fortune--2020-04-16--Shell becomes the largest global energy company to commit to a net-zero emissions goal by 2050

Energy giant Royal Dutch Shell said Thursday it would aim to reduce its emissions to net-zero by 2050, making it the largest global oil and gas company in the world so far to sign on to the target. It’s a commitment that will fundamentally shift the nature of its business.
The target will cover emissions from the manufacture of its products, the company said. A net-zero goal means to reduce all possible emissions, while offsetting those that can’t be cut entirely; the 2050 target coincides with guidelines under the Paris climate change accord.
In a statement, the company’s CEO, Ben van Beurden, said that even during the COVID-19 epidemic, Shell must “maintain the focus on the long term,” and attributed the target to broader societal change.
“Society’s expectations have shifted quickly in the debate around climate change. Shell now needs to go further with our own ambitions, which is why we aim to be a net-zero emissions energy business by 2050 or sooner. Society, and our customers, expect nothing less,” he said.
In a statement, Adam Matthews, director of ethics and engagement at the Church of England Pensions Board, which leads engagement with Shell for Climate Action 100+, an investor climate-action group that encompasses more than $40 trillion in institutional investors, including BlackRock, said the move showed Shell’s confidence. Matthews added that Shell’s announcement sets the focus on laying out a pathway for companies in the energy sector to follow.
Shell is No. 3 on Fortune’s Global 500. Before committing to the net-zero target, the Dutch-Anglo giant was one of the fastest-moving companies in the sector to commit to disclosing emissions—not just from its own operations, but from those produced by its customers. That made Thursday’s commitment a logical next step.
“The fact that Shell announced the move now underlines its commitment to make the shift from Big Oil to Big Energy,” wrote Luke Parker, vice president of corporate research at Edinburgh-based energy consultancy Wood Mackenzie, in a comment. “Coronavirus and its fallout doesn’t change that…If anything, it adds greater weight to the argument. Despite immediate cash flow constraints, Shell (and its peers) will emerge from this period more determined to make the shift.”
Shell’s commitment follows net-zero targets announced by BP, the British energy giant which is No. 7 on the Global 500, in February, and Spain’s Repsol—No. 200—late last year. It also marks a further widening of the gap between European energy giants, which have openly acknowledged the mounting pressure to lower emissions from governments and the public, versus U.S. energy companies, which analysts and experts from both sides of the Atlantic say have not felt the same direct pressure—or made the same commitments.
In February, the company’s U.K. country chair said at an International Petroleum Week panel on oil and gas and climate change that the company had already set ambitious targets to reduce its emissions, noting that as much energy as possible must be clean, but adding that “oil and gas will also need to play a role, and so society’s use of oil and gas will not necessarily reduce at the pace many might like.” Shell and Equinor, the Norwegian state energy giant, were the only two energy companies to appear on the panel.
However, Shell will now face hard questions about the specifics of how it will meet this target—a goal that even experts in reducing emissions say is currently difficult to map out, particularly for energy companies whose very existence is owed to fossil fuels. BP, after committing to the net-zero target, said it would update investors later in the year on how it would actually meet such a goal. On Thursday, Shell said that its operating plans and budget do not yet reflect the 2050 target.
The announcement also comes as the oil and gas sector appears to be entering free fall, with even agreements by OPEC+ and other producers earlier this week to limit oil production doing little to stabilize global oil prices, which hit a fresh 18-year low on Wednesday as WTI dipped below $20 per barrel. That has already resulted in widespread furloughs, layoffs, and even early bankruptcies across the sector, putting the future of cities and regions relying on oil revenues in question—and appearing to put climate change, which until earlier this year was dominating debates about the future of the industry, on hold.
That worries analysts and experts who work on oil and gas and climate change. They’re concerned that commitments to lower emissions could fall by the wayside as a result of the financial hit and strain on executives’ resources in managing the COVID-19 crisis.
On Wednesday, Fatih Birol, executive director of the International Energy Agency, said that emissions were likely to fall in 2020 as a result of the crisis, but warned that it would be the result of economic meltdown—not meaningful policy changes. In March, Birol noted that the coronavirus crisis was likely to provide a “test” for governments and companies on whether they are serious about committing to lowering their emissions.
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fortune--2020-04-16--Robinhood to raise at an $8 billion valuation, sources say

Why the U.S. government needs a new corporate bailout structure—one that doesn ’ t rely on loans

Robinhood, the stock trading app aimed at millennials, suffered unprecedented outages in March during the Dow’s largest one-day point gain in history, and sidelined clients hoping to capitalize on the market’s volatility.
Now the startup in the midst of an upround, sources say. Robinhood is raising roughly $250 million in funding led by existing investor Sequoia that would anoint the company with a pre-money valuation of about $8 billion (or a valuation before accounting for the new investment), as first reported by Bloomberg.
Sources with knowledge of the matter add that the numbers may shift as the round has yet to close and the company is still in the process of nailing down some participating investors.
It’s an uptick in valuation for Robinhood, which previously raised $323 million at a valuation of $7.6 billion for its Series E round led by DST Global. Other existing investors for the company include GV, Index Ventures, New Enterprise Associates, Dragoneer, Kleiner Perkins, and Ribbit Capital.
While Robinhood is still managing fallout from its outage, the record traffic resulting from the market’s coronavirus induced up and downs, has also resulted in record account signups.
Robinhood declined to comment.
Should the airlines get a bailout? On one hand, the travel industry has been stricken by an unpredictable Act of God. On the other, the Big Four have channeled 70% of their total net income into buybacks and dividends in the last three years—leaving the industry in a flimsy state to weather a financial downturn that has hit the travel industry first.
Here’s where the government has landed: $50 billion of the federal government’s $2 trillion stimulus package has been earmarked for passenger carriers. But major carriers will have to forgo stock buybacks and dividends, possibly for years, and impose strict caps on C-suite pay. Read it here.
There’s been lively chatter about the topic—so I wonder—do you, Term Sheet readers, think airlines should get a relief package? Let me know why or why not.
Startup Layoffs: Online real estate company OpenDoor has laid off 600. VSCO had cut a third of its staff. SoftBank-backed Zume laid off another round of about 200. Carta lays off 161 as it raises more funding at a higher valuation.
VENTURE DEALS
- Airwallex, a Melbourne-based cross-border financial startup, raised $160 million in Series D funding. New investors include ANZi Ventures and Salesforce Ventures, joining returning investors DST Global, Tencent, Sequoia Capital China, Hillhouse Capital, and Horizons Ventures. Read more.
- BioCatch, a Tel Aviv, Israel-based developer of biometrics security technology, raised $145 million in funding.Bain Capital led the round, and was joined by investors including American Express Ventures, Maverick Ventures, and Israeli crowd-funding investor, OurCrowd. Read more.
- Taxfix, a Berlin-based automated tax software provider, raised $65 million in Series C funding. Index Ventures led the round, and was joined by investors including Valar Ventures, Creandum and Redalpine. Read more.
- Lucid, a South Jordan, Ut.-based creator of workplace collaboration platforms, raised $52 million in funding. ICONIQ Capital led the round, and was joined by investors including Meritech Capital, Spectrum Equity and new investor, Cross Creek.
- Gousto, a London-based meal-kit service, raised £33 million ($41 million) in funding. Perwyn led the round, and was joined by investors including BGF Ventures, MMC Ventures and Joe Wicks. Read more.
- Avectas, a Dublin-based cell engineering technology business, raised $20 million in Series C funding. Existing investor Seamus Mulligan led the round.
- Attentive, a mobile messaging startup, raised $40 million in additional Series C funding, bringing the round size up to $110 million. Sequoia Capital Global Equities and Coatue are the new investors. Read more.
- Choco, a U.S. and Germany-based startup connecting restaurants with ingredients suppliers, announced today that it has raised $30.2 million in Series A2 funding. Coatue led the round.
- NoBroker, a Bangalore-based startup property rental or acquisition platform, raised $30 million in additional Series D funding from General Atlantic. Read more.
- Coder, an Austin-based platform for developers to write code, raised $30 million in Series B funding. GGV Capital led the round, and was joined by investors including Redpoint Ventures, Uncork Capital and In-Q-Tel.
- Greenbits, a San Jose, Calif.-based cannabis retail platform, raised $23 million in Series B funding. Tiger Global Management co-led the round with Casa Verde.
- Alluxio, a San Mateo, Calif.-based developer of open source cloud data orchestration software, extended its Series B funding to $15.5 million. Volcanics Ventures and a16z co-led the round, and were joined by investors including Isilon Founder Sujal Patel and YY Founding CTO Tony Zhao, and Seven Seas Partners.
- Juganu, an Israeli smart city lighting solutions company, raised $12 million in funding. Comcast Ventures, led the round, and was joined by investors including Viola Growth Fund and Amdocs (Nasdaq: DOX). Another $6 million was used to purchase shares from existing investors.
- Previse, an AI and data science fintech for invoice payments, raised $11 million in funding. Reefknot Investments (founded by Temasek Holdings and Kuehne + Nagel) and Mastercard led the round, and was joined by investors including Bessemer Venture Partners, Hambro Perks, and Augmentum Fintech.
- Kairos Aerospace, a Mountain View, Calif.-based provider of aerial monitoring of methane emissions, raised $9 million in Series C funding. OGCI Climate Investments led the round, and was joined by investors including John Crane and Energy Innovation Capital.
- Autofleet, a Tel Aviv provider of AI-powered fleet optimization and vehicle-as-a-service solutions, raised $7.5 million in Series A and seed funding. MizMaa Ventures led the Series A round, and was joined by investors including Maniv Mobility, Next Gear Ventures, and Liil Ventures. The seed financing was led by Maniv Mobility.
- Count, a London-based, data analysis platform, raised $2.5 million seed funding. LocalGlobe led the round, and was joined by investors including Global Founders Capital.
- Sprout.ai, a London-based company applying AI to insurance claims, raised $2.5 million in additional seed funding. Amadeus Capital Partners led the round, and was joined by investors including Playfair Capital and Techstars. Read more.
- Vida Diagnostics, Inc., a Coralville, Iowa-based maker of AI-powered lung imaging analysis, raised $2 million from OSF Ventures part of its second close of its Series C round.
- Frame AI, an AI-driven platform for operationalizing Voice-of-Customer, raised $6.3 million in a Series A funding. G20 Ventures and Greycroft co-led the round.
- Yes Health, a Mill Valley, Calif.-based digital health platform, raised $6 million in Series A funding. Khosla Ventures led the round.
- Dashbird, a Tallinn, Estonia-based platform for serverless application monitoring, raised $2.1 million in seed funding. Paladin Capital Group led the round and was joined by investors including Passion Capital, Icebreaker.vc and Lemonade Stand.
PRIVATE EQUITY
- Pearce Services, a Paso Robles-based provider of telecommunications infrastructure maintenance, repair, and engineering, partnered with New Mountain Capital and acquired MaxGen Energy Services and World Wind & Solar, providers of repair and maintenance services for the renewables industry and providers of electric vehicle charging station infrastructure. Financial terms weren't disclosed.
- TSG, a portfolio company of Advent International, acquired Burnaby, British Columbia-based PerfectMind, a provider of software and services for the parks and recreation industry. Financial terms weren't disclosed.
OTHERS
- SAP, a German tech company, is weighing a sale of a unit that helps telecommunications operators route calls and text messages, Bloomberg reports citing sources. Read more.
- Frontier Communications, a Norwalk, Conn.-based telecommunications provider, filed for Chapter 11 bankruptcy. Read more.
- The Meiji Group acquired a 25% minority stake in AustAsia Investment Holdings, a company that operates dairy farms in China, from Japfa, a Singaporean food manufacturer. The stake is worth $254.4 million (about 28 billion yen). Read more.
IPOs
- Shasta, Iran’s wealthiest state-run holding company and the investment arm of its leading pension fund, raised roughly IR70tn ($440 million) via IPO in the country’s largest initial public offering. Iran’s government is seeking to generate income as it deals with coronavirus and US sanctions. Read more.
F+FS
- Mayfield raised $750 million across two venture capital funds, the $475 million Mayfield XVI and the $275 million Mayfield Select II. Read more.
- Section 32 is seeking to raise $350 million for its third fund, per an SEC filing.
PEOPLE
- Cathay Capital hired Ricky Roman as a Vice President for its North American Private Equity team.
- Prostar Capital promoted Stuart Blackadder to Managing Director and Head of Prostar’s U.S. Office.


