From dangerously warm temperatures to vast species extinctions, humans are living on a planet that is becoming inhospitable — with only three key health markers considered safe, according to a new scientific study.

Researchers have run a full fitness examination on Earth by analyzing nine boundaries that define a safe operating space for humanity. Six out of these have been crossed so far and pressure on all of them is increasing, according to a research paper published Wednesday in the journal Science Advances.

“This does not mean that we are pushing the planet across an irreversible collapse,” said Johan Rockström, the director of the Potsdam Institute for Climate Impact Research and a co-author of the paper. “But it means we’re losing resilience — we are putting the stability of the Earth system at risk, and the buffering capacity of the Earth system to buffer stress and shocks at risk.”

Scientists have spent decades analyzing how climate change, driven by human-made greenhouse gas emissions, impacts every aspect of life on Earth. But understanding how different indicators interact with each other, and the planet’s climate and ecosystem as a whole, requires deploying comprehensive computer models and simulations. The framework of “planetary boundaries” dates to 2009, and researchers at the Stockholm Resilience Center in Sweden have spent almost 15 years studying them and refining their calculations. This is the first major update published since 2015.

“This is a real scientific breakthrough,” Rockström told reporters on Tuesday. “It’s the first time we have a scientific health check for the whole planet and we are able to provide quantification for all the nine boundaries.”

Among the boundaries that have been breached are freshwater availability, land system changes from activities such as deforestation, biodiversity loss and extinctions and concentrations of carbon dioxide. Earth is currently operating safely in only three areas: the depletion of ozone in the stratosphere, the loading of aerosol in the atmosphere and ocean acidification.

“Ocean acidification is rapidly moving into the wrong direction, what we call the yellow zone,” Rockström said.

But there are reasons for hope, said Katherine Richardson, a professor in biological oceanography in Denmark and the lead author of the research. The ozone depletion limit was exceeded in the 1990s, but a global commitment to phase out ozone-depleting substances under the Montreal Protocol reversed that trend.

Richardson cautioned against some solutions to reduce greenhouse gas emissions: For example, replacing fossil fuels with biomass for energy should not come at the cost of depleting forests.

“For 3.5 billion years the environmental conditions on Earth have been determined by the interaction between life and climate,” she said. “We’re not going to fix the climate problem if we don’t respect the boundary for how much biomass we can take out.”

For 400 years British hydrographers have made paper charts of the world’s seas and oceans. Each one captures the detail of coastlines, bays, straits, or channels. A document like this brims with information, noting the sea’s depth at various locations, the position of rocks, or places where vessels can’t drop anchor.

“It provides an incredibly rich picture for the mariner, to allow them to go about doing their jobs,” says Steven Bastable, product manager at the UK Hydrographic Office (UKHO).

So significant were nautical charts in the past that they were often depicted in portraits of the greatest mariners, including James Cook. Some of Cook’s own charts were eventually published by the UKHO.

Today, nautical charts are kept scrupulously up to date. Every day, staff at the UKHO make corrections or improvements to some of the 3,500 charts they maintain, such as adding the location of harzardous new wrecks and submarine cables or even changes to coastlines. A weekly bulletin communicates adjustments to shipping vessels worldwide and crew members must then get out a pen and manually correct any outdated paper copies.

Yet the last of these weekly updates is on the horizon. The UKHO is gradually preparing to drop its paper chart service and switch to digital-only versions, which would be accessed via Electronic Chart Display Systems on ships. Previously, the UKHO had planned to do this in 2026 – but the deadline was recently scrapped.

“It became clear that there was a problem, and that, if we went too quick on this, there was a very real risk that we would leave mariners behind,” says Bastable. “That’s simply something which we’re not prepared to do.”

The digital transition will bring to an end the tradition of hand-drawing hydrographic charts, then designing them on computer software before being printed. More recently, the UKHO started sending electronic copies to customers who could print the charts themselves.

It turns out that quite a lot of ships still need paper charts. Due to maritime regulations, vessels must carry some form of chart and, despite the availability of electronic versions – which don’t have to be manually updated every week – paper charts continue to be used as backups, or, in some cases, the only such resource on board. The Royal Yachting Association has also said that despite the withdrawal of the UKHO paper charts, it will continue to teach navigation techniques that use them.

Paper, it seems, still rules the waves.

And that’s not all. A 2,000-year-old tradition, real paper made from trees is still considered crucial to countless businesses and government systems globally, despite the environmental impact of producing it. For decades, computers, smartphones and tablets have provided an alternative. Their illuminated displays can be virtually written upon or erased with the press of a few buttons or taps of a screen.

But the crisp flex of an off-white sheet held in the hand, or the way freshly-deposited ink from a favourite pen soaks into the fibrous surface – there is arguably nothing quite like paper.

It’s true, the use of what’s called graphic paper – that is, paper used primarily for conveying printed information – is in clear decline and has been for years. Paper chart sales at the UKHO are at 17% of what they were just a decade ago, says Bastable. Today, they account for less than 16% of all the charts the agency sells now. Nonetheless, paper is stubborn. It can be extraordinarily difficult for many organisations to go fully paperless. That might be down to habit, but in some cases there are strong reasons for holding on to paper – including aesthetics, functionality, and even security. It is weirdly difficult to give up paper.

Updates to the nautical charts produced by the UKHO are sent out every week to vessels, who mark changes with a pen on their own paper copies (Credit: UK Hydrographic Office)

Updates to the nautical charts produced by the UKHO are sent out every week to vessels, who mark changes with a pen on their own paper copies (Credit: UK Hydrographic Office)

“See how this row of gold boxes isn’t even visible from the other side of the page? That is possible because of the thickness of the paper,” says Erin Smith, a popular YouTuber who runs a channel about stationery. She is explaining the virtues of good quality paper in one of her videos about bullet journaling – the practice of designing and maintaining a personal planner or journal in a notebook. Bullet journals are often created with the help of heavy, colourful inks, or motifs glued onto the notebook’s pages. It’s just one example of a special use for paper that has emerged in a world full of digital alternatives.

