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Diamonds from thin air: the search for a carbon-neutral jewel



They are among the world’s most valuable objects, formed billions of years ago deep beneath the earth’s surface then thrust hundreds of kilometres to its crust by volcanic eruptions before their eventual extraction.

But Dale Vince wants to make diamonds out of thin air.

“Mined diamonds I think are very time-limited now — the industry will come to an end, it’s a question of when,” said Vince. “We no longer need to mine the earth to make diamonds, because we can mine the sky.”

Vince, a UK entrepreneur who founded green energy group Ecotricity, is one of a growing number of producers of lab-grown diamonds. 

Identical in composition to their naturally formed counterparts, manufactured stones are cheaper, posing a challenge to the diamond mining industry led by De Beers and Russia’s Alrosa. They are sold by leading jewellery retailers from Swarovski to Warren Buffett’s Borsheims. 

The traditional extraction of diamonds and the lengthy, energy-intensive process of manufacturing can both leave a significant carbon footprint — something Vince wants to address to appeal to a growing number of environmentally conscious consumers.

Lab-grown stones are made either by mimicking natural formation using high pressure and heat or by a process known as chemical vapour deposition. With CVD a single-crystal diamond seed is placed in a chamber filled with hydrogen and a carbon-containing gas such as methane, then heated up to 1,200C. The carbon from the gas builds on the seed, forming diamond crystals.

Vince is unusual in that he even creates his own methane, a greenhouse gas that is a compound of carbon and hydrogen, by splitting hydrogen from water using electrolysis and taking carbon from the atmosphere.

Bar chart of Total gem-quality production (million carats) showing Lab-grown diamond capacity is increasing

Production of lab-grown diamonds has risen from about 2m carats in 2018 to 6m to 7m carats last year, according to consultancy Bain. That compares with mined production of 111m carats last year. 

The increased scale has helped push down prices, with a polished one carat lab-grown stone roughly a third cheaper than a polished mined diamond, according to Bain.

But while producers such as Diamond Foundry, a San Francisco start-up backed by film star Leonardo DiCaprio, use renewable energy such as hydropower, a growing number of rivals in countries such as India and China do not, say analysts.

Last year 50 per cent to 60 per cent of the world’s lab-grown diamonds were made in China, according to Bain.

UK entrepreneur Dale Vince is one of a growing number of producers of lab-grown diamonds © Jeff Moore

“The challenge in the synthetic stone sector has not been revealing where their energy is coming from,” said Saleem Ali of the University of Delaware, who is working on a new standard to measure the environmental and social performance of diamonds.

At the same time, the mined diamond industry has moved to burnish its own green credentials. De Beers, a subsidiary of FTSE 100 mining group Anglo American, says it will move to using hydrogen-powered trucks and replace “nearly all” its fossil-fuelled electricity by developing dedicated wind and solar power plants.

The company is looking at removing its remaining carbon emissions by injecting carbon dioxide into old diamond mines to take advantage of the natural propensity of the kimberlite rock in which the stones are found to absorb carbon. It is also considering starting projects to support forest growth and looking at farming practices that help soils absorb more carbon on its large landholdings.

Diamond production has been decreasing since it peaked in 2017

“The carbon footprint is starting to become an issue of interest for people that buy diamonds,” said Kirsten Hund, head of carbon neutrality at De Beers.

Alrosa, the world’s largest diamond miner, says it will spend $466m on improving its environmental footprint by 2024, including using lower-emission mining machines and managing waste. Eighty-six per cent of its electricity comes from renewable sources, it says.

Among the biggest challenges for lab-growers is that they lack the financial firepower of the miners when it comes to selling their products to consumers. “Marketing spend, by not only the man-made diamond industry but also the natural diamond industry, is likely what will ultimately determine the success in the long run,” said Paul Zimnisky, a New York-based diamond analyst.

Vince aims to set a single price for his diamonds of about $1,000 a carat because of their environmental credentials. His process uses 40 kilowatt-hours of energy to produce one carat, or four days’ worth of the average UK household’s energy use.

But Zimnisky said charging a premium for greener lab-grown diamonds could prove tricky because while consumers want a sustainable product they are not necessarily willing to pay more for it.

“If you’re trying to be the lowest-cost producer you don’t care about using hydropower as you aren’t going to get a premium for it,” he said. “You need to be able to sell it at a premium or build it as a brand.”

But Jessica Warch, co-founder of lab-grown jewellery retailer Kimai, said conscious consumers were not only concerned about the climate, and that the miners could not avoid the fact that they have to dig a big hole in the ground.

“From the perspective of sustainability it isn’t just being carbon neutral,” she said. “There’s much more to it. There’s the environmental and social perspective that’s rarely taken into account when people talk about carbon neutrality, which to us is the most important part.”