fortune--2020-04-16--Why taking the SAT at home won’t work for some families

This is the web version of Data Sheet, Fortune’s daily newsletter on the top tech news. To get it delivered daily to your in-box, sign up here.
Good morning, Data Sheet readers. This is Fortune writer Aric Jenkins, filling in for Adam.
Thinking back on the past six weeks or so, one of the most significant junctures in my understanding of the coronavirus came when New York City closed its public schools. My roommate is a middle school teacher for the city’s Department of Education, and he gave me a firsthand account of the challenge ahead: implementing a sweeping remote learning program for the city’s 1.1 million students, of which about 750,000 qualify as low income.
As the pandemic progressed, my roommate routinely updated me on what it’s like to teach children online: Zoom classes have been hacked, parents have struggled to set up school-distributed laptops and learning programs, and home Internet connections at times have proved unreliable.
Issues like these are at the forefront of the news that the SAT and ACT, standardized tests that help determine the fate of millions of college applicants, will develop digital versions for students to take at home should the coronavirus pandemic continue to require social distancing in the fall.
While there may be no alternative to administering tests online during a global pandemic, critics worry that the execution will create an inequality gap.
“You’re going to have an upper-middle-class kid with his own bedroom and his own computer system with a big monitor in a comfortable environment taking his SATs,” Mark Sklarow, CEO of the Independent Educational Consultants Association, which represents admissions coaches for private colleges, told the New York Times. “And you’re going to have a kid who lives in a home maybe with spotty broadband, one family computer in the dining room… I don’t know how that can be equitable.”
And given the pressures of a potentially application-defining test, and a lack of impartial supervision at home, how can test coordinators ensure that students won’t cheat? The answer, said the president of nonprofit organization College Board, which oversees the SAT, is a remote proctoring system that “locks down everything else in the computer” and uses the device’s camera and microphone to detect any movement in the room, like helpful parents.
It goes without saying that such an intrusion of privacy in the home could make a number of families uncomfortable.
Whether the coronavirus forces social distancing to continue into the fall remains to be seen. But questions over the privacy and inequality implications of digital education certainly will continue to linger.
Aric Jenkins
@aricwithan_a
aric.jenkins@fortune.com
This edition of Data Sheet was curated by Aaron Pressman.
NEWSWORTHY
A bird in the hand. Marking perhaps the right phone for these tough times, Apple updated its four-year-old iPhone SE model with a new design based on the iPhone 8 and a new processor from the iPhone 11. But the price, starting at just $400, is the same as the 2016 original.
Swooping in. With Zoom suffering some well-publicized setbacks, telecom giant Verizon may sense an opening. Verizon on Thursday snapped up video conferencing startup BlueJeans Network for a reported $400 million. The startup goes to Verizon's enterprise unit run by Tami Erwin, so it may or may not be a play to take on Zoom with consumers.
Nothing to see here. In another one of those Trump era investigations that didn’t review all relevant evidence, the Pentagon’s inspector general said he couldn’t find anything wrong with the way Microsoft won the $10 billion JEDI cloud contract. The inspector general also said that he “could not definitively determine” if the White House interfered in the award to Microsoft over Amazon because senior officials refused to testify on the matter, citing executive privilege.
You can't manage what you don't measure. While we're on the subject of Amazon, CEO Jeff Bezos on Thursday released his annual letter to shareholders (PDF version). In the five-page document, Bezos details how the company has tried to protect its workers and repeats a plan announced last week to build its own COVID-19 testing facility. "We are not sure how far we will get in the relevant timeframe, but we think it’s worth trying, and we stand ready to share anything we learn," Bezos writes. Still, Amazon had to shutter some operations in France on Wednesday after a court there ruled the company was not sufficiently protecting workers.
Consistency is overrated. Millennials' favorite, if not most reliable, place to trade stocks, Robinhood Markets, is raising another $250 million of venture capital in a deal that values the company at about $8 billion, Bloomberg reports. Despite multiple outages last month, Robinhood brought in $60 million of revenue, triple the take from 2019.
I'll gladly pay you today for a hamburger Tuesday. With so many small businesses in danger of disappearing during the pandemic, Facebook’s Instagram is adding some new features to its ad platform to help them. The additions make it easier for businesses to sell gift cards, offer food deliveries, or pitch fundraisers. “We want to do our part in helping them stay open, keep in touch with customers, and be informed on how to navigate this crisis,” COO Justin Osofsky said.
Ready to break this cycle. Speaking of disappearing, more jobs in tech got cut this week. Startups Carta, Opendoor, and VSCO cut a total of almost 1,000 jobs. Also GoPro is cutting 200 jobs. At considerably bigger than a startup Google, CEO Sundar Pichai says he will slow hiring and investments in data centers and marketing amid the weakening advertising environment.
FOOD FOR THOUGHT
The toll of stress from social distancing and isolation on our mental health during the coronavirus outbreak is another hidden impact of the pandemic. Rolling Stone reporter Elizabeth Yuko talked to experts including psychology professor Adam Fried and psychiatrist Dion Metzger about the "moral fatigue" that comes from living in the midst of an infectious disease that spreads so easily. She also explores some tactics for improving your outlook.
Until some sort of end is in sight, there are ways to help cope with moral fatigue and the stress of these higher-stakes decisions. First, Fried says that he encourages patients to recognize and acknowledge that we are in a truly unprecedented situation and that these decisions are tough. “Talking with supportive friends and family can be really helpful in terms of processing feelings, normalizing fears and doubts, and talking through decision-making,” he adds. Metzger advises her patients not to overwhelm themselves with too many decisions at once. “Break it up into one day at a time,” she says. “Anxiety has a way of making everything feel urgent.”
IN CASE YOU MISSED IT
YouTube TV’s fight against big cable has gotten a big boost during the coronavirus pandemic By Danielle Abril
The coronavirus crisis is fintech’s chance to prove its mettle By Lucinda Shen
Should you fear government surveillance in the coronavirus era? By Jeff John Roberts
How every sector of the S&P 500 has been impacted by the coronavirus selloff By Nicolas Rapp, Brian O’Keefe, and Scott DeCarlo
Couldn’t track your stimulus check? Errors and long waits plague IRS portal rollout By Rey Mashayekhi
The Coronavirus Economy: What it’s like running a local news station during a pandemic By Jenna Schnuer
(Some of these stories require a subscription to access. There is a 50% discount for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.)
BEFORE YOU GO
John Horton Conway, one of the most creative mathematicians of our lifetime, died on Saturday at the age of 82 from COVID-19. The discoverer of "surreal numbers" and other key concepts is probably best known as the inventor of the Game of Life, a model of how cells multiply. Blogger Jason Kottke surfaced this most excellent profile of Conway from 2015, which describes him as "a cross between Archimedes, Mick Jagger, and Salvador Dalí." Worth a read.
Aaron Pressman
@ampressman
aaron.pressman@fortune.com


fortune--2020-04-16--Military experts: We need to fight coronavirus like we fight insurgents on the battlefield

