This Week in ESG and Impact Investing

An important discussion took place regarding shareholders and stakeholders. The " Roundtable on Empowering Shareholders and Stakeholders and the Importance of ESG Disclosures " hosted by the House Financial Services Committee, was held on July 12, 2023. This event was designed to emphasize the significance of transparency in disclosing information about a company's sustainability and social responsibility while providing a platform for shareholders and stakeholders to discuss future directions.  During the event, participants engaged in conversations and exchanged ideas regarding the role of shareholders and stakeholders in corporate decision-making processes. The discussions explored ways to strengthen their involvement and influence in shaping company strategies, emphasizing environmental, social, and governance considerations. Additionally, the event highlighted the significance of ESG disclosures. ESG disclosures refer to the reporting of a company's environmenta...

Last week, I attended a House Financial Services Committee hearing during which Mr. Jerome Powell, chair of the Board of Governors of the Federal Reserve System, testified on the Federal Reserve's Semi-Annual Monetary Policy Report. As an international student, I appreciate the level of transparency and accountability that is an essential building block of any democracy. Seeing the Chairman answer a wide range of questions from different Congressmembers representing constituents from around the country served as a subtle reminder that ‘everybody has a boss.’ Now, as a student of Economics, I came to the hearing curious to see how the Federal Reserve seeks to maintain the delicate balance of achieving its two objectives of maximum employment and price stability. It is my belief that it is not a secret that contractionary monetary policy is an effective tool to curb inflation. I also think that rising prices disproportionately affect low income and disadvantaged citizens who do not h...

Given the current status of the midterm election, it appears likely, but not certain, that Republicans will control the House. If so, this means Rep. Patrick McHenry, R-N.C., currently ranking member of the House Financial Services Committee, will  become chairman. Overall, this change will be negative for the country. Regulatory agencies most at risk include the Consumer Financial Protection Bureau (CFPB), given Sen. Elizabeth Warren's role in creating the agency and in light of the fact that an appeals court ruled the CFPB’s funding mechanism  unconstitutional: "A three-judge panel of the 5th U.S. Circuit Court of Appeals ruled that the design of the CFPB violated the Constitution because it receives funding through the Federal Reserve, rather than appropriations legislation passed by Congress." As a matter of turf, McHenry is likely to support bringing the agency under congressional funding procedures, as broken as these are. We also expect the Securities and Exchange...

Wells Fargo will testify several times this month before the House Financial Services Committee, under the leadership of Rep. Maxine Waters, D-Calif. And Waters is no radical, despite what right-wing propagandists say . She is an experienced, capable legislator with a solid track record of protecting the public. Yet Waters is also not to be trifled with. Both the independent chairman and lead director at the board of Wells Fargo resigned Monday after Waters called for their resignation. Interestingly, those same two leaders are the only witnesses scheduled to testify at Wednesday’s hearing . (It’s long overdue that the entire board be replaced, as noted in 2018 .) In 2019, Wells Fargo reported net income of $19.5 billion . That was lower than the $22.4 billion the bank earned in 2018, as the cost of litigation started to impact profits. Wells recently agreed to pay regulators an additional $3 billion to cover fines for violating consumer protection laws. The bank has a long and sor...

               On Thursday, June 23, 2022, Chairman of the Federal Reserve Jerome Powell testified before the Committee of Financial Services in the House of Representatives. During this testimony, Powell discussed many of the issues relating to the responsibilities of the FED, largely explaining what role they were currently playing in the role of shaping monetary policy. With the rise of inflation, the federal reserve has decided to utilize the tools that they have access to, by raising interest rates by .75 percent. This is the largest increase in benchmark interest rates in almost 30 years, which shows how seriously the Federal Reserve views the rise in inflation that is currently occurring in the United States. However, during the questioning period of Powell’s testimony, it was clear that the two parties represented on the committee had vastly differing views on the causes of inflation, and what role the Federal Reserve should play in comba...

  On June 15th, several American financial and political leaders convened in distinct discussions concerning the future of Minority Deposit Institutions (MDIs) and Community Development Financial Institutions (CDFIs). At a White House press conference, a Federal Deposit Insurance Corporation (FDIC) Board meeting and MDI policy statement release, in a House Financial Services Committee statement, and a Georgetown University forum with an all-star cast, minority lending was the conversation of the day. Utilizing the Mosaic Theory, Creative Investment Research contends that the convergence of these events may not be a coincidence, and may signal a significant policy change. We note that the MDI events of June 15th were preceded by a June 14th meeting of the California Public Employees’ Retirement System (CalPERS) Investment Committee. Of particular relevance was a progress report on the Fund’s Sustainable Investment 5 Year Strategy Plan. Fund management discussed diversity and inclusi...

