Nvidia Balloons to Twice the Value of Apple

Economic

Summary:

Armed with its revolutionary AI chips, could tech giant Nvidia grow to twice Apple's size and become the most profitable company of all time?

The saying goes that in a gold rush, the only operators sure to make a fortune are the sellers of shovels, since most miners will fail to find any gold. What we are seeing in the AI space feels much like a gold rush, as the monopoly info-tech giants and a crush of start-ups have rushed to harness the golden promises of generative AI. These stretch from Meta’s Metaverse to the incredible number-crunching loads to drive new applications like autonomous driving. The primary shovel-seller in the AI gold rush is Nvidia, designer of the juiced-up chips, and just as importantly, the software ecosystem at the heart of the lion’s share of AI data centres.

In 2025, Nvidia’s success is supercharged further with the availability in volume of its revolutionary 208-billion transistor Blackwell chip, a chip that drives up to a 25-fold increase in performance of AI calculations per unit of energy consumed relative to the prior H100 generation. With the intensifying AI arms race as no giant or even government wants to be left behind, and as AI data centre electricity costs have soared, the insatiable demand for the more powerful and yet less power-hungry Blackwell chips sees Nvidia taking the crown as the most profitable company of all time. It handily surpasses Apple’s record USD 105 billion of profits next year, and with far faster growth baked into expectations, its market cap nearly doubles again, making it twice the size of Apple. This sees it tower above all other companies in the world at a value of USD 7 trillion, or 10% of the global equity market. Apple and other tech giants’ valuations suffer in relative terms, as their profitability is weighed down by the need to build titanic data centres to keep up in the AI gold rush.

Potential market impact

Nvidia shares trade well north of USD 250, before the market begins to question its potential to grab an ever-greater share of corporate profits, and as unwelcome regulatory scrutiny on its monopoly status tempers the outlook.

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Risk Warnings and Disclaimers

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FOREX.com

Considering some of the headlines coming out Europe, especially regarding French politics, you’d imagine Japanese yen crosses such as EUR/JPY and GBP/JPY would be getting slaughtered. But they’re not. That’s telling. Instead, political chaos in France should be treated as the norm rather than exception, leaving other factors to drive FX market movements.

As this note will discuss, in this instance, it’s relative longer-dated rate differentials with Japan that have been highly influential over the past month, providing a guide on what traders should be watching when assessing setups.

EUR/JPY delivers bottoming signal EUR/JPY, GBP/JPY: Rate differentials matter, politics don’t _1

Before looking at setups in EUR/JPY, take note of the rolling 20-day correlation it has seen with 10-year bond yield differentials between Germany and Japan in the bottom pane, sitting at an extremely strong 0.97. Where spreads have moved, EUR/JPY has almost always followed.

EUR/JPY has completed a three-candle morning star pattern on the daily timeframe, a signal often seen around market bottoms. Two failed bearish breaks of the uptrend established in early August bolsters the signal from the pattern. While the price action has become more constructive for bulls, momentum indicators such as RSI (14) and MACD are yet to confirm, continuing to generate bearish signals. As such, there is no need to force trades in this environment. Let the price action tell you how to procced.

EUR/JPY stalled above 158.58 on Wednesday, making that a near-term level of note. If the price were to push above this level again and hold there, it would present a potential bullish setup, allowing for longs to be established above with a stop beneath for protection. 160.32 is a minor level that acted as both support and resistance earlier this month, making that an initial trade target. Above, tougher tests await at 161.85 and the 50-day moving average.

Alternatively, if the price is unable to break and hold above 158.58, another setup would be to sell beneath with a stop above for protection. Potential targets include the uptrend located around 156.75 today or 156.25, the low set on Wednesday.

GBP/JPY: bearish momentum turning?

Like EUR/JPY, GBP/JPY has been strongly correlated with rate differentials between the UK and Japan over the past month on a daily timeframe, sitting at 0.96. There’s one checklist item to monitor when considering potential setups.

GBP/JPY has completed a three-candle morning star pattern, with the low struck on Tuesday coinciding with minor support at 188.10. If we have seen a near-term bottom, the first topside level of note is the uptrend established in early August. Prior to being broken earlier this month, the price bounced off this level on multiple occasions, suggesting it may now act as resistance.

Above, 193.61 and 50 and 200-day moving averages are located in close proximity, providing only limited runway for upside from a technical perspective. Even though RSI (14) has broken its downtrend, hinting momentum may be in the early stages of turning, MACD has yet to confirm the signal.