While tracking the expansion of COVID-19 has become our new national obsession, metrics like caseloads and medical supply requirements have proved ineffective in helping us understand the disease’s spread across the country. As we assess the effectiveness of our collective response efforts, it may make practical sense to focus less on rising case counts in favor of a functional theory of success, which allows us to take proactive measures as we navigate through the uncertainty of the next few months.
Defining an actionable theory of success is critical during times of uncertainty, enabling us to effectively make sense of dynamic conditions and more clearly visualize a path forward without being distracted by flawed measures of effectiveness. During the Vietnam War, American efforts suffered from fixation on easy to compile, but ultimately misleading, metrics like enemy casualties. This dangerously diverted attention away from whether real progress was being made toward strategic goals.
Over the past several weeks, our team at Decisive Point, a venture advisory firm focused on defense and national security, have focused all our efforts on helping New York confront the coronavirus crisis. Working closely with New York City officials, we’ve aimed to identify and resolve points of friction rather than focus on material solutions.
Our experience navigating this fractured and chaotic landscape has exposed the many bureaucratic barriers to effective coordination, further complicated by unscrupulous opportunists crowding an already overburdened supply chain and the limitations of capacity in our current health care system. The conditions on the ground bear striking similarities to our collective military experience conducting unconventional warfare and counterinsurgency operations in places like Iraq, Afghanistan, and Syria. In response, we’ve largely operated as decentralized teams, empowered with the resources needed to fight through complexity and solve problems.
The intent of this analysis is not to suggest that there is a military precedent which could solve this complex problem set; rather, that there is value in considering a framework specifically designed to help us better understand asymmetric threats to society. Our hope is that these observations enable others to see the challenge more clearly as they guide their communities or organizations through this crucible.
In the decades since 9/11, America has been continuously engaged in a series of low-intensity conflicts and counterinsurgency campaigns. As the spread of COVID-19 accelerated, leaders like retired Gen. Stanley McCrystal quickly identified parallels between battling a pandemic and his experience leading America’s elite Joint Special Operations Command during the war in Iraq. Similarly, here in New York, we’ve observed that the spread of COVID-19 follows a pattern similar to the phases of insurgency as outlined by the U.S. Army’s counterinsurgency doctrine (COIN).
In phase one, the enemy remains hidden, presenting only a potential threat and expanding its power and influence through acts of subversion and disruption. Plans for a coordinated, immediate response may be delayed owing to an inherent reluctance to disrupt daily life, resulting in inaction and allowing the insurgency to expand unchecked.
COVID-19 also assumes a low profile as the virus penetrates deep into population centers, remaining outside our awareness for up to 14 days when individuals are asymptomatic. The early lack of testing measures amplified the outbreak’s spread, made worse by the late adoption of widespread isolation and social distancing measures.
During this period, the lack of obvious external evidence of pandemic spread led some to wonder if we were overreacting. Since the U.S. was slow to roll out widespread testing efforts, we conflated absence of proof with proof of absence at the cost of allowing COVID-19 the time needed to become a national crisis.
In phase two, the enemy strengthens its grip on the population with each operational act and continues to expand its influence, driving government forces to assume a defensive footing. Government leaders scramble to deploy resources broadly without a clearly identified crisis point or symmetrical front line. This makes it extremely difficult to effectively coordinate a response, making initial efforts resource-intensive, appearing at times to be disorganized and incoherent.
We see this in America’s current siege posture, attempting to check COVID-19’s spread by shifting to tools like quarantine. Communities in this phase have begun to experience the challenge of allocating critical resources to mitigate patient surges. Mounting patient loads create an unsustainable crisis for health care systems. At this stage, the need to deploy critical medical resources like ventilators has become an emergency, yet there is no single location where the crisis can be resolved by a focused effort. The best way to operate at speed in this environment is placing a premium on interagency cooperation, flattened communications structures, and expanding resource-sharing efforts.
Once the enemy has the mass and structure needed to sustain operations, phase three begins. The enemy conducts both offensive and defensive operations, enabling it to hold terrain and overtake unconsolidated areas of resistance. This risks destroying the government’s legitimacy, as insurgents multiply their support among the population, and the basic needs of the people overwhelm the government’s capabilities to both respond and govern. As the government becomes overextended, it loses control and territory.
In New York City, COVID-19 has reached this stage, with infection holding large amounts of terrain and disrupting regular daily operations. While government response at this point is highly focused, the affliction has penetrated so deeply into the population that institutional capabilities for response are overextended, making progress in repelling the attack extremely difficult. Communities at this stage are confronting a full-blown crisis, medical teams are overburdened, and institutional leaders are left with few good options. In this environment, the primary focus is on pushing as many relevant and critical supplies as possible into the area while reducing the operational burden of ineffective or impractical solutions.
Armed with these observations, we turned to retired Lt. Gen. Michael Nagata for his thoughts on how to translate our experiences in New York into actionable recommendations for other communities currently in the virus’s crosshairs. With his decades of Special Operations experience planning or executing counterterrorism and counterinsurgency strategy, he emphasized the need to establish truly strategic goals when confronted with complex problems, and then ruthlessly marshaling all efforts toward those goals. In his opinion, one of the most powerful counterinsurgency concepts that pandemic responders must consider is the need for a “repeatable, consistent theory of success that we can align resources against.”
Nagata also highlighted the applicability of a lesson that the U.S. military had to learn in Iraq and Afghanistan: that successful counterinsurgency prioritizes protecting the population over the important, but secondary, need to combat the insurgent. Accordingly, in combating today’s pandemic, our focus should strategically prioritize “protecting the population first and foremost, with efforts to combat the disease itself, while crucial and necessary—particularly in light of the current absence of an effective vaccine—as a secondary goal.”
Absent this conceptual framework, response efforts risk floundering and wasting resources owing to insufficient focus. The difficulty of defining success against complex and amorphous threats, like insurgencies and pandemics, often causes leaders to rely on proxy metrics like enemy casualties or medical supply deliveries. Despite these challenges, developing a consistent theory of success is critical for navigating through uncertainty and generating unity of effort. Further, consistent messaging and execution can help instill confidence in our response efforts among the American people.
While our collective military experience does not equate to the expertise needed to develop a pandemic-appropriate theory of success, perhaps we can help identify its requisite elements. Based on our experience in support of response efforts in New York, the theory of success for this pandemic must be designed around the concept of protecting the population, emphasizing communication, integration, and sustainability.
Since each town, city, and state across the country will encounter a unique set of challenges, Nagata offered the following assessment based around three primary questions, which might help us all see the problem more clearly and ensure that we are collectively predisposed to take action:
First, “how is information being shared in such a way that it strengthens our ability to protect the population?” This definition must extend to “medical assistance, contamination, [and] CDC announcements to break down silos of communication and build a robust information-sharing regime.”
Second, “what must be done to foster stronger integration, not just among and between government organizations, civil society, and the medical community, but [across] all of these sectors regardless of type, so that activities that are occurring in government offices span the divide into the civilian sector and vice versa?” This domain seeks to find and share best practices at speed, creating interlocking feedback loops that accelerate response efforts.
Third, “what routine, repeatable actions must be implemented to foster information sharing and integration to the maximum extent possible?” This seeks to build predictable touch points among key actors to facilitate the creation of a common operational picture of the situation, eliminating barriers for coordinating and enhancing collective situational awareness. In the military we refer to this as our battle rhythm, the consistent events leaders use to execute fundamental organizational responsibilities.
A cohesive national theory of success effectively aligns a community or organization’s approach with the primary objective of our collective response—protecting the population. The more direct and actionable the definition, the more it allows leaders to benchmark where they should apply scarce resources in a given area. As we observe the state of the virus’s spread in our neighborhood, town, or city, this framework could potentially help guide and assess the effectiveness of policies and personal actions.
Given the continued trajectory of confirmed COVID-19 cases, we must consistently assess the efficacy and performance of current strategies. While it will take time to develop the appropriate theory of success, and the appropriate structure capable of leading our communities through this crisis, victory depends on establishing clarity of vision and unity of effort.
In unconventional warfare, building trust across communities and organizations is key. Likewise, in the coming weeks our ability to build additional capacity and overcome this pandemic will rely on our ability to emphasize the human element. Let us remember that our frontline soldiers in this fight are our medical personnel, and that our efforts must be designed to support them and their families.
We all have a role to play in this fight. While the majority of Americans are not directly engaged in combating COVID-19 in our hospitals, we all have a responsibility to protect our communities. COVID-19 will demand every ounce of strength that our medical personnel have to give. While there is a real need for material support, we must not forget about the importance of securing the population first, remembering the proverbial Special Operations Forces truth that in any counterinsurgency, humans are more important than hardware.
Thomas Hendrix is cofounder and managing director at Decisive Point.
Jay Long is director of innovation at Decisive Point.
More opinion in Fortune:
—Coronavirus relief funds should be used to pay workers, not bail out corporations
—Why the U.S. shouldn’t let China dominate the digital currency race
—The coronavirus pandemic is changing work forever
—The coronavirus should inspire businesses to prepare their supply chains for the future
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEOs
—WATCH: The CEO of Canada’s biggest bank on the keys to leading through the coronavirus pandemic
Listen to our audio briefing, Fortune 500 Daily