On June 18, Facebook released it’s white paper on the new digital currency, Libra.   The news led David Marcus, Chief Executive Officer of Calibra, to appear before the House Financial Services committee on July 17 - a day after appearing before the Senate Banking Committee. House Financial Services Committee members questioned whether Facebook would have overwhelming control over   the Libra Association’s 27 other members and if they were to be trusted with 2.7 billion users’ financial data, given past privacy violations.   Facebook’s trustworthiness has been in question since the 2016 Cambridge Analytica data scandal.   Most recently, charges brought in March by the Department of Housing and Development concerning Facebook's alleged violations the Fair Housing Act have not helped the firm gain favor with the public. Last month, Facebook was removed from the S&P ESG 500 index because of privacy concerns and a lack of transparency as to why cer...

Last week the House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets held a hearing on “Building a Sustainable and Competitive Economy: An Examination of Proposals to Improve Environmental, Social, and Governance Disclosures.” Several pieces of legislation, or bills, have been proposed, (but not filed yet) in the US House of Representatives regarding Environmental, Social and Governance (ESG) reporting by large corporations. ● HR ___: ESG Disclosure Simplification Act of 2019 (Rep. Vargas) ● HR ___: Shareholder Protection Act of 2019 ● HR ___: Corporate Human Rights Risk Assessment, Prevention, and Mitigation Act of 2019 ● HR ___: To require issuers required to file an annual or quarterly report under the Securities Exchange Act of 1934 to disclose the total amount of corporate tax such issuer paid in the period covered by the report, and for other purposes ● HR ___: Climate Risk Disclosure Act of 2019 (Rep. Casten) The US...

The Federal Reserve Act (FRA) requires the Chairman of the Federal Reserve System  to testify before the House Financial Services Committee and the Senate Banking Committee twice a year, in February and July, on how the Board handles monetary policy and its observations on economic developments. In keeping with that requirement, the current Chairman of the Federal Reserve, Jerome Powell, testified before the House on July 10th. He indicated as follows: Economic activity increased at a solid pace in the first part of 2019. The labor market has continued to strengthen: unemployment fell from 3.9% (Dec) to 3.6% (May), wage gains remained moderate.  Inflation has been running below the Federal Open Market Committee’s ( FOMC ) longer- run objective of 2 percent.  In June, the FOMC judged that current and prospective economic conditions called for maintaining the target range for the federal funds rate at 2 1⁄4 to 2 1⁄2 percent.  Inflation: Consumer Price I...

The House Financial Services Committee Subcommittee on Diversity and Inclusion held a hearing on Tuesday June 25, 2019 to explore the challenges minority- and women- owned (MWO) firms face competing in the asset management industry. According to Bella Research Group’s Diverse Asset Management Project Firm Assessment, MWO firms account for approximately 8.6% of all asset management firms but only manage 1.1% of all assets under management, $785 billion out of $71.4 trillion, and are underrepresented as managers in every asset class but over-represented in the top quartile of fund performance. False assumptions harm opportunities for MWO firms. Bella’s concluded that compared to peers who manage similar asset classes, 25% of women-owned and 28% of minority-owned asset management firms fall in the top quartile on average for fund performance. Studies have shown that minority and women-led investment firms invest in more diverse entrepreneurs and businesses, enriching...

On June 20 the House Financial Services Committee held a hearing on diversity in America’s boardrooms. The witness list consisted of Ms. Chelsa Gurkin, Acting Director of the Education, Workforce and Income Security team of the U.S. Government Accountability Office, Mr. Luke Visconti, Founder and Chairman of DiversityInc, Mr. Ron Lumbra, Managing Partner of Heidrick and Struggles, Ms. Linda Akutagawa, Chair of the Alliance for Board Diversity, the Former Ambassador to Argentina, Vilma Martinez, and Dr. Stephanie Creary, an Assistant Professor of Management at the Wharton School of Business of the University of Pennsylvania. The hearing examined options for diversifying the gender, racial and ethnic composition of corporate and federal boards. Each witness presented testimony on how to address the issue of diversity on corporate boards and identify the conditions that lead to meaningful diversity so that more companies can follow the lead of firms that have been successful. D...

At a February 27, 2019 Financial Services Committee hearing on Monetary Policy, Rep. Al Green (TX) asked the following question of the hearing's only witness - Chairman of the Board of Governors of the Federal Reserve System (the Fed), Jerome Powell: "I want you to do a study on the impact discrimination has on the economy." ( See video at https://www.c-span.org/video/?458249-2/federal-reserve-chair-powell-testifies-day-capitol-hill&start=2499#) We attended the hearing (https://twisri.blogspot.com/2019/03/monetary-policy-and-state-of-economy.html) , and were delighted to hear the question, which, in light of events in New Zealand,  takes on new significance. Clearly, the economic and social cost of discrimination is growing worldwide, inspired by events in the US. This adds instability to the culture and, eventually, the  marketplace. This makes getting an accurate answer to Mr. Green's question critical. It is unclear that Federal Reserve ec...