Lab-grown diamonds are identical in composition to their naturally formed counterparts © Gianluca De Girolamo

Kimai’s supplier of lab-grown diamonds, Israel-based Green Rocks Diamonds, is in the process of being certified by auditing company SCS Global Services for its sustainability footprint, according to its chief executive Leon Peres.

“It’s very confusing today, there are a lot of companies that are talking about sustainability and being carbon-neutral but they can’t really put proof to the claim,” Peres said. “When you see a new product coming into the market it’s kind of a free for all — there are no rules or regulations. But now you’re seeing consumers asking questions, the same questions they are asking about natural diamonds: what is the source?”

Amish Shah, of lab-grown producer ALTR Diamonds, believes the lab-grown industry will coalesce around new sustainability standards this year. He says his production facilities in India can easily move to using solar power and already use cow dung as the source of methane.

“I believe in the next 12 to 24 months we will see a major shift in consumer mindset which will force this industry to ensure that everything that is passing through is a low-carbon product,” he said. “And the lab-grown guys will push ahead.”

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‘Digital big bang’ needed if UK fintech to compete, says review




Sweeping policy changes and reform of London’s company listing regime will spark a “digital big bang” for the City and turbocharge the UK’s fintech industry, according to a government-commissioned review.

The report, to be published on Friday, warns that the UK’s leading position in fintech is at risk from growing global competition and regulatory uncertainty caused by Brexit

The review, carried out by former Worldpay chief Ron Kalifa, is one of a series commissioned by the government to help strengthen the UK’s position in finance and technology.

Both sectors are under greater threat from rivals since the UK left the EU in January amid growing global competition to attract and retain the fastest growing tech start-ups. 

Changes to the UK’s listing regime are recommended, such as allowing dual-class share structures to let founders maintain greater control of their companies after IPO. The review also proposes a lower free-float threshold to allow companies to list less of their stock.

Kalifa said the rapid evolution of financial services, from online banking and investment to digital identity and cryptocurrencies, meant that the UK needed to move quickly.

“This is a critical moment. We have to make sure we stay at the forefront of a global industry. We should be setting the standards and the protocols for these emerging solutions.”

John Glen, economic secretary to the Treasury, said more than 70 per cent of digitally active adults in the UK use a fintech service “but we must not rest on our laurels . . . all it takes is a bit of complacency to slip from being a leader of the pack to an also ran”.

He said the government would consider the report’s recommendations in detail. 

The review was welcomed by executives at many of the UK’s largest fintechs and leading financial institutions such as Barclays. Mark Mullen, chief executive of Atom Bank, said the review was “essential to maintain momentum in this key part of our economy and to continue to drive better — and cheaper outcomes for all of us”.

The review also recommended the government create a new visa to allow access to global talent for tech businesses, a move likely to be endorsed by ministers as early as next week’s Budget, according to people familiar with the matter.

Fintechs have been lobbying for a visa scheme since shortly after the 2016 Brexit vote, but the success of remote working since the onset of the coronavirus crisis has reduced its importance for some firms.

Revolut, for example, has ramped up its hiring of fully remote workers in Europe and Asia to reduce costs and widen its potential talent pool, according to chief executive Nik Storonsky.

Charles Delingpole, chief executive of ComplyAdvantage, a regulatory specialist, agreed that fintech was becoming more decentralised. He added that the shift in tone from the government could have as big an impact as specific policy changes. “Whilst none of the policies is in itself a silver bullet . . . the fact that the government recognises the threat to the fintech sector and is publicly acting should definitely help.”

The review also proposed a £1bn privately financed “fintech growth fund” that could be co-ordinated by the government. It identified a £2bn fintech funding gap in the UK, which has meant that many entrepreneurs have in the past preferred to sell rather than continue to build promising companies. It wants to make it easier for UK private pension schemes to invest in fintech firms. 

The report also recommended the establishment of a Centre for Innovation, Finance and Technology, run by the private sector and sponsored by government, to oversee implementation of its recommendations, alongside a digital economy task force to align government efforts.

The review has identified 10 fintech “clusters” in cities around the UK that it says needs to be further developed, with a three-year strategy to support growth and foster specialist capabilities.

Dom Hallas, executive director at the Coalition for a Digital Economy (Coadec), said it was now important that people “follow through and actually implement” the ideas in the review. The sector’s direct contribution to the economy, it is estimated, will reach £13.7bn by 2030.

However, the review also raised questions over the role of the Competition and Markets Authority, saying that the CMA should better balance competition and growth. 

“There is a case for more flexibility in the assessment of mergers and investments for nascent and fast-growing markets such as fintech,” it said. 

“Success brings scale but as some businesses thrive, others inevitably will fail. Some consolidation will therefore be critical in facilitating the growth that UK fintechs need in order to become global champions.”

Charlotte Crosswell, chief executive of Innovate Finance, which helped produce the report, said: “It’s crucial we act on the recommendations in the review to deliver this ambitious strategy that will accelerate the growth of the sector.