As for potential setups, a break and hold above the August uptrend would allow for longs to be established with a tight stop beneath entry level for protection. Targets as listed above. Alternatively, of the price is unable to break above the uptrend, the setup could be flipped with shorts established below with a tight stop above for protection. The obvious target would be 188.10 with 186 and 183.73 the next after that.

Source：FOREX

Risk Warnings and Disclaimers

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ACY

Economic

Forex

The U.S. dollar finds itself in the middle of a growing debate among global investors as President-elect Donald Trump’s economic and trade policies take centre stage. The key question is both simple and complex: Does Trump want a stronger or weaker dollar? His policy goals, rhetoric, and fiscal strategy paint a picture of conflicting objectives, leaving markets with more questions than answers.

The Case for a Weaker Dollar

Trump’s protectionist trade policies aim to reduce the U.S. trade deficit by discouraging global trade, a stance that could weaken the dollar in several ways. Historically, the dollar’s role as the world’s reserve currency has been bolstered by its central position in global trade. A protectionist tilt could dampen international demand for dollars, as fewer transactions flow through U.S. markets.

A weaker dollar could also support Trump’s efforts to boost American manufacturing and exports. A depreciated currency makes U.S. goods more competitive abroad, aligning with Trump’s narrative of rebuilding domestic industries and creating jobs in the manufacturing sector.

Yet, this approach comes with significant risks. A declining dollar would increase the cost of imports, fuelling inflationary pressures. With the U.S. already burdened by substantial fiscal deficits, a weaker dollar could exacerbate borrowing costs and complicate the financing of debt. Investors might demand higher returns to offset perceived risks, potentially creating headwinds for both private and public sectors.

The Case for a Stronger Dollar

On the other side of the coin, a stronger dollar could align with the U.S.’s heavy reliance on foreign capital. The country’s fiscal deficit, particularly under Trump’s anticipated spending policies, would require robust capital inflows. A stable or appreciating dollar would attract foreign investors seeking safe, high-return assets, ensuring the financing of U.S. obligations.

Moreover, a strong dollar could help contain inflation by keeping import prices in check. This would be particularly important if Trump’s fiscal policies stimulate economic activity to the point of overheating. A firm dollar would serve as a counterbalance, maintaining purchasing power and stabilizing consumer markets. You can check more about the USD HERE.

Contradictions and Market Perceptions

This inherent contradiction between Trump’s trade protectionism and his potential fiscal expansion leaves markets in a state of flux. On one hand, his policies suggest a structural depreciation of the dollar over time. Reduced global trade activity, coupled with potential capital repatriation trends in other regions, such as Europe, could weaken the currency's position.

On the other hand, short-term capital inflows, driven by higher U.S. interest rates or growth premiums, could lend temporary support to the dollar. For now, the market seems to perceive the dollar as overvalued against major currencies, a position that could amplify its sensitivity to economic data surprises.

Upcoming Catalysts to Watch

Investors will closely monitor the release of U.S. labour market data, including JOLTS job openings, and key speeches by Federal Reserve officials. While these events could shift short-term sentiment, the larger narrative will likely hinge on broader developments, including Trump’s fiscal strategy, international trade negotiations, and Federal Reserve policy.

Additionally, markets are already looking ahead to 2025, when portfolio and foreign direct investment flows might play a bigger role in shaping the dollar’s trajectory. For now, the interplay between Trump’s policy goals and macroeconomic fundamentals continues to fuel uncertainty.

The dollar’s direction in the coming months will depend on how Trump’s trade and fiscal policies reconcile—or fail to reconcile—their conflicting goals. A weaker dollar could provide a temporary boost to American exports and industrial output, but at the cost of inflation and higher debt-servicing costs. Conversely, a stronger dollar could stabilize inflation and attract foreign capital but may undercut Trump’s broader trade ambitions.

Ultimately, this policy tension underscores the challenges of balancing domestic and international economic priorities. As the world’s most traded currency, the dollar remains a barometer for global economic sentiment, and its path forward will likely have far-reaching implications beyond U.S. borders.

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.

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Risk Warnings and Disclaimers

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Warren Takunda

The Bank's governor, Andrew Bailey, validated expectations for just four rate cuts in 2025, which the Organisation for Economic Co-operation and Development (OECD) says is appropriate, given expectations for UK inflation to stay above the 2.0% target for the foreseeable future.

