In Washington, D.C.
New SEC Chair sworn in
On April 14, Gary Gensler was confirmed by the U.S. Senate (in a mostly party-line 53-45 vote) as the new chair of the Securities and Exchange Commission (SEC). He was sworn in April 17 by Maryland Senator Ben Cardin (D) in a small ceremony in Baltimore.
According to a press release issued by the SEC, Gensler said:
“I feel incredibly privileged to join the SEC’s team of remarkable public servants. As Chair, every day I will be animated by our mission: protecting investors, facilitating capital formation, and promoting fair, orderly, and efficient markets. It is that mission that has helped make American capital markets the most robust in the world…
I’m honored that President Biden nominated me, and I’m grateful to Vice President Harris and the Senate for their support. I’d like to thank Acting Chair Allison Herren Lee for her leadership the last few months and all of my fellow Commissioners for being so generous with their time and advice.”
Among the key issues that Gensler will deal with as the new chair are reporting standards for ESG metrics and definition of materiality as it relates to ESG matters.
Commissioner argues against integrating ESG concerns into SEC mission
On April 14, the same day as now-Chairman Gensler was confirmed by the Senate, Commissioner Hester Peirce, one of two Republicans on the SEC, released a statement (also published in the April 2021 edition of Views – the Eurofi Magazine) in which she argued against the Commission’s plans to integrate ESG concerns into its mission. “The challenge we face in addressing the ever-increasing number of issues underlying E, S, and G is daunting,” Commissioner Peirce conceded, but “The task before us is to find a way to bring about lasting, positive change to our countries on a range of issues without sacrificing in the process the very means by which so many lives have been enriched and bettered.” She continued:
“At first glance, everything sounds good—common metrics demonstrating a joint commitment to a better, cleaner, well governed society. Common disclosure metrics, however, will drive and homogenize capital allocation decisions. A single set of metrics will constrain decision making and impede creative thinking. Unlike financial accounting, which lends itself to a common set of comparable metrics, ESG factors, which continue to evolve, are complex and not readily comparable across issuers and industries. The result of global reliance on a centrally determined set of metrics could undermine the very people-centered objectives of the ESG movement by displacing the insights of the people making and consuming products and services.
Hampering the ability of the markets to collect, process, disseminate, and respond to price signals by boxing them in with preset, government-articulated metrics will stifle the people’s innovation that otherwise would address the many challenges of our age. Moreover, converging standards would be antithetical to our existing disclosure framework, which is rooted in investor-oriented financial materiality and principles-based requirements to accommodate the wide variety of issuers.
The European concept of “double materiality” has no analogue in our regulatory scheme and the addition of specific ESG metrics, responsive to the wide-ranging interests of a broad set of “stakeholders,” would mark a departure from these fundamental aspects of our disclosure framework. The strength of our capital markets can be traced in part to our investor-focused disclosure rules and I worry about the implications a stakeholder-focused disclosure regime would have. Such a regime would likely expand the jurisdictional reach of the Commission, impose new costs on public companies, decrease the attractiveness of our capital markets, distort the allocation of capital, and undermine the role of shareholders in corporate governance.
Let us rethink the path we are taking before it is too late.”
On Wall Street and in the private sector
Top holdings in BlackRock’s new ESG Fund are tech-focused
In the previous edition of this newsletter, we noted BlackRock’s launch, two weeks ago, of its U.S. Carbon Transition Readiness ETF (ticker LCTU), which attracted $1.25 billion in its first day of trading, a record in the history of exchange-traded funds. While investors flocked to the new offering from the largest asset management firm in the world, Bloomberg Green’s Claire Ballentine noted on April 14 that the ETF suffers, in her view, from the same perceived problem that plagues many other funds in the ESG arena, namely, it is less E, S, or G-focused than it is tech-focused. She wrote:
“As the biggest launch in the history of ETFs, it’s a ringing endorsement of all things ESG. But beyond its billion-dollar debut, BlackRock Inc.’s new fund might feel awfully familiar to most investors.
The top holdings in the U.S. Carbon Transition Readiness ETF (ticker LCTU) -- which lured about $1.25 billion in its first day on Thursday -- turn out to be Apple Inc., Microsoft Corp., Amazon.com Inc., Alphabet Inc. and Facebook Inc.
The same five companies, in the same order, are the top stakes in the largest environmental, social and governance ETF on the market, the $16.5 billion iShares ESG Aware MSCI USA ETF (ESGU). That’s also from BlackRock with a fee of 0.15%, half the price of LCTU.
In fact, those tech megacaps form the bedrock of many exchange-traded funds, both in the ESG space and beyond. For example, four of them also are among the five largest holdings of the $167 billion Invesco QQQ Trust Series 1 ETF (QQQ), which is simply tracking the Nasdaq 100….
The record launch comes while many questions linger in the still-maturing ESG sector. A report released Friday by the U.S. Securities and Exchange Commission cautioned that some firms are mis-characterizing their products as ESG, possibly even violating securities laws in the process. The agency didn’t name any companies.”
JPMorgan Chase to invest in ESG
JPMorgan Chase & Co., the biggest bank in the United States and the second biggest in the world, announced last Thursday that the bank will invest significant amounts in ESG efforts over the next decade—a potential blow to fossil fuel energy companies. Reuters reported the story as follows:
“JPMorgan Chase & Co (JPM.N) aims to lend, invest and provide other financial services for up to $2.5 trillion of banking business to be done for companies and projects tackling climate change and social inequality over the next decade.
In a statement on Thursday, JPMorgan said green initiatives will account for $1 trillion of that total - the largest environmental, sustainable and governance (ESG) financing target announced by a U.S. bank to date.
That could mean lending or investing in companies that develop clean-energy technology for the trucking, aviation or industrial manufacturing sectors, the bank's head of sustainability, Marisa Buchanan, told Reuters in an interview….
JPMorgan is among the leading U.S. lenders to fossil fuel companies, having provided $317 billion of lending and underwriting since 2016, according to a recent study by environmental activist group Rainforest Action network….
JPMorgan pledged to share more details about its ESG initiatives, including its work establishing emission targets for companies in its financing portfolio, in its next climate report, due out this spring.”
|