“The UK is well positioned to lead this charge but we must act swiftly, decisively and with urgency.”

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Coinbase: digital marketing | Financial Times




Coinbase will be a stock riding a runaway train. The US cryptocurrency platform wants investors to think long term about the prospects for a global “open financial system”. Most will be unable to tear their eyes away from wild, short-term price swings in bitcoin, the world’s largest digital asset. 

This has its benefits. Coinbase, which has filed for a US direct listing, makes most of its money from commissions on crypto trades. Sales more than doubled to $1.3bn last year. The company has swung from a loss to net income of $322m as crypto prices jumped.

But the company has given no detail on the financial impact of the 2018 bitcoin price crash. Will Coinbase’s 2.8m active retail users and 7,000 institutions hang on if there is another protracted price fall? 

Coinbase was valued at $8bn in a 2018 private funding round and $100bn in a recent private share sale, according to Axois. That rise looks remarkably similar to the increase in bitcoin’s price from less than $5,000 to more than $50,000 this year.

The rally is hard to justify. Bitcoin has not become a widely used currency — nor is the US ever likely to countenance that. It offers investors no yield. Volatility remains high. Elon Musk’s tweet this weekend that bitcoin prices “seem high lol” propelled a sharp fall that hit shares in crypto-related companies. Shares in bitcoin miner Riot Blockchain have lost a quarter of their value this week. 

Prospective investors in Coinbase should keep this in mind. Its listing will take cryptocurrencies further towards the financial mainstream. But risk factors are unusually numerous, including the volatility of crypto assets and regulatory enforcement. 

Both threats are widely known. Another risk factor in the listing document deserves more attention. Vaccination campaigns and the reopening of shuttered sectors of the economy is raising yields in safe assets such as Treasuries. Risky trades may become less attractive. Coinbase might be about to go public just as the incentive to trade cryptocurrencies is undermined. 

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US stocks make gains on Fed message of patience over monetary policy




Stocks on Wall Street reversed earlier losses after Jay Powell, the Federal Reserve chairman, reiterated the central bank’s desire to stick with accommodative policies during his second day of testimony to Congress.

The tech-heavy Nasdaq Composite ended the day up 1 per cent, having fallen almost 1 per cent at the opening bell. The S&P 500 climbed 1.1 per cent, marking the blue-chip benchmark’s second consecutive rise after five sessions of back-to-back losses.

A morning sell-off in US Treasuries also faded, with the yield on the 10-year note having climbed as much as 0.07 percentage points to slightly less than 1.43 per cent, its highest level since February last year, before settling back to 1.37 per cent.

Treasuries have been hit by expectations that US president Joe Biden’s $1.9tn stimulus plan will stoke inflation, which erodes the cash value of the debt instruments’ interest payments. However, the more recent rise in yields has also been accompanied by a rise in real rates, which are more indicative of the return investors make after inflation and signal an improving growth outlook for the economy.

Higher yields, which move inversely to the price of the security, also knock-on to equity valuations by affecting the price-to-earnings multiples investors are willing to pay for companies’ shares. A higher yield, analysts say, makes fast-growth companies whose earnings represent a slim proportion of their stock market value less attractive in comparison.

Shares in the 100 largest companies on the Nasdaq are valued at a multiple of 37 times current earnings, against 17 times for the global FTSE All-World index of developed market equities.

“When bonds yield close to zero, you are not losing out by investing in those companies whose cash flows could be years into the future,” said Nick Nelson, head of European equity strategy at UBS. “[But] as bond yields start to rise, that cost of waiting [for companies’ earnings growth] increases.”

Earlier on Wednesday, investors’ retreat from growth stocks rippled into Asia. Hong Kong’s Hang Seng index sank 3 per cent, its worst daily performance in nine months. Chinese investors using market link-ups with bourses in Shanghai and Shenzhen dumped Hong Kong-listed shares at a record pace, selling a net HK$20bn ($2.6bn) on Wednesday. China’s CSI 300 index fell 2.6 per cent. Japan’s Topix slipped 1.8 per cent, dragged down by tech stocks.

Column chart of Hang Seng index, daily % change showing worst day for Hong Kong stocks in 9 months

European equity markets closed higher, with the Stoxx 600 regional index rising 0.5 per cent and London’s FTSE 100 index up 0.5 per cent. UBS’s Nelson said European equities were less vulnerable to rising yields because European stocks generally traded at lower valuations than in Asia and the US. “We have fewer big technology companies here.”

While the bond market ructions have unsettled many equity investors, some believe this should not affect stock markets because the inflation expectations that have driven the Treasury sell-off are linked to bets of a global recovery.

“Rising bond yields and rising inflation from low levels provide a historically attractive environment for equities,” said Patrik Lang, head of equity strategy and research at Julius Baer. Traditional businesses whose fortunes are linked to economic growth, such as “industrials, materials and especially financials”, should do better in a reflationary environment than tech stocks, added Lang.

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