In its latest assessment of the UK, the OECD recommended the Bank of England, "maintain the data-dependent restrictive monetary policy stance until inflation is durably around the 2% target."

The OECD thinks the Bank of England's base rate will plateau at 3.5% in 2026 following a gradual interest rate cutting cycle at the Bank of England.

One of the UK's most accurate forecasters, the British Chambers of Commerce, has today said interest rates will fall to 4.0% at the end of 2025, down from 4.75% today, implying just three rate cuts next year. The BCC joins the OECD in thinking the UK's terminal rate will be 3.50% in 2026.

For foreign exchange markets, these are important developments. It means the UK's base rate will lie above the terminal rate for the Federal Reserve, which the OECD expects to be 3.25-3.5%.

It also means UK interest rates will remain well above the Eurozone's, with the OECD expecting the ECB to cut its key rate to 2.0% in late 2025.

"Sterling looks on course to be the best performing major currency of 2024. The outlook for 2025 appears similar in structure and is once again framed by relative growth, and the path and ultimate landing point of the BoE’s easing cycle relative to other major central banks," says Paul Robson, Head of G10 FX Strategy at NatWest.

Higher for Longer Rates to Underpin Pound Sterling vs. Euro and Dollar_1

The Pound to Euro exchange rate is up 4.67% in 2024, and the Pound to Dollar exchange rate is down 0.40%, making Serling the second-best performing G10 of the year after USD.

The Bank of England expects interest rates to be cut at a steady one-per-quarter rate in 2025, which implies four 25-basis point cuts.

Governor Andrew Bailey confirmed this in an interview with the FT this week.

"The Bank of England expects four interest rate cuts next year if its outlook for the UK economy bears out, Andrew Bailey said on Wednesday," reports the newspaper.

The assessment is the latest indication from the Bank that UK interest rates will remain supportive of Pound exchange rates for the foreseeable future.

"In the absence of a major shift in the expected shape of the global monetary policy easing cycle or sharp deterioration in risk appetite, currencies with higher interest rates (carry) are seen trending higher against those with lower yields. Sterling is set to maintain a favourable carry position through ’25 as the BoE stays a 'cautious cutter' while many other central banks remain 'enthusiastic easers'," says Robson.

OECD Chief Economist Álvaro Pereira said the shallower path for rate cuts anticipated for the Bank of England reflects robust domestic demand and extra stimulus from the Budget, which saw Chancellor Rachel Reeve announce the government would be spending more in the coming year than previously assumed.

As a result, the OECD thinks UK inflation will be more robust than previously forecast. The organisation's new inflation projections show inflation won't fall to the Bank of England's 2.0% target in the forecast horizon, ending 2026 at 2.3%.

"Persistent services price pressures will keep core inflation elevated at 3.7% in 2024 and 2.8% in 2025, requiring monetary policy to remain restrictive," said the OECD.

These factors, along with "some strong but not spectacular wage growth", meant the Bank of England did not need to "ease so fast", said Pereira.

Source: Poundsterlinglive

Risk Warnings and Disclaimers

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Goldman Sachs

Economic

China’s economy is projected by Goldman Sachs Research to grow at a slower pace in 2025, as the government’s stimulus efforts partially offset the impact of potential tariffs from the US.

Real GDP growth is predicted to decelerate to 4.5% next year from 4.9% in 2024. Goldman Sachs Research’s forecast assumes a 20 percentage-point increase in the effective tariff rate imposed by the incoming Trump administration on Chinese goods, which would weigh on China’s real GDP by 0.7 percentage point in 2025. The forecast also assumes that Chinese policymakers will introduce fresh stimulus to blunt the impact of tariffs.

“The choice in front of Chinese policymakers is simple: either to provide a large dose of policy offset or to accept a notably lower headline real GDP growth,” Chief China Economist Hui Shan writes in the team’s report. “We expect them to choose the former.”

China’s economic stimulus to partially offset US tariffs in 2025_1

In other aspects, the focus for China’s leadership hasn’t changed: Officials are determined, over the medium term, to steer the economy toward a technology-driven and self-reliant growth model. The cost of doing so — climbing the ladder to produce higher quality growth — is slower economic expansion, according to Goldman Sachs Research. Our economists forecast real GDP growth to average 3.5% from 2025 to 2035, compared to 9.0% during 2000-2019.