fortune--2020-04-16--22 million have lost their jobs over the past month—real unemployment rate likely nearing 18%

Another 5.2 million Americans filed initial unemployment claims in the week ending April 11. That brings the total unemployment claims over the past four weeks to 22 million, according to the U.S. Department of Labor.
The total weekly claims fell close to 1.4 million from last week’s 6.6 million initial unemployment claims. Economists had been expecting the report to show the ranks of jobless Americans increasing by 5.5 million.
But these claims are still staggering: The one-week record—before the current streak of multi-million claims—was 695,000 in October 1982.
Prior to this four-week stretch of 22 million unemployment claims, there were already 7.1 million unemployed Americans as of March 13, according to the U.S. Bureau of Labor Statistics. When the figures are combined, it would equal more than 29 million unemployed. That’s a real unemployment rate of 17.9%—higher than month since 1938.
For perspective: We’ve only had one month over the past 30 years with a double digit unemployment rate. And that was 10% in October 2009.
The BLS’ official unemployment rate is 4.4%, but that calculation is through March 13—right before the massive wave of jobless claims. The April jobs report is when we should start to see this double digit figure manifest.
Not every initial unemployment claim will translate into unemployment insurance benefits. But then again, that won’t matter in terms of calculating the unemployment rate, which includes everyone out-of-work and also looking for work.
As apart of the $2.2 trillion stimulus package, jobless Americans who get put on their state’s unemployment insurance rolls will be eligible for an additional $600 in weekly payments. As long as they remain on the UI rolls, they’ll continue to receive the additional money through July 31.
More coronavirus coverage from Fortune:
—How Fortune 500 companies are utilizing their resources and expertise during the pandemic
—Inside the surreal “Mask Economy”: Price-gouging, bidding wars, and armed guards
—The IRS just launched “Get My Payment” portal for tracking your stimulus check status
—Should you fear government surveillance in the coronavirus era?
—If you’ve been a little busy lately, here’s what’s going on with the 2020 election
—The coronavirus crisis is fintech’s biggest test yet—and greatest opportunity to go mainstream
—There are 32 authorized coronavirus tests so far—here’s how they differ
—PODCAST: COVID-19 might have upended the concept of the best companies of the year
—VIDEO: 401(k) withdrawal penalties waived for anyone hurt by COVID-19
Subscribe to Outbreak, a daily newsletter roundup of stories on the coronavirus pandemic and its impact on global business. It’s free to get it in your inbox.


fortune--2020-04-16--What brands can learn from Reese Witherspoon’s free dress mess

This is the web version of the Broadsheet, Fortune’s daily newsletter for and about the world’s most powerful women. To get it delivered daily to your in-box, sign up here.
Good morning, Broadsheet readers! Few women are on President Trump’s council on reopening America, Stacey Abrams is ready to serve as VP, and Reese Witherspoon’s lifestyle brand starts with good intentions—and ends up in a PR nightmare. Have a good Thursday.
– Dress for unrest. One of the few pleasures of the pandemic has been watching the world—from neighbors to nations—come together to help one another through this trying time. The business community is no exception, be it giving out grants to smaller companies, pivoting to manufacture medical supplies, providing products and services to frontline healthcare workers, or simply donating piles of money.
But doing good in a crisis isn’t always as easy as it looks—as Reese Witherspoon and her lifestyle brand Draper James recently learned. The New York Times has the story of the company’s ill-fated attempt to celebrate the hard work teachers have been doing during the lockdown with a free dress giveaway for educators. The problem? The brand got more than 1 million applications for the frocks—but had only 250 to give away. As you can imagine, that did not go over well with the teachers who’d applied, all of whom had provided their contact info and were now getting marketing emails from the company.
So, how does a well-intentioned gesture turn into a PR nightmare? The Times’ Vanessa Friedman gets into the details, but the broad strokes are simple—combine Witherspoon’s larger-than-life fame with the reality that Draper James is a relatively small company (it has fewer than 30 employees) and you get a million or so understandably confused and disappointed teachers. Friedman writes:
“Assuming [Witherspoon] was giving away her cheapest dress, which sells for $78, and if the cost of that dress to her company is, say, $40, which takes into account the average wholesale margin, that would have meant spending something like $40 million on the giveaway…Giving away $40 million in dresses may even have seemed in character, at least as far as this public character went. Ms. Witherspoon is a very plausible dream benefactor, swooping in to do something entirely unexpected and joy-giving.”
Not every company has a widely beloved celebrity at its head, but there are lessons here for even the most glamour-free of businesses. Here’s what I took away: Yes, it’s absolutely worth doing what you can to help those in need. And, yes, doing so requires companies to act quickly—but not so quickly that they don’t think through the consequences of what they’re offering. Can you deliver on the promises you’re making? Are you making the best possible use of your resources? And finally, does your feel-good act have marketing strings attached? If so, now’s the time to think about cutting them. Just ask Reese!
Kristen Bellstrom
kristen.bellstrom@fortune.com
@kayelbee
Today’s Broadsheet was produced by Emma Hinchliffe.
ALSO IN THE HEADLINES
- Veep's veep. Biden-Abrams 2020? Stacey Abrams says she would be on board. "I would be an excellent running mate," the former Georgia candidate for governor says. "If I am selected, I am prepared and excited to serve." Elle
- Do the Rite thing. Heyward Donigan took over as CEO of Rite Aid in August; now, her plan to turn around the drugstore chain has been upended by the pandemic. In this interview, she talks about her vision for the retailer and about keeping toilet paper in stock. Wall Street Journal
- Expert counsel? President Trump this week name-checked the business executives who will advise him on "reopening America." Less than 10% of the CEOs are women; the list of almost 200 includes Marillyn Hewson of Lockheed Martin and Kathy Warden of Northrop Grumman. Fortune
- Kiwi solidarity. New Zealand Prime Minister Jacinda Ardern and her government ministers will take 20% pay cuts for six months to "show solidarity" with New Zealanders who have lost their jobs or are on the front lines of the coronavirus crisis. The move is symbolic, not meant to make any significant change to the government's budget. Guardian
IN CASE YOU MISSED IT
- Do as I say, not as I do. Ivanka Trump has made videos advocating social distancing and asking Americans who can stay home to "please do so," but it appears that she has not been practicing what she's preaching. The NYT reports that she left D.C., violating the city's stay-at-home order, to take her family to Trump National Golf Club Bedminster in New Jersey to celebrate the first night of Passover. New York Times
- Justice watch. In a long New Yorker profile of Senate Majority Leader Mitch McConnell, there's a short anecdote about Republicans' approach to the Supreme Court. "McConnell’s telling our donors that when R.B.G. meets her reward, even if it’s October, we’re getting our judge," a former Trump White House Official says. "He’s saying it’s our October Surprise.” The New Yorker
- Anxiety, by the billions. Anxiety facing working parents—and specifically, working moms—could cost the U.S. economy $341 billion. In a survey of 500 mothers, 81% said their ability to engage effectively at work was negatively impacted by the COVID-19 crisis. An economist calculated the $341 billion number with the estimated cost of employee disengagement (34% of a person's salary) for 31 million employed mothers nationwide, making on average of $40,000. Working Mother
ON MY RADAR
11 women in 10 countries on how their morning routines have changed in quarantine InStyle
Michelle Obama answers 20 questions Oprah Magazine
Princess Anne opens up about her lifetime as a royal Vanity Fair
The bizarre intimacy of group fitness classes on Zoom Outside
PARTING WORDS
"I think we’ll tread differently with Mother Nature—we won’t be as careless as we have been. I think we’ll be more empathetic and make moments count."
-Pop star Dua Lipa on life post-pandemic


fortune--2020-04-16--California to give stimulus cash to undocumented immigrants hurt by coronavirus