Smith, who is based in Australia, tells BBC Future that there is a cottage industry of high-quality stationery manufacturers who target their products at those who want to use real paper, pencils and pens, or even watercolour paint in bullet journals to help them track their habits, write up daily schedules or organise the month ahead.

Generally, the best notebook paper has a weight of 160 grams per square metre (gsm), says Smith – about twice the thickness of the paper used in a standard office printer. “Now when I pick up a piece of printer copy paper, I kind of cringe a little bit,” Smith confesses.

But this fixation with physical stationery does not mean that she shuns all things digital. Smith is a YouTuber after all and even prefers to read e-books over paper books. But journaling is a chance to do something creative away from a computer or smartphone screen – and for that she wants the best materials possible. Smith suggests that besides being an enjoyable, mindful experience, there’s a real benefit in selecting paper for tasks like this.

“I do find if I save something in my Google calendar, I’ll remember it if I check,” she says. “But if I write it down, I don’t need to check.”

The mind better grasps elaborate, complex, deep arguments that run over several pages of paper – Richard Harper

There could be something in Smith’s experience of paper versus digital calendars . A study published in 2021 indicated increased brain activity is associated with remembering information once it has been written down by hand, as opposed to recording it on a smartphone or tablet. The research was based on experiments involving a small group of students and recent graduates in Japan, though the authors did not explore the broader or long-term impact this additional brain activity might have on learning.

There’s a big difference between information presented on paper versus on a screen, says Richard Harper, an expert on human computer interactions at the University of Lancaster. In 2002, Harper and his co-author Abigail Sellen, a cognitive and computer scientist now working at Microsoft, published The Myth of the Paperless Office, about why paper remained so vital in many business organisations.

“The mind better grasps elaborate, complex, deep arguments that run over several pages of paper,” says Harper, noting that when you have something particularly nuanced and elaborate to say, putting it down on paper may be a good idea.

In many cases, though, continued reliance on paper isn’t necessarily to do with a genuine appreciation of its attributes. Much like the UKHO, lots of organisations attempt to go largely or exclusively digital only to encounter hurdles. The US government is due to go paperless but it is taking longer than expected. Last year, the National Archives and Records Administration found a third of the sprawling federal government had still not adopted e-records and the Administration was forced to extend the deadline for this by 18 months, to 30 June 2024.

Paper also plays a role in more clandestine sectors of government. In the UK, for example, the Government Communications Headquarters (GCHQ) keeps thousands of secret paper files on its personnel in a vault in its basement while the MI5 security service states on its website: “Paper files remain important to MI5.” Russia’s Federal Guard Service (FSO), which is responsible for security at the Kremlin, reverted to using typewriters in 2013, reportedly to prevent computer leaks.

Separately, the logistics industry has long relied on paperwork for documenting the transit of goods, leading to hefty paper trails and sometimes inefficient processing. Although that is starting to change, it’s notoriously difficult to do away with paper records in this sector, say industry insiders.

The healthcare industry has a historical reliance on paper too. From prescriptions to hospital documentation, paper has persevered well into the 21st Century. To take one example, the majority of care homes in south-east Scotland still use paper-based management systems, according to a study published last year. Even when hospitals switch to digital, they may be faced with the burden of storing historical paper documents relating to patient care off-site.

Within the European Union there are 11 countries that still use paper for medical prescriptions rather than digital systems. In the US, paper stubbornly remains in use in some parts of the healthcare system despite attempts to modernise – 96% of hospitals and 78% of physicians were found to use electronic health records in 2021.

Paper still plays a major role in the health systems around the world – from prescriptions to patient notes (Credit: Getty Images)

Paper still plays a major role in the health systems around the world – from prescriptions to patient notes (Credit: Getty Images)

Paper is still considered the backup medium whenever electronic systems fail – which, naturally, they do. In the aftermath of a cyber-attack on a small Alaskan community in 2018, municipal staff quickly switched to paper forms and typewriters when their computers went offline.

Even Wikipedia, a gigantic online resource continually updated and edited by people all around the world, has an emergency plan called the “Terminal Event Management Policy”. During some potential future apocalyptic turn of events such as “imminent societal collapse” or “an imminent extinction level event”, Wikipedia’s millions of editors would be tasked with printing out various pages of the online encyclopaedia for posterity – because paper, ultimately, is considered reliable.

Perhaps it’s not so surprising, then, that in the Star Trek: Voyager episode “The Disease”, Captain Kathryn Janeway reminds one of her crewmembers that Starfleet’s handbook on personal relationships is three centimetres thick, a comment that strongly suggests the handbook, even in the year 2375, is printed on paper.

Paper just seems to have a habit of sticking around.

Other kinds of non-graphic paper, especially cardboard packaging, are flourishing

Oskar Lingqvist, global leader of paper and forest products at management consultants McKinsey, remembers the 100-page wad of presentation materials he and colleagues used to lug to client meetings. The graphs, the data, all printed out and handed around the board room table.

“That’s a segment of paper use I would say that’s almost gone,” he says. But getting rid of the last printed receipt, or form? “That’s going to take a long time.”

Graphic paper is finding niches, such as those mentioned above, where it persists. But the overall trend is clear decline, stresses Lingqvist. And that decline accelerated with the eruption of the Covid-19 pandemic.

“Even our most negative scenario wasn’t negative enough compared to what happened in the market,” he says, adding that the rate of decline is now slowing again and will probably return to an annual drop of around 5%, globally. Far fewer newspapers and magazines are printed today than just a decade or two ago, for example, which is one major factor. The rise of working from home, and corporate sustainability drives aimed at reducing paper consumption, also play a role.

But McKinsey’s research also reveals that other kinds of non-graphic paper, especially cardboard packaging, are flourishing. Data from the firm suggests that production of this kind of paper nearly doubled between 2000 and 2020 in Europe. In China, over the same period, it roughly quadrupled. The online shopping boom associated with Covid-19 lockdowns is one reason.

