This Week in ESG and Impact Investing

According to the SEC, "The Securities and Exchange Commission has adopted rules requiring a registered investment company (fund) to disclose when it divests, in accordance with the Sudan Accountability and Divestment Act of 2007, from securities of issuers that the fund determines conduct or have direct investments in certain business operations in Sudan. The Commission adopted the rules on April 24, 2008. The Sudan Accountability and Divestment Act required the SEC to prescribe regulations requiring this disclosure by April 29, 2008. On Dec. 31, 2007, the President signed the Sudan Accountability and Divestment Act into law. Among other things, the Act provides that no person may bring any civil, criminal, or administrative action against any fund, or any employee, officer, director, or investment adviser of the fund, based solely upon the fund divesting from securities issued by persons that the fund determines, using credible information that is available to the public, conduct...

According to NorthStar Asset Management, Inc. and Responsible Wealth, a project of United for a Fair Economy, both based in Boston, Massachusetts: "According to Federal Reserve data, 53.7% of (Wells Fargo) purchase loans to African-American families were "high-cost" versus 17.7% to white borrowers." Data reported by Wells Fargo under the Home Mortgage Disclosure Act (HDMA) showed that "African-Americans were 3.69 times, and Latinos were 1.82 times more likely than whites to receive a high cost loan in 2006. A lawsuit filed by the City of Baltimore this year finds 65% of Wells Fargo's African-American borrowers in that city received high-cost loans." "For the mortgage industry as a whole, racial bias in high-cost loans has been rampant. A report from United for a Fair Economy, in January 2008, detailed racial disparities in expected losses from foreclosure of sub-prime loans made during the past eight years."

From CalPERS: "CalPERS Expands Environmental, Diversity Corporate Governance Guidelines - Supports State Legislation on Climate Change SACRAMENTO, CA – The CalPERS Board today signaled the importance of environmental disclosure and diversity of corporate boards by expanding corporate governance guidelines for portfolio companies. The new guidelines will be added to the System’s Global Principles of Accountable Corporate Governance. These principles are used by CalPERS to vote proxies, engage management and boards of equity companies, and implement initiatives. Both guidelines were proposed by State Controller John Chiang, a member of the CalPERS Board of Administration. The environmental guidelines are aimed at getting companies to disclose and act upon climate risks like carbon emissions that, if unaddressed, could diminish investment returns. To stay in step with changes in the marketplace, the pension fund’s Board adopted new corporate board diversity guidelines which will crea...

From the EPA: "Join us this May at the 2008 National Environmental Partnership Summit in Baltimore for an EPA, two-session, interactive workshop – Helping Small Business and the Environment. The first half of this EPA training will help small businesses increase their success in getting contracts with EPA. The second half of the training will focus on green business practices and staying ahead of the curve with regards to environmental and business compliance standards in the federal procurement process." Based on our past experience with Federal Small Business Programs in general (a quagmire and a nightmare) and EPA, specifically, we doubt this seminar will be helpful. Make up your own mind. See: http://www.environmentalsummit.org/agenda.cfm?xdl=705#SLOT705 For more information, contact: Paula Zampieri EPA Office of Small Business Programs (OSBP, formerly the Office of Small and Disadvantaged Business Utilization (OSDBU)) 1200 Pennsylvania Avenue, NW mail code (1230T) Wash...

By Bonnie McGeer, American Banker | Wednesday, April 9, 2008 United Bank of Philadelphia must strengthen its management, board oversight, and loan policies under a cease-and-desist order that the Federal Deposit Insurance Corp. disclosed Tuesday. The $75 million-asset African-American-owned bank has been operating with insufficient earnings and capital, according to the Jan. 23 order. United posted a $1,000 fourth-quarter profit and reported a core capital leverage ratio of 9.99%, according to FDIC data. The order also says the bank has been violating regulations on loans made to officers, directors, and shareholders, and engaging in unsafe banking practices. It requires United to establish an adequate allowance for loan losses, enhance loan documentation, reduce delinquent loans, have an active audit committee made up solely of outside directors, cut expenses, and write a strategic plan for improving its earnings. United, which had a ratio of noncurrent loans to loans of 4% at yeare...

We note that "Securities and Exchange Commission Chairman Christopher Cox today announced the launch of a new Internet Web page that enables investors to more easily read, analyze, and compare the information provided by mutual funds related to fund cost, risk, and past performance." See: http://a.viewerprototype1.com/viewer and http://www.sec.gov/xbrl

I have been following the Bear rescue and the Financial Market reform plan. I attended today's SBC hearing. A few things to note: a. Treasury sounded a little defensive when asked by Senator Jack Reed about the lack of foresight, claiming that no one could have foreseen this crisis. Actually, we did, in August, 2007: "Major market institutions are now, as the troubled Bear Stearns reveals, feeling the negative effect of allowing these practices to flourish. Bear Stearns may be in real danger - it's stock decreased in value by 27% over the last month. We do not expect, but would not be surprised if the firm failed, another casualty of arrogance and greed." See: http://twisri.blogspot.com/2007/08/morgage-gses-predatory-lending-and.html and http://www.sec.gov/comments/s7-16-07/s71607-495.pdf b. In addition, even the claim that perfect foresight was needed is wrong. With the development of toxic (derivative and subprime lending) financial products, the relationship betwe...

On a conference call with Assistant Secretary for Financial Institutions David Nason yesterday, Treasury Department officials announced that they will implement many parts of their plan to overhaul the nation's financial regulatory structure by executive order. This includes "streamlining the approval process for securities that contributed to the crisis now roiling Wall Street." According to the Washington Post , "The Treasury's initiatives seek to sweep away the current patchwork of regulation over the coming decade in favor of three more powerful agencies to oversee banking, market stability, and consumer and investor protection." Treasury officials also acknowledged that the plan is "silent on CRA," or the Community Reinvestment Act. As Paul Krugman noted, "Traditional, deposit-taking banks have been regulated since the 1930s, because the experience of the Great Depression showed how bank failures can threaten the whole economy. Supposedl...