“The Chinese economy faced significant growth headwinds in 2024, and policymakers finally started more forceful easing in late September,” Shan writes. “How Chinese policymakers will lean against the wind to stabilize domestic consumption and the property market, and to manage renewed US-China trade tensions, will be the overarching theme of 2025.”

How will China support its economy?

Historically, China’s government has looked to support its economy through infrastructure and property construction. This time around, Goldman Sachs Research believes China’s policymakers will likely react by cutting policy rates considerably and increasing the fiscal deficit.

Strong exports have been the sole bright spot in the Chinese economy this year, contributing 70% of the expected 4.9% headline real GDP growth, according to Goldman Sachs Research. Even though Chinese exporters may continue to gain market share in emerging-market countries, amid significantly higher US tariffs, growth of total exports is likely to decelerate sharply. The contribution to real GDP growth from exports may drop materially next year.

Chinese exports to non-US countries (which are estimated to be more than 85% of China’s total exports) will likely increase modestly in 2025, thanks partly to strong price competitiveness and potential currency depreciation. Goldman Sachs Research expects China’s total goods export volume to be flat next year relative to this year (versus a 13% gain in 2024).

The outlook for inflation in China

Goldman Sachs Research’s inflation projections are notably below the consensus estimates of economists. Shan expects CPI and PPI inflation to be 0.8% and 0% next year, respectively, compared to Bloomberg’s consensus of 1.2% and 0.4%. “There are structural factors weighing on inflation, including the multi-year housing downturn and persistent industrial overcapacity,” Shan writes. “Restoring consumer confidence and strengthening labor markets and wage growth are likely to take time.”

Policymakers in September pledged a raft of measures to support everything from China’s property sector to its equity market amid slowing consumption. Household consumption contributed just 29% to headline GDP in the third quarter of 2024, down from 47% in the second quarter and 59% before the onset of the pandemic. Goldman Sachs Research expects growth in household consumption to stay flat at 5% in 2025.

“The weakness in domestic demand has finally struck the ‘policy put,’ and the current easing emphasizes local government debt resolution, household consumption, and equity market performance,” Shan writes.

Is China’s property market near the bottom?

China’s economic stimulus to partially offset US tariffs in 2025_2

Still, China’s ongoing property downturn is likely to continue to be a significant drag. New home starts and government revenue from land sales plunged by 60-70% from their peak in 2020-21. New home sales and completions almost halved in the latest data.

Given the many structural challenges, our economists see “no quick fix” for the nationwide property sector and expect the downturn to be a multi-year drag on growth for the Chinese economy. Goldman Sachs Research projects that the property sector will likely weigh on China’s GDP growth by 2 percentage points in 2025 (versus -2.1 percentage points in 2024). The team expects the growth drag to narrow starting from 2026 but to linger until 2030.

“With incremental housing easing measures ahead, it is possible to see a stabilization of home prices in some large cities next year — but probably not nationwide,” Shan writes. “For many construction-related property activities, their multi-year downtrend appears inevitable.”

While our economists’ 4.5% forecast for GDP in 2025 is in line with consensus expectations, they note the range of possible outcomes is wide for next year. Higher-than-expected tariffs by the US administration is a key downside risk; US president-elect Donald Trump has threatened to raise them by as much as 60 percentage points, and revoking China’s Permanent Normal Trade Relations status would see the effective tariff rate climb by 40 percentage points. Regarding the upside risk, Chinese goods exports could prove more resilient than expected, which could cause growth to come in higher than forecast.

This article is being provided for educational purposes only. The information contained in this article does not constitute a recommendation from any Goldman Sachs entity to the recipient, and Goldman Sachs is not providing any financial, economic, legal, investment, accounting, or tax advice through this article or to its recipient. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the statements or any information contained in this article and any liability therefore (including in respect of direct, indirect, or consequential loss or damage) is expressly disclaimed.

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Risk Warnings and Disclaimers

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PEW

Nearly three years into the war in Ukraine, President-elect Donald Trump has been promising a swift end to the conflict when he takes office. Americans’ views about U.S. support for Ukraine have shifted little in recent months, but there continue to be wide partisan differences, according to a Pew Research Center survey conducted Nov. 12-17.

Republicans are far more likely than Democrats to say the United States is providing too much support to Ukraine (42% vs. 13%).

Republicans are also far less likely than Democrats to say the U.S. has a responsibility to help Ukraine defend itself against Russia’s invasion (36% vs. 65%).