Food packaging, ecommerce packaging and tissue paper – all these kinds of paper are increasingly in demand, says Alice Palmer, a Canada-based freelance consultant for the forestry industry. Paper and cardboard is viewed as more sustainable and yet this distinction is not as clear cut as many think.

Cardboard packaging has become increasingly in demand as online shopping has increased while many brands have also tried to move away from using plastic (Credit: Getty Images)

Cardboard packaging has become increasingly in demand as online shopping has increased while many brands have also tried to move away from using plastic (Credit: Getty Images)

That many retailers are nonetheless moving away from plastic packaging presents an industrial challenge for the paper industry because there are two main ways of making paper, explains Palmer. One involves using chemicals to digest wood down into a pulp. This tends to yield high-quality paper full of strong fibres.

The other method uses heat and grinding action to form the pulp, without the assistance of chemicals. The paper you get from this kind of pulp is a little less robust. For years, though, it worked well for newspapers and brochures.

While the mechanical pulp is less in demand today in some regions, the mills that make it can’t easily convert to making chemical pulp, says Palmer. “You have to rebuild the mill,” she says. “That’s millions or even billions of dollars of investment.”

Cardboard is in demand but that requires strong fibres, which means the old newspaper producers are finding it hard to dominate the packaging materials market. But they can provide a key component in corrugated cardboard: “the wavy layer in the middle”, says Palmer. Canadian paper firm Catalyst Paper, with whom Palmer worked on a research project in 2015, is one example of a company that has made exactly this transition at some of its factories.

If you expand “paper” to mean everything from fancy notebooks to Amazon packaging, it’s clear the material is more popular than ever. But our reliance on paper as a disposable medium for conveying food, or goods, is problematic, says Sergio Baffoni, a campaign coordinator at the Environmental Paper Network (EPN), a worldwide network of organisations focused on making the pulp and paper industry as sustainable as possible.

The EPN reports three billion trees are cut down every year just to satisfy demand for packaging. “That’s insane,” says Baffoni. “Just to throw it away – it’s a nonsense.”

In the UK and the US, roughly one third of paper and cardboard-based packaging waste is not recycled. Baffoni says cardboard makes for a cheap packaging material only because the true cost – to ecosystems and our planet’s ability to sequester carbon via the photosynthesis of trees – is “externalised”. It would be better to find reusable packing materials and maintain those, he suggests. Even plastic containers would be preferable, he argues, if they could be used repeatedly, than single-use cardboard ones.

Paper will likely never go completely out of fashion. But given that across the world we have felled an area of forest larger than the island of Borneo, more than 300,000sq miles (800,000sq km), in just 60 years, there are many who argue we cut down trees far too readily for the sake of a few sheets of paper.

Others would contest that sometimes, it’s worth it: for the smell of a brand new book, for the handwritten letter to an old friend, or the records that must survive even in an apocalyptic future when the last computer and database fails.

In its heyday, Fenway Partners snapped up a fleet of companies from outposts overlooking Manhattan and Los Angeles. Decades later, a three-man team manages its remnants from a beach town in Rhode Island.

Gone are the big pension clients that cashed out stakes at discounts after tiring of waiting for Fenway to wrap up bets. The firm hasn’t tried to raise a new flagship fund since 2006. Its main asset is a 20-year investment in a maker of football helmets beset by lawsuits from athletes over concussions. Fenway set up new vehicles to take stakes in the business starting several years ago, gaining yet more time to exit.

Across the $12 trillion industry, hundreds of private equity firms are lumbering on years after their funds’ intended twilight with no new fundraising in sight — a cohort that investors and regulators have dubbed “zombies.”

Now, a historic shakeup of the industry is threatening to impose the same fate on more fading money managers whose past funds are inching toward limbo.

Old Funds Lock Up Pension Money And Time

Ten major US pensions have about $6.8 billion in aging private equity funds

Source: Bloomberg analysis of pension disclosures

Note: Outliers include North Carolina, which decreased the pace of new investments in private equity funds in recent years. The figure for Connecticut’s pension is elevated because of its concentration of venture funds of funds. Oldest bets exclude liquidated vehicles as well as funds of funds that last longer than traditional private equity funds.

After years of ramping up allocations that helped launch numerous private equity firms, many pensions have maxed out how much they can devote to the illiquid asset class. Instead, they’re steering cash to investments that are more attractive as interest rates climb.

The result: Buyout firms that failed to build fresh war chests during the recent boom years of low interest rates are now finding it difficult to arrange fresh funds. The industry is on track to raise 28% less than last year, according to Bain & Co. At the same time, aging funds are finding it harder to sell out of their remaining holdings as rising borrowing costs sideline potential buyers.

Across the nation, public pension funds are stuck with a slew of private equity holdings that, for a variety of reasons, keep plodding on year after year. They include vehicles set up by energy-sector specialist First Reserve and Yucaipa Cos, the money manager led by supermarket mogul and Democratic donor Ron Burkle.

“This is the market where you could see several zombie funds emerge,” said Joncarlo Mark, founder of Upwelling Capital Group, an adviser to investors and managers on older holdings. “When things go sideways it creates a downward trajectory.”

If money managers don’t launch new flagship funds or find other ways to shore up their fees, they can eventually lose staffers en masse, leaving a skeleton crew behind to resolve old bets and manage bills. Funds — typically designed to last no longer than 12 years — end up going long past expiration dates, with firms sometimes sliding assets into continuation funds to keep managing them.

It creates headaches for clients, who have to decide whether to press for an exit or hang on, hoping things turn around. The steep discounts to ditch problematic fund stakes prompt many investors to spend years crossing their fingers.

“It’s important to realize that not everyone associated with a zombie lacks capabilities,” Mark said.

In Fenway’s case, one big bet — the helmet maker Riddell, now known as BRG Sports — proved hard to sell. Fenway went with the best alternative to a forced sale, and investors who stuck around will end up happy, said Walter Wiacek, the firm’s chief compliance officer. He rejects the notion that the firm can be described as a zombie, but past clients and former executives say it fits the bill.

