ESG disclosures update

  1. The Subcommittee on Investor Protection, Entrepreneurship and Capital Markets of the House Financial Services Committee held a hearing on July 10 on ESG disclosures. Five bills were introduced: (A) the ESG Disclosure Simplification Act of 2019, (B) the Shareholder Protection Act of 2019, (C) the Corporate Human Rights Risk Assessment, Prevention, and Mitigation Act of 2019, (D) 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 purpose, and (E) the Climate Risk Disclosure Act of 2019. The committee memorandum can be found here.
  2. There is an interesting report by Ignites on the differences of the MSCI and Morningstar ESG ratings. Besides being informative on the methodologies, the article also notes how fiduciaries and investors still seek a standardized ratings and evaluation approach, which has not yet materialized.

CFTC to examine how climate change affects markets

Politico Pro is reporting that CFTC Commissioner Rostin Behnam has established a new subcommittee to examine the risks associated with climate change on markets.

July 10 House Hearing – Building a Sustainable and Competitive Economy: An Examination of Proposals to Improve Environmental, Social and Governance Disclosures

The hearing is scheduled for 2 pm on July 10.

CFTC plans to produce a report on how climate change could affect the financial sector

Rostin Behnam, who sits on the Commodity Futures Trading Commission, plans to detail the formation of a panel of experts at the trading commission assigned to produce a report on how global warming could affect the financial sector, potentially impacting food costs, insurance markets, the mortgage industry and other economic pillars. According to the The New York Times article, Behnam “said in an interview on Monday that the financial risks from climate change were comparable to those posed by the mortgage meltdown that triggered the 2008 financial crisis.

Do hedge funds and ESG make a good couple?

Bloomberg is reporting on how at least some hedge funds are attempting to account for environmental, social & governance (ESG) risks. This asset class has been a particularly tricky one to incorporate ESG factors, and other reports suggest that while institutional investors are clearly asking or pressing their hedge fund managers to address ESG issues, it seems that the hedge fund managers themselves are still trying to sort out just how ESG integration, for instance, can be used by a hedge fund. The article also reveals how terminology around ESG continues to be an issue.

USA may be closing gap with Europe in terms of ESG adoption

John Hamilton to speak on new approaches to aggregating capital into the impact investing space

John Hamilton, a private funds attorney and new member of the Fiduciary Governance Group, is heading to New York University Law School tomorrow, where he will serve as a panelist at the 2019 Conference on Legal Issues in Social Entrepreneurship and Impact Investing, co-organized by the Impact Investing Legal Working Group (IILWG) and the Grunin Center for Law and Social Entrepreneurship. John is participating on the panel titled “New Approaches to Aggregating Capital into the Impact Investing Space.” The panel is described as follows:

As the impact investing market continues to scale at the intersection of philanthropy and traditional finance, both non-profit and for-profit organizations are utilizing new legal structures to channel additional capital toward their missions. The larger trend is driven in part by investors seeking to align their portfolios with their values. Attorneys who practice in this area will learn about necessary legal and regulatory considerations related to implementing innovations to channel such demand. Specifically, lawyers will explore the legal challenges to maintaining exemptions for non-profit organizations and partners while working with impact shares. This panel will also discuss legal approaches to the significant regulation affecting investment products aimed at a broader audience of retail and community investors, as well as the less heavy regulation of institutional products targeting a narrower audience of more sophisticated investors. The discussion will be enriched with examples, including a non-profit ETF sponsor that partners with underlying non-profit organizations, as well as cases of direct public offerings of equity and debt securities by private companies and non-profit organizations.

Mercer models forecast climate change risk to investment portfolios

Bloomberg has an article out on a Mercer report regarding the risks climate change poses to investors, including on a sector-by-sector analysis. According to Bloomberg, “The report marks one of the first attempts to model sector-specific investment risks from climate change over decades.”

SEC ready to move forward to proxy advisor/shareholder proposal rules

Asset managers expressing more concern over climate change risk