California will be the first state to give cash to immigrants living in the country illegally who are hurt by the coronavirus, offering $500 apiece to 150,000 adults who were left out of the $2.2 trillion stimulus package approved by Congress.
Many Americans began receiving $1,200 checks from the federal government this week, and others who are unemployed are getting an additional $600 a week from the government that has ordered them to stay home and disrupted what had been a roaring economy.
But people living in the country illegally are not eligible for any of that money, and advocates have been pushing for states to fill in the gap. Wednesday, Gov. Gavin Newsom announced he would spend $75 million of taxpayer money to create a Disaster Relief Fund for immigrants living in the country illegally.
“We feel a deep sense of gratitude for people that are in fear of deportations that are still addressing essential needs of tens of millions of Californians,” said Newsom, who noted 10% of the state’s workforce are immigrants living in the country illegally who paid more than $2.5 billion in state and local taxes last year.
Senate Republican Leader Shannon Grove said Newsom should spend the money instead on food banks, equipment for students to continue their education online and local governments struggling with revenue losses.
“Instead of meeting these urgent needs, Governor Newsom has chosen to irresponsibly pursue a left-wing path and unilaterally secured $125 million for undocumented immigrants,” said Grove, who represents Bakersfield.
California has an estimated 2.2 million immigrants living in the country illegally, the most of any state, according to the Pew Research Center. State officials won’t decide who gets the money. Instead, the state will give the money to a network of regional nonprofits to find and vet potential recipients. Advocates say that’s key to making the plan work because immigrants are unlikely to contact the government for fear of deportation.
“You need to use organizations that have trusted relationships with these families,” said Jacqueline Martinez, CEO of the Latino Community Foundation.
A group of charities has committed to raising another $50 million for the fund from private donors, potentially offering benefits to another 100,000 people. But that money will have fewer limitations, meaning grants could be more than $500 or less, depending on the cost-of-living where a person lives.
Organizers began raising money on Friday and have raised more than $6 million so far, with contributions from the Emerson Collective, Blue Shield of California Foundation, the California Endowment, the James Irvine Foundation, the Chan Zuckerberg Initiative and an anonymous donor.
“We want this to be as equitable as possible and benefit as many people as possible,” said Daranee Petsod, president of Grantmakers Concerned with Immigrants and Refugees.
California has been the most aggressive state in the nation when it comes to giving benefits to immigrants living in the country illegally. Last year, California became the first state to give taxpayer-funded health benefits to low-income adults 25 and younger living in the country illegally. This year, Newsom had proposed expanding those benefits to seniors 65 and older.
The spending announced Wednesday means Newsom has committed to spending more than $2 billion responding to the coronavirus, an extraordinary amount in just over one month. Thursday, state lawmakers are scheduled to have their first oversight hearing of Newsom’s spending.
For most people, the new coronavirus causes mild or moderate symptoms, such as fever and cough that clear up in two to three weeks. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia, and death.
California has more than 26,600 confirmed coronavirus cases and more than 850 deaths, according to data compiled by Johns Hopkins University. Those numbers are far behind other virus hot spots like U.S. like New York and New Jersey, which public health officials attribute to the state’s aggressive implementation of physical distancing and stay-at-home orders.
Since mid-March, 2.7 million Californians have filed for unemployment benefits — more than all of the claims California processed in 2019 combined. The state’s Employment Development Department has been overwhelmed, causing delays for many people seeking assistance.
Wednesday, Newsom announced the state’s call center will expand its hours to 8 a.m. to 8 p.m., seven days a week. More than 1,300 state employees have been reassigned to help process the claims. And Newsom said the state will begin distributing federal unemployment benefits by the end of the month to people who usually aren’t eligible for them, including the gig workers and the self-employed.
At least five other states are already issuing those benefits, prompting criticism from some state lawmakers.
“The people in Sacramento are making promises, and the bureaucracies and the technology are failing the people,” Republican state Assemblyman Jim Patterson said.


fortune--2020-04-16--The coronavirus pandemic is a test for how society can thrive without growth

This is the web version of The Loop, Fortune’s weekly newsletter on the revolutions in sustainability. To get it delivered daily to your inbox, sign up here.
China is due to release GDP data for the first quarter of the year tomorrow, offering the greatest insight yet into what the effect of the coronavirus pandemic has been on the country’s economy. Predictions, naturally, are far from bright.
China isn’t alone here. The coronavirus pandemic has forced governments worldwide to reckon with recession or, as some pundits predict, depression. But not all economists see a decline in GDP as an inherently bad thing.
“I find it in a sense very disappointing that we cannot even fathom or imagine an economy where we produce less in a particular year,” says Giorgos Karris, an economist at the Catalan Institution for Research and Advanced Studies (ICREA) and author of Degrowth—an economic critique.
Degrowth, according to Karris, is a critique of the belief that perpetual growth is necessary or feasible. Degrowth, as a conceptual alternative to growth, advocates a decline in both production and consumption and a reassessment of what factors we consider vital to prosperity. As Kallis says, degrowth is “a qualitative and quantitative change of the economy.”
It’s the quantitative component that separates degrowth from the sustainable growth model that industries are already trending towards. Sustainable, or “green,” growth assumes that productivity will continue to rise; degrowth says eventually expansion must stop and even retreat. How to manage that retreat is the issue many governments are struggling with now.
“In a situation like the current crisis, we really need to have an answer for how to manage an economy that doesn’t produce more than it did the year before for two years or, even, longer,” Karris says.
In the scramble to prop up economies during the coronavirus pandemic, numerous governments have implemented measures straight from the degrowth playbook. Government-issued wage support—such as the U.S. stimulus checks—is one tenet of a degrowth economy.
The provision of a basic income shows that not everyone needs to work in order to survive, degrowthers say. However, currently those checks are being issued as an emergency measure. Whether and how that support can be sustained is unclear.
“We don’t really have a familiar architecture for how that will work for the long term in a big economy,” says Tim Jackson, author of Prosperity Without Growth. However the post-pandemic landscape will give governments the opportunity to find out, with countries like Spain already planning to extend a universal basic income beyond the crisis.
Elsewhere in Europe and around the world people are urging governments to invest in renewable energy and other climate-conscious projects to facilitate a green recovery. Meanwhile the governments are deciding which industries are essential and worthy of saving.
“In a way, that’s an easy win for implementing a different way of thinking about the economy,” Jackson says. “The coronavirus has shifted our perspective on what really matters.”
More below.
Eamon Barrett
Eamon.Barrett@fortune.com
CARBON COPY
Go forth and multiply
Research shows that increased biodiversity could help prevent future pandemics by fostering ecosystems where zoonotic viruses, such as COVID-19, never reach critical mass and “spillover” into the human world. The human impact on natural ecosystems has resulted, primarily, in the loss of larger predators. That allows smaller creatures with high fertility rates and short life spans to propagate and breed novel viruses. Bloomberg
Damming behavior
Research from an American duo shows that a record-breaking drought suffered by South Asian countries along the Mekong River was caused by damming activities in China, where the Mekong begins. In February China Foreign Minister Wang Yi had told Laotian farmers that China shared in their hardship and was suffering a drought too; satellite data from the report shows water from the Mekong was actually being retained in China, suggesting the record low river levels seen in Laos and Cambodia were caused by China. New York TImes
All at sea
China’s Ministry of Ecology and Environment is currently without a Minister, after Beijing transferred the previous head to an administrative role in Shandong province last week. China has appointed Sun Jinlong as new Party chief to the department this week but hasn’t confirmed who will be the civil servant to pick up the mantel of Minister. Caixin
Renewables to the front
In other China news, the National Energy Administration released a draft of the new China Energy Law—a bill that aims to unify current disparate energy laws, which govern fossil fuels and renewables separately. The draft law, which is open for consultation until May, reportedly prioritizes the use of renewables and categorizes hydrogen power as energy source for the first time. Caixin
IN CASE YOU MISSED IT
IN CASE YOU MISSED IT
Coronavirus should inspire businesses to prepare their supply chains for the future by John Chambers
The coronavirus pandemic may be a turning point for responsible business by Paul Polman
A medical giant is sharing its ventilator designs. Will that change anything? by Jeff John Roberts
The ‘green death’ movement: Scientific advances give more eco-friendly funeral options by Emily Gillespie
IBM’s Ginni Rommety on the urgent need to reskill workers Leadership Next
For boom-bust oil towns, coronavirus is a very different kind of crisis by Katherine Dunn
CLOSING NUMBER
80 million
Scientists have confirmed that a prolonged heatwave caused the dramatic melting of an arctic ice sheet last summer. The Greenland ice sheet shed 197 gigatons of surface ice in July alone, equivalent to 80 million Olympic size swimming pools, but the heatwave lasted for 63 of the total 92 summer days. Between 1981 and 2010, the area of high pressure only lasted an average 28 days. If future years see similar prolonged arctic heat, melt rates could be twice as high as current predictions expect.


fortune--2020-04-16--Amid medical protective gear shortage, nurses are suspended for refusing coronavirus care without N9

Amid medical protective gear shortage, nurses are suspended for refusing coronavirus care without N95 masks