Fenway’s main remaining investment is helmet maker RiddellPhotographer: Jose M. Osorio/Getty Images

Years-long delays have become common in the industry. Private funds that launched before 2010 still held roughly $80 billion as of last year, according to Preqin. And there are now 645 firms that haven’t raised a new buyout vehicle since the start of 2015.

“If you haven’t raised a new fund in the last five years, the perception is you may become a zombie,” Todd Miller, co-head of private capital advisory at Jefferies Financial Group Inc. “You need to raise new capital to feed the junior team.”

Zombies are pretty much unique to money managers who make illiquid, complex wagers. In contrast, funds that pick stocks and bonds can collapse relatively swiftly after major missteps and an exodus of investors.

Sticky bets can create dilemmas. Pensions and endowments can’t force private equity managers to sell. They can’t pull money from a fund without typically paying a price. Nor can they replace a manager unless there’s evidence of wrongdoing. That means zombie funds can go on for years, sucking up pension managers’ time and eroding returns.

Reports from 10 major public retirement systems show that they have a median 4% of their private equity portfolios locked up in funds older than 2009. Collectively, that’s $6.8 billion across more than 900 fund investments, some of which date back to the 1990s. Several funds were so troubled that they were delivering losses.

“Fund lives are going much, much longer,” Miller said. And with asset sales now more difficult, many managers face the same questions: “What, when and how are they going to exit?”

That’s an inconvenient counterpoint to private equity’s pitch that it can reliably take cash from teachers, police, firefighters and other civil servants and hand it back with significant returns a decade later.

Longtime friends Peter Lamm and Richard Dresdale named Fenway in honor of the Boston Red Sox baseball stadium when they launched the firm in 1994. Their investments included the companies behind Simmons mattresses, Van de Kamp’s fish sticks and home-delivered contact lenses, establishing themselves as part of a new generation of private equity dealmakers.

Peter Lamm and Deborah Lamm in 2017Photographer: Scott Eisen/Getty Images

The turning point came when Riddell was sued. Pensions got jittery and wanted out. It didn’t help that the US Securities and Exchange Commission said in 2015 that Fenway failed to disclose it diverted millions of dollars from investors, prompting the firm and certain executives to pay more than $10 million to settle the claims. They didn’t admit or deny the agency’s findings.

Fenway clashed with investors over how much to take in profits. Dealmakers departed. Fenway set up new funds to take over BRG, calling it a way to recapitalize older bets.

In 2018, investors in the 1998 fund faced a choice: transfer into the new fund, let Hollyport Capital take over their stakes at about 50% discount, or do nothing. The vast majority of Fenway’s investors — accounting for 97% of the money — decided to get out. The firm repeated a similar playbook in 2019 for another fund. Hollyport, a specialist in buying old stakes, is now Fenway’s biggest investor.

Today, Fenway operates from a tidy office park along a picturesque tree-lined road by Westerly State Airport near the westernmost tip of Rhode Island. The firm said it’s collecting only modest fees. Hollyport has given Fenway an incentive to resolve the bet on the helmet maker successfully, agreeing to give the shrunken money manager a chunk of the profit if it sells the company above a certain price.

“We work very hard for investors,” Wiacek said. “I’m confident when we exit the two funds, investors will be very pleased with the results and they will not have any regrets having retained their interest.”

Steve Nicholls, senior investment partner at Hollyport, said his firm essentially reset the clock on Fenway’s investment.

“Fenway has done a good job in managing the asset,” he said. BRG “needed the time to develop the business and clarify their issues — and that’s the time we’re willing to give them.”

A BRG spokesperson said the helmet maker has grown under Fenway, is committed to improving protection for athletes, and that given its market share and innovation, “the future is bright for the company and the game, too.” Fenway’s holding has been gaining value in recent years, a person with knowledge of the matter said.

The industry’s first wave of zombies arose after the 2008 financial crisis, when buyout firms struggled to persuade recession-scarred customers to contribute to new funds. The SEC eventually called out such money managers for prioritizing their need to keep generating fees from old funds over what was best for clients.

“Since zombie managers are unable to raise new capital, their incentives may shift from maintaining good relations with their investors to maximizing their own revenue,” Bruce Karpati, then the head of the agency’s enforcement group specializing in asset managers, warned in 2013.

Another wave is taking shape with pensions, endowments and other institutions steering less cash into private equity. Pensions now have so many options that they’re taking little chance on small, untested firms or those with blemished histories.

“If a manager has not been able to raise money in good times, you wonder about the quality of their fund,” said Fabrice Moyne, who led secondary investments at money manager Mantra Investment Partners until 2022. “You ask yourself how well they’re going to manage assets and how much value they’re going to be able to generate.”

Pension funds stuck with aging investments don’t have many good options.

North Carolina’s state pension, for example, stands out with a $780.9 million exposure to funds launched before 2009 — about 11% of its private equity portfolio. The $175.6 billion system dramatically slowed the pace of new fund investments after Treasurer Dale Folwell took office in 2017. Folwell rode a motorcycle during his election campaign tour and vowed to save the state money.

“I refuse to sell any of our vintage limited partnerships at deep discounts, which our investment management team has determined not to be in the best interest of those we serve,” he said in an interview.

Staying on doesn’t guarantee a better outcome.

The California Public Employees’ Retirement System, the nation’s largest pension, committed roughly $900 million to funds launched more than 15 years ago by Burkle’s Yucaipa.

Ronald BurklePhotographer: Chip Somodevilla/Getty Images

Two of those investments — to which Calpers pledged almost $300 million — are under water, according to Calpers’ website. The pension system explored offloading the stakes to second-hand buyers in the past year, but didn’t find an acceptable bid, according to a person with knowledge of the situation.

A Yucaipa spokesperson said Calpers approached Burkle to invest in underserved communities in California, and the performance reflects the constrained mandate. He disputed any suggestion the funds are zombies, adding that one had a “liquidity event” in the past year.