In addition, Republicans and Republican-leaning independents have long been less likely than Democrats and Democratic leaners to see Russia’s invasion as a major threat to U.S. interests. But this partisan gap has grown. Just 19% of Republicans now say the invasion is a major threat, compared with 42% of Democrats.

Note: The survey was fielded before the Biden administration allowed Ukraine to use U.S. long-range weapons to hit targets inside Russia and provided anti-personnel mines to Ukraine.

U.S. support for Ukraine

Today, 27% of Americans say the U.S. is providing too much assistance to Ukraine. Another 25% characterize U.S. support as “about right,” and 18% say the U.S. is not providing enough support. These shares are similar to views in July, though Americans are now somewhat more likely to say they are not sure than they were four months ago (29% vs. 25% then).

Among Republicans, 42% say the U.S. is providing too much support. Another 19% say the amount of support is about right, while one-in-ten say the U.S. is not providing enough support.

By comparison, among Democrats, just 13% say the country is providing too much support to Ukraine. About three-in-ten (31%) say the level of support is about right. A similar share (28%) say the U.S. isn’t providing enough support. Wide partisan divisions remain in Americans’ views of the war in Ukraine_1

Wide partisan divisions remain in Americans’ views of the war in Ukraine_1

U.S. responsibility to help Ukraine

Americans are also split on whether the U.S. has a responsibility to help Ukraine defend itself from Russia’s invasion. Half of Americans say the U.S. has this responsibility, while 47% say it does not. These views are largely unchanged over the last several months.

Partisans’ opinions are also essentially the same as they were in July:

36% of Republicans say the U.S. has a responsibility to help Ukraine defend itself. The same percentage said this in July.

65% of Democrats say the U.S. has this responsibility. That is also nearly identical to views in July (when 63% said this). Wide partisan divisions remain in Americans’ views of the war in Ukraine_2

Wide partisan divisions remain in Americans’ views of the war in Ukraine_2

Russia’s invasion as a threat to U.S. interests

Three-in-ten Americans now say Russia’s invasion of Ukraine poses a major threat to U.S. interests. These views have been relatively stable over the last few years – though Americans were considerably more likely to say this in the early weeks of the conflict in 2022.

Since 2023, Republicans have been far less likely than Democrats to view the Russian invasion of Ukraine as a threat to the U.S. But the share saying this is now at a low point: Today, 19% say this, down from 26% in July.

About four-in-ten Democrats (42%) see Russia’s invasion as a major threat. This is slightly lower than the 45% who said this in July but on par with Democrats’ views since 2023. Wide partisan divisions remain in Americans’ views of the war in Ukraine_3

Wide partisan divisions remain in Americans’ views of the war in Ukraine_3

Source：PEW

Risk Warnings and Disclaimers

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Brookings Institution

Economic

In 2024, the Global Footprint Network estimated “humans use as much ecological resources as if we lived on 1.7 Earths.” This overuse of resources highlights how the global economy has developed at the cost of continuous environmental degradation. The 2021 Dasgupta Review—a comprehensive report on the economics of biodiversity—estimated that, between 1992 and 2014, human capital per person, defined as labor, skills, and knowledge, increased by around 13% and produced capital per person such as roads, buildings, and factories doubled. Meanwhile, natural capital per person, defined as “the stock of renewable and non-renewable natural assets that yield a flow of benefits to people,” fell by 40%.

As we grapple with challenges arising from climate change and loss of biodiversity, there is a growing need to incorporate environmental considerations in economic decisionmaking.

What challenges do we face when incorporating the value of nature in economic decisions?

Environmental degradation arises from what economists refer to as the externality problem: The failure of individuals directly involved in a transaction to account for the indirect costs borne by society. An example of this would be a landowner cutting down a forest without considering its role in absorbing greenhouse gasses. In addition, quantifying the value of clean air or unpolluted rivers using traditional economic metrics is challenging in the absence of a formal market. As a result, humanity has treated the services provided by nature (“ecosystem services”)—such as oxygen from trees, pollination of crops by bees, and mitigation of flooding from wetlands— largely as if they were free, without considering the depletion of these resources caused by their actions.

