Companies Grapple With Reducing Consumer-Use Emissions
This week we talk about companies’ push to change consumer habits to reduce emissions and about total-return swaps.
Intro: Welcome to our weekly chat about the environmental and social issues that influence the way we work, spend our money and live our lives. We're your hosts, Maitane Sardon and Dieter Holger. Want to get our newsletter every Wednesday? Hit the subscribe button in the upper right corner and please share with your friends.
Hi Dieter! The world’s biggest makers of shampoo, detergent and toothpaste are struggling to reduce what they say is their biggest source of carbon emissions: those we generate when, for example, we take a hot shower at home.
Unilever, which makes Dove soap and Suave shampoo, aimed to halve the emissions caused by consumer use of its products by 2020 but has had to postpone its deadline by a decade. It says one of the reasons for the deferral is that it couldn’t persuade people to take shorter showers. Consumer use of Unilever’s products makes up 66% of its total greenhouse-gas emissions, the company says.
When the company set the target in 2010, it thought it could persuade its customers as it did when it changed how they used its laundry detergents. The consumer-goods giant reformulated laundry products so they could be used with cold water and told consumers they would save on their electric bill by turning the dial down.
But Unilever’s customers didn’t like taking colder showers, according to the company’s research. The company’s sustainability head Thomas Lingard said another problem is that when we’re in the privacy of our bathrooms, we don’t experience peer pressure to be more environmentally friendly. Unilever says it is now focused on pushing governments to accelerate the switch to renewable energy.
Another company grappling with this issue is Reckitt Benckiser Group, which makes Finish dishwasher tablets. The company targeted slashing emissions per product dose by 33% between 2012 and 2020, but by 2019 it had only achieved a reduction of 6%.
Companies also say they find it hard to measure their progress accurately. These difficulties have led some firms—including P&G and Henkel, according to the companies—not to set targets aimed at reducing emissions generated by consumers.
Now, let’s talk about the chaos hedge fund Archegos Capital Management has caused on Wall Street. The shares of blue-chip companies—including media groups ViacomCBS and Discovery—plunged on Friday as banks that lent to Archegos forced the firm to unwind the big bets it had made on European, U.S. and Asian stocks.
The sales have also left banks facing losses in the range of $5 billion to $10 billion, J.P. Morgan Securities analysts say. Swiss bank Credit Suisse and Nomura, a Japanese bank, are thought to account for more than half of the projected losses, the analysts say, because it took them longer than their peers to unwind the positions.
Archegos is estimated to have managed $10 billion of its own money, according to people familiar with the fund, but its total positions in companies approached $30 billion thanks to leverage it obtained from banks. Instead of simply buying shares from the companies, Archegos used something called total-return swaps.
What are total-return swaps? Total-return swaps are contracts brokered by banks that allow an investor to invest in assets without owning them. The bank buys assets such as stocks and pays the investor based on the total return of the assets. The investor pays the bank a fee in exchange. Swaps allow investors to take huge positions while posting limited funds up front.
Swaps are controversial products and have for years faced scrutiny from regulators and some well-known investors, who said the increased leverage adds risks to other investors.
We will keep an eye on how the Archegos situation evolves and whether regulators increase their inspection of swaps.
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Meet the team:
Elevate the Conversation is produced by the editorial teams of The Wall Street Journal and Dow Jones Newswires. Here's a little bit more about us, along with our contact information. We'd love to hear from you.
Dieter Holger, Reporter: I have a knack for uncovering values-based investing trends and I’m obsessed with spreadsheets and charts. I really enjoy ‘80s music and skateboarding (but I suck). dieter.holger@wsj.com @dieterholger
Maitane Sardon, Reporter: I have a passion for amplifying the voices of those at the center of stories. I love running on Barcelona’s beaches and binging on chocolate ice-cream to compensate (it’s all about balance). maitane.sardon@wsj.com @sardonmaitane
Catherine Lindsay, Editor: I like breaking down complex ideas and explaining them. On the weekend, you’ll find me wandering the city with my film camera at the ready. catherine.lindsay@wsj.com @CathsLindsay
Tammy Lian, Designer: As a visual producer, I'm always excited by the challenge of creative problem solving. In my spare time, you can usually find me taking care of my ever-growing collection of plants and drinking tea. tammy.lian@wsj.com @violian.tammy