The pension’s big checks to Yucaipa boosted its stature as a pension manager back in the day. Yucaipa hasn’t raised a new flagship private equity fund since 2015. The Yucaipa spokesperson said that reflects Burkle’s desire to return Yucaipa to its roots as a family office. The firm launched a so-called blank-check company — known as a SPAC — three years ago.

Many older funds missed their chance to sell assets to buyers with access to easy financing, leaving them saddled with holdings going further past their prime.

“There’s a continuing slowdown in the mergers and acquisitions and IPO markets, which makes certain assets harder to sell out of private equity funds,” said Holcombe Green, who heads Lazard’s private capital advisory business. “That could create more old assets inside of those funds.”

One upside for fund managers: Hanging on to assets can generate fees.

Take First Reserve. The private equity firm raised the biggest energy fund of its kind in 2009 and rose to become one of the most active players in the patch when oil prices rallied.

But the firm’s fortunes changed when oil prices plunged and the SEC rapped it for failing to disclose conflicts of interest. In 2017, First Reserve sold its infrastructure business to BlackRock Inc., and its star team joined the asset manager. Later came the explosion of a chemical plant, in which a First Reserve fund owned a stake. The fund, which once collected roughly $9 billion, was written down by half, according to people with knowledge of the matter. The fund stopped collecting fees and is now in liquidation, one of the people said.

Last year, First Reserve shifted the plant operator and other bets into a continuation fund. Buyout firms often pitch such funds as a way to keep some of the best bets going. Such a move can give managers more time to salvage underperformers, but it also guarantees a fee stream. The plant has since filed for bankruptcy.

For investors, the other option was to cash out for less than 40 cents on the dollar, the people said. The fund manager presented this to investors as a way they could get some liquidity.

The firm faces other challenges. Its 2014 fund is underwater and still is holding on to about one out of every three bets it made, one of the people said. First Reserve raised just a fraction of what it hoped to raise for its latest fund. The pandemic temporarily reduced demand for oil and made energy funds less appealing for investors.

Firms or funds that become zombies often do so quietly, years after they’ve left the limelight. They’re easy to overlook at a time when Wall Street’s marquee names and a swath of boutique private equity firms are conspicuously thriving. Blackstone, which passed $1 trillion of assets in July, has seen its stock soar 50% this year.

Biggest Buyout Funds Mop Up a Larger Share of Fundraising

Funds below $1 billion attracted a smaller portion of last year’s haul

Source: Preqin

The big firms are benefiting as small firms fall by the wayside. Since 2020, funds with less than $1 billion have drawn a shrinking share of the industry’s annual fundraisings, while funds exceeding $5 billion garnered more.

“The inclination by investors,” said Upwelling’s Mark, “is to commit to managers they know best.”

Next to fields of corn and sunflowers near the city of Debrecen in eastern Hungary, workers in hard hats pour concrete into the foundations of what will be Europe’s biggest factory making batteries for electric vehicles.

The airport-sized project by China’s Contemporary Amperex Technology Co. Ltd. is the jewel in the crown of roughly €20 billion ($21.3 billion) of investments that Prime Minister Viktor Orban says will allow the economy to thrive from Europe’s green transition. Nowhere in the world is ramping up battery production faster on a per capita basis than Hungary.

Yet the plan to become one of the biggest suppliers on the planet goes beyond economics. Environmental activists, community leaders and political opponents say there’s a cost that’s being ignored by a leadership that controls everything from the courts and regulators to the media as Orban seeks to underpin the next era of his rule.

The $7.8 billion facility CATL is building in partnership with Mercedes-Benz AG has been heralded by the government as the single-biggest foreign direct investment in Hungary’s history. Adjacent to the site, two other battery suppliers are building their own plants. Across town, another one, by Chinese firm EVE Energy Co. Ltd., is being put up next to German carmaker BMW AG’s new factory.

“We’re told to trust the authorities when it comes to enforcing environmental rules,” says Ilona Roka, an activist at the CATL site. “That’s a big ask.”Photographer: Akos Stiller/Bloomberg

Concerns range from the loss of prime agricultural land to the strain on water and energy resources and questions surrounding the disposal of used batteries. Then there’s the potential for accidents at factories working with hazardous materials like lithium.

Town hall meetings on new battery-related investments have descended into shouting matches. Even in strongholds of Orban’s ruling Fidesz party, people have called local officials “traitors.” The government has since changed laws to no longer require in-person consultations.

“Nobody asked us if we wanted this plant,” said Zoltan Timar, the Fidesz mayor of Mikepercs, the suburb of Debrecen nearest the CATL plant. “This may be part of the green transition, but locally what we see is that they’ll be working with hazardous substances. People are scared.”

The plant lies just beyond the Debrecen suburb of Mikepercs.Photographer: Akos Stiller/Bloomberg

CATL said it knows what it’s doing, using its extensive experience to ensure that no pollution is released into the air or water. The company also said it would like to work with the local authorities to prevent potential contamination outside the plant.

Yet the anxiety Timar talked of is shared across communities in Hungary, based on more than a dozen interviews with residents, officials and environmental groups, with hardly a corner of the country left untouched in some way by the battery boom.

Scaling Up EV Production

The tensions highlight the difficulty of going green: while electric vehicles are hailed as a way to cut emissions and slow climate change, there are local environmental costs that critics say are being ignored by a government focused primarily on economic gains.

There are other examples of opposition to the EV revolution. In Germany, Tesla Inc.’s first European plant faced delays as a court considered a legal challenge by environmentalists over the clearing of trees. But under Orban, Hungary is going all in like nowhere else.

The World’s Fourth-Biggest Producer of EV Batteries

Hungary in on track to eclipse larger countries in scaling up manufacturing.

Source: Bloomberg New Energy Finance

In just a few years, the country of less than 10 million people is projected to become the fourth-largest producer of batteries globally, after China, the US and Germany, according to BloombergNEF data.

Hungary has currently six battery plants that are already producing or in the process of being built. Additionally, there are about two dozen other companies that are part of the production chain that have set up shop.