Nurse Mike Gulick was meticulous about not bringing the coronavirus home to his wife and their 2-year-old daughter. He’d stop at a hotel after work just to take a shower. He’d wash his clothes in Lysol disinfectant. They did a tremendous amount of handwashing.
But at Providence Saint John’s Health Center in Santa Monica, California, Gulick and his colleagues worried that caring for infected patients without first being able to don an N95 respirator mask was risky. The N95 mask filters out 95% of all airborne particles, including ones too tiny to be blocked by regular masks. But administrators at his hospital said they weren’t necessary and didn’t provide them, he said.
His wife, also a nurse, not only wore an N95 mask but covered it with a second air-purifying respirator while she cared for COVID-19 patients at Cedars-Sinai Medical Center across town in Los Angeles.
Then, last week, a nurse on Gulick’s ward tested positive for the coronavirus, which causes the disease COVID-19. The next day doctors doing rounds on their ward asked the nurses why they weren’t wearing N95 masks, Gulick said, and told them they should have better protection.
For Gulick, that was it. He and a handful of nurses told their managers they wouldn’t enter COVID-19 patient rooms without N95 masks. The hospital suspended them, according to the National Nurses Union, which represents them. Ten nurses are now being paid but not allowed to return to work pending an investigation from human resources, the union said.
They are among hundreds of doctors, nurses and other health care workers across the country who say they’ve been asked to work without adequate protection. Some have taken part in protests or lodged formal complaints. Others are buying — or even making — their own supplies.
Guidelines from the Centers for Disease Control and Prevention don’t require N95 masks for COVID-19 caregivers, but many hospitals are opting for the added protection because the infection has proven to be extremely contagious. The CDC said Wednesday at least 9,200 health care workers have been infected.
Saint John’s said in a statement that as of Tuesday it was providing N95 masks to all nurses caring for COVID-19 patients and those awaiting test results. The statement said the hospital had increased its supply and was disinfecting masks daily.
“It’s no secret there is a national shortage,” said the statement. The hospital would not comment on the suspended nurses.
Angela Gatdula, a Saint John’s nurse who fell ill with COVID-19, said she asked hospital managers why doctors were wearing N95s but nurses weren’t. She says they told her that the CDC said surgical masks were enough to keep her safe.
Then she was hit with a dry cough, severe body aches and joint pain.
“When I got the phone call that I was positive I got really scared,” she said.
She’s now recovering and plans to return to work next week.
“The next nurse that gets this might not be lucky. They might require hospitalization. They might die,” she said.
As COVID-19 cases soared in March, the U.S. was hit with a critical shortage of medical supplies including N95s, which are mostly made in China. In response, the CDC lowered its standard for health care workers’ protective gear, recommending they use bandannas if they run out of the masks.
Some exasperated health care workers have complained to the Occupational Safety and Health Administration.
“I … fear retribution for being a whistleblower and plead to please keep me anonymous,” wrote a Tennessee medical worker, who complained staffers were not allowed to wear their own masks if they weren’t directly treating COVID-19 patients.
In Oregon, a March 26 complaint warned that masks were not being provided to nurses working with suspected COVID-19 patients. Another Oregon complaint alleged nurses “are told that wearing a mask will result in disciplinary action.”
One New Jersey nurse who asked not to be named out of fear of retribution, said she was looking for a new job after complaining to OSHA.
“Do I regret filing the complaint? No, at least not yet,” she said. “I know it was the right thing to do.”
Some are taking to the streets.
On Wednesday, nurse unions in New York, Massachusetts, Michigan, Illinois, California, and Pennsylvania scheduled actions at their hospitals and posted on social media using hashtag “PPEoverProfit.”
Nurses at Kaiser Permanente’s Fresno Medical Center in central California demanded more protective supplies at a protest during their shift change Tuesday. The hospital, like many in the U.S., requires nurses to use one N95 mask per day, which has raised concerns about carrying the infection from one patient to the next.
Ten nurses from the facility have tested positive with COVID-19, Kaiser said. Three have been admitted to the hospital and one is in critical care, protest organizers said.
Wade Nogy, a Kaiser senior vice president, denied union claims that nurses have been unnecessarily exposed.
“Kaiser Permanente has years of experience managing highly infectious diseases, and we are safely treating patients who have been infected with this virus, while protecting other patients, members and employees,” Nogy said.
Amy Arlund, a critical care nurse at the facility, said that before the pandemic, following infection control protocols they’re currently using would have been grounds for disciplinary action.
“And now it’s like they’ve thrown all those standards out the window as if they never existed,” Arlund said. “It’s beyond me.”
More coronavirus coverage from Fortune:
—How Fortune 500 companies are utilizing their resources and expertise during the pandemic
—Inside the surreal “Mask Economy”: Price-gouging, bidding wars, and armed guards
—The IRS just launched “Get My Payment” portal for tracking your stimulus check status
—Should you fear government surveillance in the coronavirus era?
—If you’ve been a little busy lately, here’s what’s going on with the 2020 election
—The coronavirus crisis is fintech’s biggest test yet—and greatest opportunity to go mainstream
—There are 32 authorized coronavirus tests so far—here’s how they differ
—PODCAST: COVID-19 might have upended the concept of the best companies of the year
—VIDEO: 401(k) withdrawal penalties waived for anyone hurt by COVID-19
Subscribe to Outbreak, a daily newsletter roundup of stories on the coronavirus pandemic and its impact on global business. It’s free to get it in your inbox.


fortune--2020-04-17--The tangled web of companies buying and selling ‘credit’ to reduce carbon emissions

