Bloomberg Law recently profiled Ethan Powell of ImpactShares. As described by Bloomberg, “he’s setting up funds that eschew popular one-size-fits-all environmental, social and governance (ESG) models for ones that not only are built hand-in-hand with specific charities, but also fork over the bulk of their fees to those organizations.” These are values funds, that, while very niche, have yet to attract sizeable inflows. How niche? The article adds: “Impact Shares and a handful of others want to keep the focus on social responsibility while remaining commercially viable. Issuers are starting targeted funds that fit the zeitgeist; think gay rights in the workplace, help for veterans, women on corporate boards, and so on. UBS Group AG is donating 5 percent of the fee from its InsightShares ETFs, with a minimum floor donation if the funds are slow to catch on.” This strategy sharply contrasts with other strategies that incorporate ESG factors as a hedge against investment risks. Confusion over terminology persists.
Today, the Senate confirmed Elad Roisman for a seat on the Securities and Exchange Commission, 85-14.
As its government continues to make progress on capital-market reforms, and with fiduciaries having wider access to and confidence in the markets, few would argue that President Xi Jinping’s measures to attract foreign investment have not paid off. There are concerns, however, related to uncertainty regarding the potential fallout from a possible trade war, an economic slowdown that has been worse than expected and the pressure on companies related to their massive debt obligations. In response, Beijing has introduced moderate policy easing and chosen to soften its stance on deleveraging. This is in sharp contrast to the US Fed which has advocated monetary tightening and, in turn, a rising rate environment. Given the changing liquidity environment, along with the risk of capital controls, how can investors reevaluate and recalibrate their China exposures and strategy to take advantage of these trends? This esteemed panel of China investment vets will use their insight and experience, along with a bit of tea-leaf reading, to provide a GPS for investing in China. One that will get an investor from point A to point B directly, free of any unnecessary or hazardous detours. Issues to be explored will include:
- What are the political and macroeconomic risks that investors can expect in the near and longer term?
- What is on the horizon for debt and equity markets in China and how does this impact the rest of the global economy, both emerging and developed?
- What are the potential outcomes and where do the opportunities for institutional investors lie?
- What risks could arise and how can one anticipate/hedge against?
- What does accessibility require, how should it be approached and what is different about investing in China?
Ignites recently reported on a recent Morningstar paper regarding the influence of its ESG scoring system on investor decision-making. Evidently, investors are avoiding funds with low ESG scores but are not automatically seeking out funds with high ESG scores. According to the article, “A one-globe rating corresponded to a 3.7% lower growth rate over the tested period, the paper finds. Funds with better globe ratings did see higher growth rates, but the impact was much smaller — four-globe funds had a 1.5% higher growth rate while five-globe funds had a 1.4% higher rate.”
President Donald Trump’s Executive Order, which he signed last Friday, contains a provision that requires the Department of Labor to prepare an analysis of allowing the electronic delivery of participant disclosures. It reads:
“(c) Improving the Effectiveness of and Reducing the Cost of Furnishing Required Notices and Disclosures. Within 1 year of the date of this order, the Secretary of Labor shall, in consultation with the Secretary of the Treasury, complete a review of actions that could be taken through regulation or guidance, or both, to make retirement plan disclosures required under ERISA and the Internal Revenue Code of 1986 more understandable and useful for participants and beneficiaries, while also reducing the costs and burdens they impose on employers and other plan fiduciaries responsible for their production and distribution. This review shall include an exploration of the potential for broader use of electronic delivery as a way to improve the effectiveness of disclosures and to reduce their associated costs and burdens. If the Secretary of Labor finds that action should be taken, the Secretary shall, in consultation with the Secretary of the Treasury, consider proposing appropriate regulations or guidance, consistent with applicable law and the policy set forth in section 1 of this order.”