The first plant to open was in Göd on the bank of the Danube River north of the capital, Budapest. The South Korean conglomerate Samsung SDI converted its plasma screen factory to focus on battery production for EVs in 2017.

The Samsung plant sprawls over the outskirts of Göd.Photographer: Akos Stiller/Bloomberg

The factory borders housing and almost immediately, residents started to raise concerns over noise pollution and alleged water contamination. Years of complaints went largely unheeded as the government and the company pushed ahead, with Samsung SDI doubling the size of its investment.

Teacher Julianna Lam Palla in Göd complained about the smell of “rotten fish” coming from the taps in her house. Though she had no proof the cause was the battery plant, years of being ignored by local officials convinced her to move. “There are so many questions, so much anger and disillusionment,” Lam Palla said as she played with her dog by the Danube.

Things got worse when an opposition party took control of the local municipality in 2019 and promised to look into claims of environmental damage. Orban’s government responded by redistributing the factory’s lucrative business tax receipts away from Göd to surrounding areas.

New water pipes will connect the Samsung plant with the River Danube in Göd.Photographer: Akos Stiller/Bloomberg

Activists started measuring pollution themselves and found N-methyl-2-pyrrolidone, or NMP, the most common solvent for manufacturing cathode electrodes in batteries, in wells.

“We don’t fear that they’re polluting, we know they are,” said Zsuzsa Bodnar, a vice president of the local environmental group Göd-ÉRT. “Only the authorities refuse to do tests and they don’t accept our results.”

A study published this year in the journal Scientific Reports found lithium in the tap water in cities across Hungary’s 19 counties, though not in quantities hazardous to humans.

After five years of operation, Samsung SDI is now carrying out a comprehensive environmental impact study. The company said it’s applied for a pollution prevention and control permit because its activities have now reached levels that require one.

Samsung SDI is “making continuous efforts to mitigate concerns over the environment of the city of Göd, including water testings that prove no NMP or any other harmful materials are found in water and air, in close cooperation with Hungarian authorities and civil groups,” the company also said in an e-mailed response to questions.

The municipality of Göd, which is now led by a Fidesz-backed mayor again, declined a request for an interview.

In land-locked Hungary, the Danube is a key trade route. It flows south from Göd to Budapest.Photographer: Akos Stiller/Bloomberg

Whether the environmental concerns were warranted or not, the argument reverberated across Hungary. To opponents, it underscored the potential risks to communities when a battery plant moves in, and also the cost of resisting it.

The government, meanwhile, has doubled down in its narrative that if you want to revive the Hungarian economy, you need to get behind its plan. Foreign Minister Peter Szijjarto, the point-person for these investments, called the battery plants “our life insurance” that the country will come out as a winner from the green transition to electric cars.

“It’s extremely unfair and contrary to the national interest to mislead people and create movements so these factories come not to Hungary but to Germany, France, US, Sweden and who knows where else,” he told an audience of young ruling party supporters.

Hungary’s Battery-Powered Future

Samsung SDI’s plant north of Budapest was the first step, while CATL’s facility near the Romanian border will be the biggest.

Hungary has a lot to lose. Orban has spent most of his time in government since 2010 at loggerheads with the EU over the erosion of rule of law in his “illiberal democracy” and flourishing corruption and cronyism. The European Parliament has branded Hungary an “electoral autocracy.” Yet he’s also remained a close ally of German carmakers like BMW and Mercedes, offering tax breaks and lavish subsidies to locate new plants in his country.

Orban’s Political Choice

European Union Leaders Summit in Brussels
Orban, left, chats with Antonio Guterres, secretary-general of the UN and Ursula von der Leyen, president of the European Commission, during the EU leaders summit in Brussels on March 23.Photographer: Valeria Mongelli/Bloomberg

The EU has set 2035 as the deadline to stop the sale of new petrol and diesel cars, forcing manufacturers to go electric. Factories that fail to transition risk being shuttered. That has boosted Hungary’s appeal by drawing in primarily Chinese and South Korean battery makers. They can be next to their biggest customers inside the world’s largest trading bloc.

“Battery plants have rapidly come to define Hungary’s economy but they’re also a political choice,” said Andrea Elteto, a researcher at the World Economy Institute in Budapest. “They dovetail with Orban’s goal of connecting East and West in the hope that benefiting firms will work to sustain him in power.”

The CATL plant in Debrecen will be seven times the size of the Chinese company’s only other European factory, in Germany. Production will start within three years, the company said. Laszlo Papp, the city’s mayor, described his region as “where the marriage between the western European car sector and the battery industry is being consummated.”

What residents are concerned about is the cost of those nuptials. Battery plants need massive amounts of water for cooling purposes and unlike most of the other battery plants in land-locked Hungary, the city doesn’t have a large river or lake close by.

Activists from the Göd-ÉRT civil organization have been testing the water.Photographer: Akos Stiller/Bloomberg

Papp said the city has made exhaustive assessments that showed that it wouldn’t run out of water for the plants, nor its residents. But a study by the regional water works published locally said otherwise, predicting that the city’s water resources may be stretched to the limit.

Peter Kaderjak, the head of Hungary’s battery lobby group and a former high-ranking energy official in the previous Orban government, is candid about the risks to the environment. He said the government should even fund monitoring stations where locals demand it. That said, local communities also need to make an effort to understand the economics, he said.

“The point isn’t to make Hungary the world champion” in battery output, said Kaderjak, who helped Orban set up the ruling Fidesz party in the late 1980s in the waning days of communism. “This is positive for Hungary’s economy only in as much as it’s environmentally sustainable and communities feel they gain more than they lose.”

There are signs of change. Last month, Hungarian authorities suspended the operation of the South Korean battery recycling company SungEel Hitech Co. Ltd for a series of violations that threatened the safe operation of the plant. New investors now also need to carry out an environmental impact study.

In Debrecen, the city is building out air and water monitoring stations for the early detection of any potential contamination, a move CATL said it welcomes in a written response to questions.

