This Week in ESG and Impact Investing

The May, 2023 jobs report paints an optimistic picture of the U.S. economy, showing the addition of 339,000 jobs - a pleasant surprise for many who anticipated a slowdown. Yet, this report carries more weight than simple optimism. It plays an instrumental role in shaping the Federal Reserve's decision-making process, particularly whether to resort to an old lever: raising interest rates. Traditionally, the Federal Reserve has employed interest rate increases as a tool to manage inflation. The underlying principle is relatively straightforward: raising interest rates slows borrowing and spending, thereby tempering the labor market and reigning in price increases. However, such an approach also increases unemployment. Given increasing social volatility and our precarious cultural  position, we must question the efficacy of this strategy in our evolving economic landscape. The impact of the Covid-19 pandemic continues to transform our world, including the economy, in profound ways. A ...

The U.S. economy improved in the second quarter of 2022. Real GDP fell by 0.9% (REVISED TO -0.6%) in Q2 after falling 1.6% in the first. Real gross domestic product (GDP) decreased at an annual rate of 0.6 percent in the second quarter of 2022, following a decrease of 1.6 percent in the first quarter. The second-quarter decrease was revised up 0.3 percentage point from the "advance" estimate released in July. The smaller decrease in the second quarter, compared to the first quarter, primarily reflected an upturn in exports and a smaller decrease in federal government spending. Profits increased 6.1 percent at a quarterly rate in the second quarter after decreasing 2.2 percent in the first quarter. Despite the negativity in the media, this is an even more positive indicator. Whether it remains a good sign depends on future economic policy. The Fed may get its "soft landing" after all.

We note the Federal Reserve now expects to "end its pandemic-era bond purchases in March (2022) and pave the way for three quarter-percentage-point interest rate hikes by the end of 2022.."  While we agree the Fed is correct in observing that, for whites, "the economy no longer needs increasing amounts of policy support," specific sectors and demographics require ongoing support. The key skill of a central bank in the current environment is identifying these demographic sectors and providing targeted, non-inflationary support. There are a number of ways to do so, but, given the lack of relevant African American diversity on and at the Board, we do not expect the Fed to be familiar with these techniques. (We suggest they see our Maternal Mortality Reparation Facility for Black Women. ) We continue to believe that the recent inflation spike is due to fear and greed-based labor and supply chain disruptions resulting from the unprecedented and ongoing COVID crisis. This...

The Biden Administration now expects consumer prices to rise 4.8% in the fourth quarter of 2021. This follows July's 5.4% increase in consumer prices in advance of the Fed’s Jackson Hole conference. Our analysis suggests that the inflation spike is due to fear and greed-based labor and supply chain disruptions resulting from the unprecedented and ongoing COVID crisis. Thus, price increases are to be expected. The current pandemic is not fully comparable to earlier ones, given technology's role in facilitating the highly integrated nature of the global economy and the decline in ethical standards of business behavior, as evidenced by the prior occupant of the White House. The Fed is right to focus on inequality, now the greater risk, than it is on protecting the financial standing of a small group of mainly non-minority individuals and institutions. Given the above, we suggest the central bank modify monetary policy to resist price increase tactics by major industrial and financ...