Addressing externalities involves incorporating societal costs into the price of goods and services created in the economy. Ideally, we would estimate and price the carbon emitted during production, the loss of biodiversity caused by water pollution, the depletion of oxygen from deforestation, and so forth. The underlying idea is to value forests, lakes, and other natural resources not only for the goods they can be turned into but also for the value they provide to society when they remain in their original natural form. For instance, plants absorb the CO2 in the atmosphere and release oxygen through photosynthesis. So, in principle, it is possible to calculate the price of CO2 emissions by estimating the cost of planting trees to offset them. However, valuing other environmental externalities is more complex. Assigning a monetary value to biodiversity loss—such as the extinction of animal species due to climate change—is particularly challenging because it involves factors that are not easily quantifiable, like the intrinsic value of different animal species and the long-term impacts on ecosystems.

What are some examples of attempts to incorporate nature into financial markets?

Despite the difficulties in assigning a monetary value to environmental externalities and ecosystem services, financial markets could offer tools and mechanisms to address these challenges by accounting for businesses’ environmental impact and channeling investments toward sustainable initiatives. By developing financial instruments that recognize the value of natural resources, we could incentivize companies to prioritize the preservation of the environment. This approach could help quantify the value of nature and direct funds towards ventures with positive environmental impact. In the following sections, we examine how financial markets are attempting to incorporate the value of nature and assess the effectiveness of these efforts.

Sustainable investments

Sustainable investments aim to generate financial returns while promoting environmental or social value. Often labeled “ESG”—which refers to environmental, social, and governance—these investments encompass a wide variety of instruments. These range from green bonds—debt securities issued to finance projects with positive environmental impacts—to ESG-focused exchange-traded funds (ETFs) that select stocks or bonds based on ESG criteria.

Despite recent backlash, demand for ESG investments has increased in recent years and is expected to continue growing in the U.S. A recent study shows that, in the year following the publication of sustainability ratings by a well-known rating agency in 2016, “high-sustainability” funds experienced $24 billion in net inflows while “low-sustainability” funds instead experienced $12 billion in net outflows. This occurred despite a lack of evidence that high-sustainability funds outperform low-sustainability funds.

Yet significant concerns remain regarding the effectiveness and transparency of ESG labels. An analysis of self-labeled ESG mutual funds in the U.S. has found that these funds held a portfolio of firms with “worse track records for compliance with labor and environmental laws” compared to those held by non-ESG funds within the same financial institutions between 2010 and 2018. The authors found that, despite the ESG funds holding portfolios of firms with higher ESG scores, these scores were correlated with the quantity of voluntary ESG-related disclosures rather than actual compliance records or levels of carbon emissions.

Another study that analyzed emissions data from over 3,000 companies between 2002 and 2020 suggests that sustainable investment strategies involving divestment from “brown” firms in favor of “green” ones may be counterproductive. The authors found that when “green” firms experience a lower cost of capital, their emissions do not change much, but when “brown” firms experience a higher cost of capital, their emissions increase significantly. This is because divesting from “brown” firms increases their cost of capital and forces them to continue using their current high-pollution production methods rather than investing in new green technologies that could reduce emissions.

Finally, an analysis of biodiversity finance deals from 2020 to 2022 found that approximately 60% were financed solely by private capital, while the remaining 40% involved “blended finance”—private capital combined with public or philanthropic funding. The study also revealed that pure private capital tended to finance smaller-scale deals with higher expected financial returns but less ambitious biodiversity impacts. In contrast, blended finance was used for larger-scale projects with lower profitability but more ambitious biodiversity impacts. The authors suggest that blended finance is a useful tool for attracting private investors by reducing their risk and bridging the profitability gap.

Credits

Environmental credits are financial instruments that allow purchasers to support specific environmental actions indirectly. For example, by buying carbon credits, an investor pays another company to reduce its greenhouse gas (GHG) emissions. Compared to other types of emerging credits, the carbon credit market is well-established: In 2022, the voluntary carbon market had a market size of around $2 billion covering 1.7 gigatons of carbon, and the compliance markets had a market size of around $850 billion covering just under 20% of global GHG emissions in 2021.

Other types of nature-related credits, such as biodiversity credits, have been proposed to create financial rewards for conservation. Under this model, a company devises a plan for improving biodiversity and implements it with regular monitoring, either by the company itself or a third party. A biodiversity credit is generated when the monitoring confirms that specific biodiversity goals have been met. The credit can then be sold, with the revenue shared between the landowner and the biodiversity credit developer. A few companies have begun selling biodiversity credits, and the United Nations is currently facilitating a voluntary international alliance on biodiversity credits. The EU is also exploring biodiversity credits and biodiversity-linked carbon credits through its Climate Biodiversity Nexus project.