The Danube at Göd is a welcome escape from the August heat. Environmentalists are concerned about water contamination.Photographer: Akos Stiller/Bloomberg

Activists will take some convincing, though. Next to wooden cabanas summer vacationers rent out by the Danube near Göd, representatives of about a dozen environmental groups from across Hungary were meeting for the first time in August. They were there to learn from the veterans in Göd and to join forces.

“We know we’re not going to be able to stop the world’s biggest battery makers,” said Bodnar, the activist. “But if this is so important for the government, then we also want to have a voice when it comes to drawing up the legal, environmental and safety regulations. We refuse to be ignored.”

Chelsea FC has raised £500 million ($612 million) of subordinated debt from US direct lending giant Ares Management Corp., according to people with knowledge of the situation.

The deal is structured as a so-called HoldCo payment-in-kind note, a type of financing that allows the borrower to pay interest with additional principal, and sits below other forms of debt in repayment priority. The financing will be at the holding company level, rather than the club itself.

A spokesperson for Ares declined to comment, while a representative for Chelsea didn’t respond to a request for comment. Bloomberg first reported that Chelsea was in talks with Ares in August.

Since buying the club the new owners have spent more than £1 billion on players as they try to refashion the squad, focusing on younger talent and offering comparatively long contracts of up to eight and nine years. Still, the team has struggled to show improvement on the field. Last year was the team’s worst finish in 29 years.

Part of the new financing may be used to purchase the Oswald Stoll Mansions, a building close to Chelsea’s Stamford Bridge stadium. That would put the club in a better position to redevelop, a separate source familiar with the matter said.

Ares last year raised $3.7 billion to invest in sports, media and entertainment, more than twice the $1.5 billion originally targeted. The firm invests across the capital structure in both debt and equity.

Eurozone interest rates have been hiked to a record high by the European Central Bank (ECB).

The bank raised its key rate for the 10th time in a row, to 4% from 3.75%, as it warned inflation was “expected to remain too high for too long”.

The latest increase came after forecasts predicted inflation, which is the rate prices rise at, would be 5.6% on average in 2023.

But the ECB signalled that Thursday’s hike could be the last for now.

“The governing council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target,” the bank said.

It added that it expected inflation in the 20-nation bloc to fall to around 2.9% next year and 2.2% in 2025.

As in other parts of the world, the eurozone has been hit by rising food and energy prices that have squeezed household budgets.

Central banks have been increasing interest rates in an attempt to slow rising prices.

The theory behind increasing rates is that by making it more expensive for people to borrow money, they will then have less excess cash to spend, meaning households will buy fewer things and then price rises will ease. But it is a balancing act as raising rates too aggressively could cause a recession.

Interest rates in the UK are currently higher than in the eurozone at 5.25%, but UK inflation is also higher at 6.8%, and the Bank of England is expected to raise rates again next week.

ECB interest rates chart

The ECB said it was determined to see inflation fall to its 2% target in a “timely manner”.

However, policymakers admitted they had lowered their economic growth projections for the bloc “significantly” due to the impact of higher rates.

Economists at Pantheon Macroeconomics said the ECB’s communication around its latest decision was a “clear indication” that rates would not rise further.

“We now see a high bar for anything other than a holding operation in the October and December meetings,” they said.

“Looking further ahead, we still see a narrow window for rate cuts next year, though there is no way that you can get the ECB to even contemplate that scenario at this point.”

ECB president Christine Lagarde did not rule out further rate rises, but said the “focus is going to move, going forwards, to the duration, but that is not to say – because we can’t say that now – that we are at peak”.

In June, revised figures showed the eurozone fell into recession last winter. Revised data from Germany – Europe’s largest economy – contributed to the economic slump.

A recession is generally defined as when an economy shrinks for two three-month periods, or quarters, in a row. A contracting economy can be bad news for businesses and result in job losses.

Toshiba, one of Japan’s oldest and biggest firms, is set to end its 74-year stock market history as a group of investors have bought a majority stake.

The company has announced that a consortium led by private equity firm Japan Industrial Partners (JIP) has purchased 78.65% of its shares.

Owning more than two-thirds of the firm allows the group to complete a $14bn (£11.4bn) deal to take it private.

The firm’s roots date back to 1875, as a maker of telegraph equipment.

Under the deal its shares could be taken off the stock market as early as the end of this year.

The company “will now take a major step toward a new future with a new shareholder,” Toshiba’s president and chief executive officer, Taro Shimada, said in a statement.

Toshiba’s shares started trading in May 1949 when the Tokyo Stock Exchange reopened as Japan emerged from the ravages of World War Two (WW2).

Its divisions range from home electronics to nuclear power stations, and for decades after WW2 was a symbol of the country’s economic recovery and its technology industry.

In 1985, Toshiba launched what it described as “the world’s first mass-market laptop computer”.

However the Tokyo-based company has faced a number of major setbacks in recent years.

“Toshiba’s catastrophe is a consequence of inadequate corporate governance at the top,” Gerhard Fasol, chief executive of business advisory firm Eurotechnology Japan told the BBC.

In 2015, it admitted to overstating its profits by more than a $1bn over six years and paid a 7.37bn yen ($47m; £38m) fine, which was the biggest in the country’s history at the time.

Two years later, it revealed major losses at its US nuclear power business, Westinghouse, taking a 700bn yen writedown.

To avoid bankruptcy it sold its memory chip business in 2018, which was seen as a crown-jewel in the company’s portfolio.

Since then Toshiba has received several takeover offers, including one from UK private equity group CVC Capital Partners in 2021, which it rejected.

In the same year, the company was found to have colluded with the Japanese government to suppress the interests of foreign investors.

“Toshiba, in the eyes of many Japanese people and especially government, is a national treasure, which is part of the problem,” Mr Fasol said.

The firm then announced plans to break up the company into three separate businesses. Within months the plan was revised, with its board saying it would instead split the company into two units.

