the here and now. And that means significant costs and risks for business. McKinsey CEO Kevin Sneader and his sustainability lead Dickon Pinner made that point powerfully in a piece on Fortune.com last week, which if you missed is worth reading here. (Disclosure: McKinsey was a sponsor of the Yunnan event.) A few of their data points:
- Water rose above the nuisance level an average of 14 days a year between 2005 and 2017, more than triple the rate of 11 years prior.
- In northern India, summer temperatures are hitting 120 degrees Fahrenheit, shutting down workplaces.
- In Brazil, the two-crop cycle has in certain regions been reduced to one.
McKinsey’s Jonathan Woetzel told the Yunnan gathering that C02 in the atmosphere has now veered from historical norms to a degree not seen since the last ice age. The issue for companies, he said, is no longer heading off climate change, but rather adapting to it.
When the world’s most influential consulting firm starts talking this way, it’s time to listen.
By the way, one of the liveliest discussions at the forum was around the bold claims made by solar executives—including Tom Werner, CEO of California-based SunPower, and Christian Rynning-Tonnensen, CEO of Norway’s Statkraft—on the role solar will play in adaptation. Rynning-Tonnensen said his company has scenarios in which renewable energy provides 80% of the world’s electric power in 2050, with solar generating half of that. “The conversion to renewables is inevitable and it’s happening,” said Werner. “Capitalism works.”
More news below.
WeWork doesn’t seem to be enjoying its pre-IPO scrutiny. Having already reportedly reduced its IPO valuation to around $20 billion (the figure was $47 billion at its last private funding round,) We Co. is now looking at an even lower valuation, and some existing investors are apparently talking about shelving the flotation altogether. Fortune
The advocacy group China Labor Watch has accused Apple and contractor Foxconn of multiple violations of China labor law in the production of iPhones. Apple has admitted exceeding the allowed number of contract workers (the cap is supposed to be 10%) but denies most of the allegations, which also include the exploitation of Chinese workers in order to absorb tariff-associated costs. Washington Post
British Airways pilots are engaging in their first-ever strike, and it’s a doozy: almost all flights are cancelled today and tomorrow. The British Airline Pilots Association called the strike over the issue of pay. BA says the union didn’t tell it which pilots would be striking, hence the need to cancel all those flights—passengers are advised to stay away from the airports altogether. Sky News
Germany may be widely expected to tip into recession this quarter, but it turns out the country’s exports rose in July, beating economists’ expectations. ING economist Carsten Brzeski: “This morning’s trade data brings a very weak ray of sunshine. Nothing more but luckily also nothing less.” Reuters
AROUND THE WATER COOLER
President Trump regularly moves markets with his tweets, so J.P. Morgan has decided to create a new index to measure the resulting volatility in 2-year and 5-year Treasurys. It’s called the Volfefe Index, in a nod to the president’s enigmatic/fat-fingered “covfefe” tweet in 2017 (which did not, it should be noted, move markets). CNBC
Former South Carolina governor and congressman Mark Sanford is the latest Republican to throw his hat into the ring for 2020. “I think we need to have a conversation on what it means to be a Republican. I think that as the Republican Party, we have lost our way,” said Sanford by way of explanation for his intent to beat President Trump to the candidacy. Fortune
Not for the first time, observers are wondering whether China’s official growth figures accurately reflect what’s going on. According to the Journal, the real numbers could be as much as 3 percentage points lower than the 6.2% quoted by Beijing for Q2. WSJ
Russia’s state communications regulator has accused Google and Facebook of illegally distributing political advertising during local elections at the weekend. Google responded by saying it supports “responsible political advertising,” while Facebook’s trying to argue that advertisers, rather than Facebook itself, are responsible for complying with local election laws. Reuters