Challenges facing these nature-based credits include ensuring that the revenues from the credits are used towards their intended goals and accurately measuring the environmental impact.

Nature preserving companies

Another approach to internalizing environmental externalities in financial markets is the creation of nature-preserving companies. These companies’ primary purpose is to purchase or lease land and manage it to generate ecosystem services. Landowners may donate or sell conservation easements, which results in the landowner forfeiting certain rights, such as the right to develop or subdivide the land. There are 221,256 conservation easements covering approximately 38 million acres of land in the U.S. While conservation easements are associated with tax benefits for landowners, the Internal Revenue Service has observed abuses of these tax advantages.

In some cases, these companies are envisioned to be publicly traded and listed on exchanges, with the idea that the price-discovery process associated with trading would reflect the value of protecting natural assets. This model was being considered by the Securities and Exchange Commission when the New York Stock Exchange proposed listing “natural asset companies” to be publicly traded. While the proposal was withdrawn in January 2024, the New York Times notes that there are prototypes of this model underway in private markets.

Nature-preserving companies aim to generate economic returns alongside their conservation efforts. These returns are typically achieved through the sale of carbon credits or economic activities such as sustainable agriculture, property rental, renewable energy production, and ecotourism. Proceeds from these activities may be applied to repay loans used to purchase the land.

Integrating the value of nature into nature-preserving companies is challenging for several reasons. First, basic finance valuation formulas imply that a company’s stock price is the discounted value of all the future cash flows investors expect it to generate. In competitive markets, nature-based companies would need to offer competitive returns to their investors to secure the financing they need to operate successfully. However, to generate such profits, companies may be forced to monetize the ecosystem services or extract values from the natural resources they oversee rather than preserve them. If this extraction of value is necessary to attract investors, economic activities should be conducted in a sustainable, transparent way—for example, through sustainable agriculture or ecotourism.

Another challenge relates to ensuring transparency and rigorous oversight of the activities of nature-preserving companies. These companies must demonstrate that their operations genuinely benefit the environment, but measuring biodiversity, for example, is inherently difficult due to its complex nature. Implementing the auditing and reporting frameworks necessary to monitor these activities is also a complex task, often requiring significant resources and expertise. The lack of standardized metrics for biodiversity further hampers investors’ ability to evaluate the true impact of their investments.

Despite these challenges, nature-preserving companies embody the powerful idea that assigning value to nature’s intrinsic benefits is essential for its preservation. By attracting private capital into conservation efforts, they can address funding needs that government and philanthropy alone cannot meet. Given the significant funding gap to prevent biodiversity loss—estimated at over $700 billion annually—the hope is that, with proper safeguards and transparent operations, nature-preserving companies can meaningfully contribute to environmental preservation while offering investors the prospect of long-term returns.

Conclusions

Valuing nature within financial markets is an essential yet complex task that requires innovative approaches and careful considerations. While the current state of sustainable investment and nature-preserving companies offers some promise, significant challenges remain in ensuring that nature is adequately valued and protected. By addressing these challenges, we can create financial institutions that support economic development while promoting environmental sustainability.

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Nvidia Balloons to Twice the Value of Apple

Potential market impact

EUR/JPY, GBP/JPY: Rate differentials matter, politics don’t

Source：FOREX

The U.S. Dollar at a Crossroads: Decoding Trump’s Trade and Fiscal Agenda

The Case for a Weaker Dollar

The Case for a Stronger Dollar

Contradictions and Market Perceptions

Upcoming Catalysts to Watch

Higher for Longer Rates to Underpin Pound Sterling vs. Euro and Dollar

Source: Poundsterlinglive

China’s economic stimulus to partially offset US tariffs in 2025

Wide partisan divisions remain in Americans’ views of the war in Ukraine

Note: The survey was fielded before the Biden administration allowed Ukraine to use U.S. long-range weapons to hit targets inside Russia and provided anti-personnel mines to Ukraine.

U.S. support for Ukraine

U.S. responsibility to help Ukraine

Russia’s invasion as a threat to U.S. interests

Could Financial Markets Incorporate the Value of Nature?

What challenges do we face when incorporating the value of nature in economic decisions?

What are some examples of attempts to incorporate nature into financial markets?

Conclusions

Risk Disclosure