Before the new breakup plan was carried out the company’s board said it was considering JIP’s offer to take the company private

Federal Reserve Chair Jerome Powell made clear Wednesday the central bank is close to done raising interest rates, but his colleagues delivered the message that resonated: Borrowing costs must remain higher for longer amid renewed strength in the economy.

After a series of rapid rate hikes over the past 18 months, the Fed can now “proceed carefully,” Powell said — a sentiment he repeated at least a dozen times Wednesday during a press conference that followed the central bank’s decision to leave rates unchanged.

In quarterly economic projections released following a two-day policy meeting, 12 of 19 Fed officials said they still expect to raise rates once more this year. The bigger takeaway for investors was the revelation that policymakers see fewer rate cuts than previously anticipated in 2024, in part due to a stronger labor market.

The projections also showed they expect inflation to fall below 3% next year, and return to their 2% target by 2026. In other words, the “soft landing” for the US economy that looked more remote three months ago now seems within reach.

“They’re basically saying that a soft landing scenario is going to be met with tighter policy,” said Brett Ryan, a senior US economist at Deutsche Bank AG. “That was the main takeaway.”

The US economy has so far been resilient against the Fed’s historic tightening campaign, which lifted the target range for the federal funds rate from nearly zero in March 2022 to 5.25% to 5.5% in July, a 22-year high. Consumer spending remains strong and the labor market has been steady, though job growth is starting to moderate.

That strength bodes well for the Fed’s efforts to cool inflation without sending the economy into a recession, but it’s also raised concern at the central bank that the inflation fight could be prolonged.

The new projections reflected that. Fed officials now expect their benchmark rate to be at 5.1% by the end of next year, according to their median estimate, up from 4.6% in the last projection round in June.

During the press conference, Powell stressed that policymakers are facing a high amount of uncertainty, and seemed determined not to give markets any reason to rally.

Treasuries sold off after the decision, with the yields on two-, five- and 10-year US government bonds all rising to the highest in more than a decade. Wednesday’s 0.9% drop for the S&P 500 was the second-worst this year on a Fed day, second only to the 1.7% decline registered in March.

“If you were really looking for the worst piece of news, it’s not necessarily that we’re going higher but that we’re staying longer — that’s the new narrative,” said Art Hogan, chief market strategist at B. Riley Wealth. “It’s not how high, but how long.”

The Fed chief also cautioned that a soft-landing scenario was not yet guaranteed, saying it was not the Fed’s baseline expectation — despite what the latest projections implied.

“Ultimately, this may be decided by factors that are outside our control,” Powell said, though he later added that a soft landing is “what we’ve been trying to achieve for all this time.”

With an array of potential economic headwinds on the horizon — including rising gas prices, a United Auto Workers strike and a looming government shutdown — investors remain skeptical that the Fed will follow through with another rate increase this year. Futures show roughly even odds of more tightening in 2023.

Lou Crandall, the chief economist at Wrightson ICAP LLC, said the economic picture may end up less favorable than what policymakers expect for the coming months.

“The odds are pretty good that unemployment in the fourth quarter will be higher than they project, and core inflation will be lower,” Crandall said. “The risk of another rate hike is pretty low.”

United Airlines Holdings Inc. discovered dubious parts in two aircraft engines, adding to the list of carriers worldwide that have found bogus components from supplier AOG Technics Ltd.

The parts were discovered in a single engine on each of two aircraft, including one that was already undergoing routine maintenance, a spokesperson for United said Monday. The Chicago-based airline is replacing the engines before the planes are returned to flying, he said.

United discovered the parts based on new information from its suppliers, and will continue to investigate as more details become available, the company said. The parts were seals on compressor stator vanes that help direct airflow inside the engine. United didn’t immediately say which type of aircraft the engines had powered.

The company’s disclosure makes it the latest major carrier to confirm that suspect components from AOG were installed in their fleet, including Southwest Airlines Co. and Virgin Australia Airlines Pty. Aviation regulators have said AOG supplied an unknown number of jet engine spare parts backed by falsified airworthiness documentation, kicking off a worldwide effort by the industry to hunt down more components.

CFM International Inc., the joint venture of General Electric Co. and Safran SA that makes the engines for many older-generation Airbus SE A320 and Boeing 737 aircraft, previously said parts with fraudulent documentation had been used in 68 of its power plants.

Morgan Stanley said in a statement, “The Firm does not believe the claims have merit and will defend itself vigorously.” Brightline didn’t respond to a request for comment.

According to the suit, Certares and Knighthead invested in the Brightline loan through their jointly managed CK Opportunities Fund, which was launched during the pandemic to focus on distressed assets in the travel and tourism industry.

‘Undetected for Month’

The firms claim Morgan Stanley went out of its way to hide revisions to the original credit agreement allowing the share issue, even attaching an earlier CK signature page to avoid showing them the amendments.

“Given Morgan Stanley’s concealment,” the suit claims, the language “went undetected for months.”

The issue should have triggered the deal’s prepayment make-whole provisions, the firms claim. They are asking for an order requiring Brightline to prepay the loan and make the make-whole payments.

Brightline describes itself as the only privately owned and operated intercity railroad in the US. It currently operates between Miami and West Palm Beach and is set to extend service to Orlando on Friday. The company hopes to break ground later this year on its West Coast service, which it claims will take riders from Southern California to Las Vegas in just over two hours at 186 miles per hour.

According to the suit, Morgan Stanley was motivated to defraud Certares and Knighthead because it wanted to “position itself for future lucrative investment-banking business with Brightline Holdings and its private equity owners at Fortress, including through handling municipal debt transactions for Brightline Holdings which could generate sizable fees for Morgan Stanley.”

Certares also claims it has faced retaliation from Morgan Stanley for objecting to the bank’s actions. According to the suit, Morgan Stanley last month declined to participate in another, unrelated financing deal with Certares because of the Brightline dispute.

“This kind of retaliation is unfair and unbecoming of a global financial institution,” the plaintiffs state in the suit.

The case is CK Opportunities Fund v. Morgan Stanley, New York State Supreme Court, New York County (Manhattan).