The Fed may have fundamentally altered the nature of risk in the stock market

In a world of climate-change worries, where investors increasingly look at environmental sustainability, companies scramble to improve their carbon footprint—and their reputations.
Microsoft said it will be carbon negative by 2030. JetBlue wants to be carbon neutral on all domestic flights by July 2020. Starbucks looks to be “resource-positive” by 2030, including storing more carbon than it emits.
Even Barclays announced it aimed to be net-zero on carbon and to “align all of its financing activities with the goals and timelines of the Paris Agreement”—after years of pressure by U.K. nonprofit ShareAction to reduce its financing of the fossil fuel industry.
These are all great goals, and some might have an easier time than others. For example, a company that could kick most of a fossil fuel habit and switch to complete renewable power without much trouble can make a big dent in its carbon load. But other companies might not have easy choices. In general, though, companies don’t become carbon neutral or even negative in a single move. It takes a mix of conservation, smarter operations, and carbon allowances and offsets to achieve success. And the balance varies a lot, depending on the individual business.
And sometimes it takes multiple companies working together to share reductions and reduce overall carbon levels.
If carbon reduction were a game of Monopoly, carbon allowances and offsets would be like a get-out-of-jail-free card—except more like time off for good behavior. Company A, which has reduced its carbon footprint, has credits in one of two forms: An allowance is a reduction of ongoing and future carbon emissions into the atmosphere—for example, moving to renewable energy or reducing emissions from smokestacks or vehicle fleets. An offset refers to removal from the environment of previously released carbon, a popular approach being planting trees that pull carbon dioxide from the air and emit oxygen.
Although it’s not a term used by industry experts, it’s easier to understand all this by grouping both together as carbon credits. Company A can sell its credits—those time-off-for-good-behavior cards—to Company B, which wants credit for reducing its own carbon footprint but is having trouble doing so.
To the uninitiated, it can sound like a scam. One business buys another’s efforts and pretends to lower its own carbon footprint? There are ways to make it work so everyone benefits, but if not done carefully, investors, the public, and companies themselves can take an unintended green-carpet ride.
Flooring company Interface claims to have cut its carbon footprint by 69% over the past quarter-century by changing its raw materials and manufacturing. That doesn’t cover transportation, installation, and ultimate disposal—factors outside of the company’s control.
“To make carbon neutral products, the greatest impact is in the raw materials sourcing,” said Erin Meezan, Interface’s chief sustainability officer. “That’s out of our total control. We have to convince our suppliers to make the shift.” If the vendors don’t reduce their own carbon footprint, their dirtier operations get applied to the products that Interface produces and sells. So, in the meantime, Interface uses credits to reduce its carbon use.
But are these credits nothing more than paper shuffling? The net amount of carbon between the two companies seems to stay constant. And what’s to prevent the credit owner from making money by selling them over and over?
“I think that level of skepticism is probably both well-placed and well-earned,” said Kenneth Richards, associate professor of public and environmental affairs and affiliated associate professor of law at Indiana University. “That’s different from saying every project or even every developer is severely flawed.”
It is possible for credit trading to actually help reduce the overall amount of carbon that’s impacting the climate. Companies that can reduce carbon emissions are motivated to because they can sell the credits, and companies who need to buy them are helping to finance the goal.
To make ecological sense, credit mechanisms need to incorporate three aspects that experts call additionality, leakage, and permanence, noted Alex Leff, a principal at environmental law firm Sive Paget & Riesel. Additionality recognizes that projects that would have happened anyway aren’t increasing carbon reduction, like the company that was ordered to reduce emissions from its smokestack. The lack of additionality can create a false impression of additional action.
Leakage means a project done in one place could be countered elsewhere. “Let’s say I have crop land, and I’m growing corn, and I say I’m going to convert that to forest,” Richards said. Because there’s a net increase in carbon capture with the change, farmers have offsets they can sell to make the shift economically viable. However, the demand for corn remains, and other farmers might cut down trees to plant the crop.
Or a project prevents trees from being harvested in Belize for lumber and again creates credits. Loggers who found themselves stopped may take their saws to another area. “In drug enforcement, they call it the push-down, pop-up effect,” Richards said. “Others refer to it as the whack-a-mole.”
In permanence, the intent is to ensure that the benefits are long-lasting—a term that is slippery. How many years after a new forest is planted would be reasonable to allow logging? Ten years? Twenty-five? Never?
Credits are voluntary systems that companies have tried. That might sound terrific as companies need to reduce carbon, either on principle, as a promotional tool, or to address public pressure. But the absence of oversight enables multiple problems.
One company might decide to buy credits for something that would happen anyway, like a company forced by a court order to reduce carbon emissions from a smokestack. Should the company be allowed to sell credits when the choice to change was made for it?
There is also the potential for carbon credit fraud. The Justice Department at times has prosecuted companies for selling credits that didn’t really exist. Or there can be potential mismanagement, as British Steel found when it reportedly sold excess credits it thought were not needed to meet EU commitments, according to the Financial Times. Additionally, buyers might not have a way to check that the promised reductions actually happen.
For these reasons and others, experts emphasize third-party oversight and certification. There are various government regulatory structures using so-called cap-and-trade—in which the government sets a limit on total carbon emissions in a geographic region and then lowers the limit each year while controlling the issuance of credits and their use.
“Every year you’re reducing the cap, and they have to find alternative ways [to lower their emissions],” said Jeremy Firestone, a professor in the College of Earth, Ocean, and Environment and director of the Center for Research in Wind at the University of Delaware.
Some examples of these government structures are the EU Emissions Trading System, California’s Cap-and-Trade Program, and the Regional Greenhouse Gas Initiative of nine states, including all of New England, New York, New Jersey, Delaware, and Maryland. The overall cap comes down on a regular basis, requiring more innovation and action for offsets or credits to continue.
Paired with the cap is a credit system. “If you produce CO2, you have to have [a credit] for each metric ton of carbon that you release into the atmosphere,” Firestone explained. Companies that are efficient in reducing their own emissions can have excess credits, which they can sell.
The result is a transparent market-based system that doesn’t care how companies reduce and which ones are better. The important thing is that the overall carbon footprint keeps shrinking.
Or, instead of a government framework, companies seeking to generate credits that can be sold and monitored might work with some of the NGOs, like the Gold Standard Foundation or Winrock International, that run voluntarily verified and controlled programs.
Before joining his current law firm, Leff worked for the Gold Standard Foundation. Participating companies at times would get upset because it typically took years to get a project accredited. “You could feel pretty comfortable that the carbon [credit] project wasn’t a sham,” he said.
Without some kind of third-party framework, whether government or NGO, companies are much less likely to have a successful program. Businesses buying credits won’t have any way to verify the actual carbon reduction. “When it doesn’t have accreditation, immediately it seems like it’s a load of bull,” said Leff.
“Anybody who’s serious about participating in the market makes sure they are buying certified and verified offsets from a number of entities that meet tracking and reporting protocols,” said Aurora Sharrard, director of sustainability at the University of Pittsburgh.
Finally, if a company can’t point to some solid strategies beyond offsets or allowance, there is something wrong.
“Carbon offsets should not and will not be the sole feature of companies taking climate action,” said Marcus Krembs, head of sustainability for renewable-energy operator Enel North America. Expecting other businesses to provide all the effort and innovation and then to depend only on credits might work for a while. But caps will get tighter, and credits will become more costly as the easy ones have already been sold, and the price of lowering a carbon footprint gets far more expensive.
More must-read energy sector coverage from Fortune:
—The oil sector is quickly running out of storage for its unprecedented surplus
—The great African air conditioning boom is about to begin—and it could strain the planet
—Coronavirus fight could prove fatal for addressing climate change
—Business is finally starting to reckon with climate change
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: PSEG CEO on climate change action: “It should have been done yesterday”
Subscribe to The Loop, a weekly look at the revolutions in energy, tech, and sustainability.


fortune--2020-04-17--Trump fixer Michael Cohen is being released from prison amid coronavirus outbreak fears

President Donald Trump’s former lawyer and longtime fixer Michael Cohen will be released from federal prison to serve the remainder of his sentence in home confinement amid the coronavirus pandemic, a person familiar with the matter told The Associated Press.
Cohen is currently locked up at FCI Otisville in New York after pleading guilty to numerous charges, including campaign finance fraud and lying to Congress. He will remain under quarantine for 14 days before he is released. Federal statistics show 14 inmates and seven staff members at the prison have tested positive for coronavirus.
After he is released, Cohen will serve the remainder of his sentence at home, according to the person, who could not discuss the matter publicly and spoke to the AP on condition of anonymity.
Cohen’s release comes as prison advocates and congressional leaders have been pressing the Justice Department for weeks to release at-risk inmates ahead of a potential outbreak, arguing that the public health guidance to stay 6 feet (1.8 meters) away from other people is nearly impossible behind bars.
Attorney General William Barr ordered the Bureau of Prisons earlier this month to increase the use of home confinement and expedite the release of eligible high-risk inmates, beginning at three prisons identified as coronavirus hot spots. Otisville is not one of those facilities.
As of Thursday, 473 federal inmates and 279 Bureau of Prisons staff members had tested positive for coronavirus at facilities across the U.S. Eighteen inmates have died since late March.
Many federal inmates have been seeking home confinement as the number of coronavirus cases grows in the federal prison system, but advocates have accused the Bureau of Prisons of moving too slowly to release inmates. The Bureau of Prisons said it had moved more than 1,000 inmates to home confinement since March 26, when Barr first issued a directive to increase its use in late March. The agency said it is a “tremendous logistical lift that was accomplished through the marshaling of all of BOP’s resources.”
A federal judge had denied Cohen’s attempt for an early release to home confinement after serving 10 months in prison and said in a ruling earlier this month that it “appears to be just another effort to inject himself into the news cycle.” But the Bureau of Prisons can take action to move him to home confinement without a judicial order.
Cohen began serving his sentence last May and was scheduled to be released from prison in November 2021.
Other high-profile inmates have also been released as the number of coronavirus cases soars. Last week, a judge ordered Michael Avenatti — the attorney who rose to fame representing porn star Stormy Daniels in lawsuits against Trump — to be temporarily freed from a federal jail in New York City and stay at a friend’s house in Los Angeles. Avenatti had said he was at high risk of getting the coronavirus because he had a recent bout with pneumonia and his cellmate at the Metropolitan Correctional Center in Manhattan was removed due to flu-like symptoms.
Former New York state Senate leader Dean Skelos, 72, who was also serving a sentence at Otisville, is also expected to be released soon from prison to home confinement after testing positive for the coronavirus, prosecutors told a judge Wednesday.
CNN first reported Cohen was being released to home confinement.
A spokesman for the U.S. attorney’s office in Manhattan declined to comment.
More politics coverage from Fortune:
—How Fortune 500 companies are utilizing their resources and expertise during the pandemic
—Trump’s withdrawal of U.S. funding would make China WHO’s biggest benefactor
—How South Korea is preparing for the first nationwide election of the coronavirus era
—If you’ve been a little busy lately, here’s what’s going on with the 2020 election
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: As unemployment skyrockets, the labor market’s future looks grim
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-04-17--The Fed may have fundamentally altered the nature of risk in the stock market

The tangled web of companies buying and selling ‘ credit ’ to reduce carbon emissions

