This Week in ESG and Impact Investing

An estimated  $7 billion in corporate  pledges have been made to facilitate efforts that support racial justice, and help activities  that seek immediate solutions  to the crisis affecting Black people. We are very familiar with these types of promises, having launched the first website focusing on financial support for minority communities in 1995 and a new website to monitor such corporate pledges. Yet it appears that only $188 million of that $7 billion is money someone can reasonably expect to get their hands on. Further, in certain sections of the Black community, there is concern about the effectiveness of the traditional organizations identified as recipients of the pledges. And there appears to be less  concern with newer, trending  organizations. Our recent survey of  customers banking at black-owned banks  suggests most consumers who do not use Black banks are concerned about their financial stability, and have not been able to leverage financial resources from th

According to the Financial Times, megabank Wells Fargo & Co “has asked the U.S. Federal Reserve to remove an asset cap introduced during its accounts scandal in order to allow it to support businesses and customers hit by the coronavirus economic fallout..” The growth cap was imposed after the bank “acknowledged that it improperly foreclosed on 545 distressed homeowners after they asked for help with their mortgages, created 3.5 million fake accounts, charged 570,000 customers for auto insurance they did not need, and illegally repossessed vehicles from hundreds of service members.” Former bank employees state that Wells "targeted black churches” and neighborhoods by offering escalating-interest mortgages, which some loan officers called “ghetto loans.” This week, the bank demanded that call center workers come to the office despite coronavirus, but agreed to pay "all of its domestic full-time employees who make less than $100,000 a year.. a pre-tax payment of $

Last week, Chairman of the Federal Reserve, Jerome H. Powell appeared before the House of Representatives Committee on Financial Services to present the Semiannual Monetary Policy Report. Chairman Powell opened his remarks by stating that “the economy performed reasonably well over the first half of 2019 and the current expansion is now in its 11 th year.” Inflation has run below the FOMC 2% objective, trade tensions and concerns about global growth have weighed on economic activity." The Current Economic Situation Labor Market: job gains remain healthy, with the unemployment rate falling to 3.7% in June. Employers are increasingly willing to hire and train workers with fewer skills.   Unemployment for African Americans and Hispanics remain well above the rates of whites and Asians. Urban employment rates are higher than those in rural communities. Labour force participation by those in their prime working years is lower in the US than in comparable nations. G

Our model of Federal Reserve policy estimates the probability that the Federal Reserve will increase interest rates. Our July 3rd Summary shows that the probability of the US Federal Reserve increasing the federal funds rate is 90.53%. While our model needs to be adjusted, as noted below, we remain confident in these results. The first forecast adjustment element are the previous hikes. Recall that in March, 2018, our model predicted a rate increase with a 92.3% probability . The rate increase following the June 12 – 13 FOMC meeting decreases the probability of subsequent rate increases, if only slightly (90.53% vs 92.30%). One precedent for the Fed raising rates in this manner came in 1994, during the Clinton Administration, when the Fed raised rates from February to May at a 25 basis point pace. Interest rates increased from 3.25% to 4.25% in 4 months (FED, 2018). Each successive rate increase adds less to policy impact. Given that the Fed has  raised interest rates two time

The Federal Reserve’s Federal Open Market Committee (FOMC) meeting statement on March 21, indicated that the Committee voted for a quarter-point increase in federal fund rate. (See:  http://twisri.blogspot.com/2018/03/probability-of-fed-rate-hike-in-march.html ) The Fed seemed to signal, by this rate hike, that a more robust  economic outlook, strengthened, at least in part, due to fiscal policy (tax bill), provides a solid base on which to tighten (increase interest rates) monetary policy more aggressively in the future. The FOMC also sought to cling to a strategy in 2018 , according to the statement , that “ supports strong labor market conditions and a sustained return to 2% inflation .” Top  FOMC  considerations : Inflation targets and the labor market This cautious stance diverged from market expectation in a surprising way: the market seemed to expect more . The accommodative monetary policy and moderate rat