At the lows on March 23, the S&P 500 was off roughly 34% from its highs. From those lows it’s now up more than 27% through the close on Tuesday.
This is confusing to many investors for a number of reasons:
The economy is still effectively shut down for the foreseeable future.
The unemployment numbers continue to worsen as jobless claims in the past three weeks pour in from more than 16 million people (a full 10% of the labor force).
Even though social distancing seems to be helping, it appears the coronavirus will be with us for some time.
No one has a clue how this is going to work when we try to turn the economy back on again.
I understand the confusion. Markets are seemingly detached from reality at the moment. If you’re not confused you’re not paying attention.
But there are also more coordinated fiscal and monetary rescue measures going on right now than at any time in history. The Fed just announced this week that it will…
Make up to $600 billion in loans for small– and mid-size companies.
Support up to $850 billion in corporate bonds (which includes individual bonds and ETFs).
Buy up to $500 billion in state and municipal bonds.
This is in addition to taking short-term rates down to zero and launching the $2 trillion fiscal rescue plan, plus all the other measures already put in place over the past few weeks (with hopefully more on the fiscal side to come).
The economy has been put on ice, but the Fed and the government are throwing in trillions of dollars to (one hopes) thaw it when the time comes. I don’t know how this experiment will unfold. Anyone who tells you they do is either delusional or lying.
It’s still far too early to say, but let’s assume for a minute March 23rd was the bottom. I’m not saying this is a fact, but let’s say the Fed and the government somehow thread the needle and do enough to keep investors happy during this economic calamity.
This outcome would be pretty difficult to reconcile with an economy that could experience a contraction that may rival the Great Depression.
I can’t prove this with 100% certainty, but in the past when the Fed either didn’t have the tools (or didn’t use them as it has today), and the government didn’t spend 10% of GDP to help out on the fiscal side of things, the stock market likely would have fallen 60% to 70% in this situation.
Many people think this will still happen this time. Maybe they’re right, but if not this could have ripple effects on the U.S. stock market going forward.
Here’s the big question: If the stock market during the worst economic contraction in 90 years can be smoothed out by government spending and Fed actions, does this change the risk-return framework in the stock market going forward?
Said another way—if stocks are now safer, and no longer carry the risk of a Great Depression–like crash, the fundamental risk vs. reward equation has been altered. And if there’s less risk, does that mean expected returns will be lower going forward?
Looking at valuations over the long term, you could make the case that the market has been pricing this in for some time now. Robert Shiller has pieced together U.S. market data going back to 1871 to calculate his cyclically-adjusted price-to-earnings ratio.
This valuation measure is far from perfect, but it is telling to see how the averages have changed over time:
There is an obvious upward move in the average over time. There are a number of explanations for this increase: Interest rates and inflation have fallen over time; accounting rules have changed on corporate earnings; the underlying structure of the market has changed (think more tech companies); the U.S. economy and markets are more mature, etc.
But another reason for this is the Fed now plays a larger role in the economy and management of the financial system, and thus, financial assets. If the stock market is “safer” over time, in that the Fed will do its best to smooth economic cycles, it would make sense that valuations should rise over time.
I don’t know who invented the P/E ratio but I wish they would have called it the E/P ratio instead. Price-to-earnings just gives you a number that’s tethered to nothing but earnings-to-price gives you a yield. Here are those same averages shown as the inverse or earnings yield:
Earnings yield doesn’t tell you exactly what future returns will be, but this shows investors have been willing to pay more for profits over time.
There are legitimate reasons for this, but theoretically, this should mean lower expected returns. The Federal Reserve has shown in the past two crises that it will likely be more involved in the markets than ever before. I don’t expect this to change anytime soon. If anything, the Fed’s involvement will only increase in the future.
Unfortunately, though, it’s possible that when the Fed takes on something like a Great Depression–esque 85% crash, it may be adding other risks to the system.
Risk can change shape, but it never completely goes away.
Markets have become more micro efficient over time in that it’s getting harder to outperform based on security selection alone. There are simply many more professional investors out there today than there were in the past.
But you could argue that markets may be growing more macro inefficient at the same time. While a monster crash may be off the table, it’s possible we see more crashes that don’t reach that magnitude. In essence, making the system safer in some ways could be making it riskier in other ways.
One positive between now and the past when dealing with the markets is the fact that the costs of investing were so high in the past, that that could be one of the reasons valuations were so much lower. Equity investors needed the promise of higher expected returns to account for a higher cost of doing business and the higher risk inherent in stocks back then.
The fact that the U.S. has dominated in the past 100 years or so in terms of markets and the economy could actually be part of the reason that dominance won’t continue as much going forward. I could be wrong. Things could get far worse in the markets as the economic pain continues. Nothing would surprise me at this point.
But if the Fed has effectively taken enormous risk off the table, there could be unintended consequences for the markets going forward.
Ben Carlson, CFA, is the director of institutional asset management at Ritholtz Wealth Management. He may own securities or assets discussed in this piece.
More must-read finance coverage from Fortune:
—Are SBA small-business loans running out? What we know so far
—CEOs David Solomon and Brian Moynihan stand alone on Wall Street—literally
—College-educated investors may be more likely to fall for coronavirus scams
—Stocks have gained 25% since their March lows—but the math doesn’t add up
—How Fortune 500 companies are utilizing their resources and expertise during the pandemic
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEOs
—VIDEO: 401(k) withdrawal penalties waived for anyone hurt by COVID-19
Subscribe to Fortune’s Bull Sheet for no-nonsense finance news and analysis daily.


fortune--2020-04-17--Scenarios for a post-COVID-19 world

Scenarios for a post-COVID-19 world

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
How will COVID-19 change the world? By this point, it’s clear there will be no V-shaped recovery, and no return to normal. The world will change, as it does after any social, geopolitical or economic event of this magnitude.
But how? A group at Deloitte Consulting and Salesforce teamed up to map out four fascinating scenarios, which explore not just the economic effects, but also the social, political, environmental and technological possibilities. A quick summary of the four:
1) Passing storm. Despite a bumpy start, the pandemic is met with an increasingly effective health system and political response. There is no “second wave.” The economy starts to rebound late in 2020, continuing to recover slowly until the second half of 2021, as confidence gradually returns. Social cohesion “is generally improved,” virtual learning and conferencing accelerate. Inequality is heightened, but trust in government rises, as does the ability to tackle other big problems like climate change.
2) Good company. The health crisis is prolonged, the economic crisis is prolonged, governments struggle to deal with it, but companies step up—putting “stakeholder capitalism” into action. Telecommuting and online education become the norm, innovation flourishes, and people embrace technology for its power to solve problems—a reversal of the “tech lash.” Trust in government falls.
3) Sunrise in the east. China and other East Asian countries manage the crisis more effectively than those in the West, and rise as the primary powers on the world stage. Western governments respond by enhancing government control mechanisms. Travel-related industries face extended decline.
4) Lone wolves. Rolling waves of the disease continue to rock the globe for longer than anyone was prepared for, creating widespread social unrest and leading to increased isolationism as well as growing government surveillance. Governments take more control over business life, and global environmental efforts are deprioritized as countries focus on food and energy independence.
I asked Andrew Blau, the managing director at Deloitte who led the scenario planning, which of these he thought most probable. “We are dealing with fundamental uncertainty. We’ve never seen a crisis like this. To assign probabilities seems irresponsible,” he said. Besides, “you are much more resilient if you are prepared for a range of possibilities.”
You can see full scenario descriptions here. And if you favor the more optimistic ones, be sure and read Erika Fry’s Fortune piece on how the private and public sector came together in Seattle to fight the pandemic. It’s quite a story.
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
China GDP
China's GDP contracted 6.8% in Q1—its first shrinkage in at least 28 years. So what stimulus measures are Beijing planning to roll out? The first round began in mid-February, and experts suggest round two could include the deployment of China's shadow banking system—credit lines kept off the books of official banks. Fortune
Stocks up
The Chinese data, which was anticipated to some degree, has not caused too much of a dent in market optimism. The markets seem to be buoyed by news about potential COVID-19 treatments, and the rather contentious prospect of the U.S. reopening its economy sometime soon. The Hang Seng was up 1.6% and the Nikkei 225 up 3.2% this morning, while the Stoxx Europe 600 had risen around 2.5% at the time of writing. As is often the case these days, U.S. futures appear roughly aligned with what's happening in Europe. Wall Street Journal
Fake news
In an unprecedented move, Facebook will tell millions of users if they saw posts with coronavirus misinformation. The move—which has some observers asking why Facebook couldn't do this with other types of disinformation—follows the revelation by campaign group Avaaz that more than 40% of the coronavirus fake news on Facebook stayed there despite the company having been told the posts were false. Politico
EUnity
French President Emmanuel Macron has warned that the EU political project may be doomed, unless its members pull together in the face of the coronavirus crisis. The early stages of the crisis have not demonstrated much of that comradery, with an every-nation-for-itself mentality taking hold. But now, after the likes of China and Cuba started stepping into the void with medical supplies, doctors and nurses, the European Commission is in apologetic mode and pledging to do better. Fortune
AROUND THE WATER COOLER
Business support
While countries such as the U.S., the U.K. and Italy are struggling to get financial support to businesses quickly, Germany is not having such problems. Why? Because Germany already had the mechanisms in place—it used them during the global financial crisis, and it's using them again now, to great effect. Fortune
Venezuelan gasoline
Oil-rich Venezuela is running out of gas, to the extent that vegetables are rotting on farms and doctors can't get to work. The Venezuelan government has idled some of its oil fields, because it can't sell its crude thanks to sanctions and the plummet in global demand. Its refineries are crippled by a shortage of both spare parts and technicians—and Russia seems to have halted gasoline shipments to Venezuela, for now. Washington Post
Degrowth world
Are contractions in GDP necessarily a bad thing? Some economists think not, as Eamon Barrett writes here. He notes that current government policies such as wage support and universal basic income come straight out of the degrowth playbook, and quotes economist Giorgos Karris: "In a situation like the current crisis, we really need to have an answer for how to manage an economy that doesn’t produce more than it did the year before for two years or, even, longer." Fortune
.Org fiasco
Website addresses ending with .org denote nonprofit organizations, so there has been huge disquiet around the sale of the .org registry to a private equity firm, Ethos Capital. Now the sale is on hold (again) thanks to the intervention of California Attorney General Xavier Becerra, who wants to preserve "an Internet that serves everyone" and fears the sale would put "profits above the public interest." The Register
This edition of CEO Daily was edited by David Meyer.