As ESG Investments Soften and Pressure Grows on Allegedly ‘Woke’ Finance Giants, Conservative Investment Firms Scour for Missed Opportunities

Link: https://www.nysun.com/article/as-esg-investments-soften-and-pressure-grows-on-allegedly-woke-finance-giants-conservative-investment-firms-scour-for-missed-opportunities

Excerpt:

In May, the United Kingdom’s version of the Securities and Exchange Commission will begin enforcing its pledge to crack down on so-called greenwashing by companies wishing to trade on the label of being green-friendly.  

The Financial Conduct Authority’s rules, announced in late November, come as U.S. traders await stronger regulations from the SEC. That body moved in September to curb misleading marketing practices by requiring 80 percent of funds that claim to be “sustainable,” “green,” or “socially responsible” to actually be so. 

The sustainability disclosure requirements are now deemed a necessity after regulators found “environmental, social, and corporate governance” analysts at Goldman Sachs and Germany’s DWS Group were promoting investments that were not as ESG-friendly as they claimed. 

“The portfolio managers weren’t necessarily doing all of the work that they said they were doing,” the associate director of sustainability research for Morningstar Research Services LLC, Alyssa Stankiewicz, said. “They didn’t have documentation or data maybe related to the ESG-ness of these investments.”

At the same time as ESG-friendly firms are facing accusations of insincerity, they’re also coming under pressure from state pension funds in states with Republican-controlled governments that don’t want their employees’ retirement funds affected by what they view as politicized, left-leaning investing strategies.

Author(s): SHARON KEHNEMUI

Publication Date: 16 Jan 2024

Publication Site: NY Sun

The great anti-ESG backlash

Link: https://thespectator.com/topic/great-anti-esg-backlash/

Excerpt:

The ESG story starts in 2004, when the three-letter acronym appeared in a UN report arguing for environmental, social and governance considerations to be hardwired into financial systems. Since then the term has been on a long but rapidly accelerating journey from NGO-world obscurity into the financial mainstream and subsequently the political limelight, prompting strong reactions from a chorus of prominent figures. Elon Musk calls it “a scam.” Peter Thiel says it’s a “hate factory.” Warren Buffett describes it as “asinine.”

Unsurprisingly for a piece of UN jargon that has become part of the political cut and thrust, “ESG” is often used to mean different things. Properly defined, it refers to an investment strategy that factors in environmental, social and corporate governance considerations. That might mean not investing in oil and gas companies, for example. Or it might mean only investing in companies that have a stated commitment to diversity, equity and inclusion. As it has grown in infamy, the acronym has also come to refer not only to investment products billed as ESG, but to other practices through which investment firms use their customers’ money to push political ends. For example, your pension may not be invested in an ESG fund, but the manager of that money may still be using stocks owned on your behalf to pursue political goals. A third, even broader, meaning is as a synonym for woke capitalism: a broad catch-all for big business’s embrace of bien pensant opinion, particularly on the environment.

….

This win-win rhetoric has been the rallying cry of the ESG crowd on what has looked like an unstoppable march. Make money and do good: who could possibly object? Millions have bought into this seductive logic. Globally, more than $35 trillion of assets are invested according to ESG considerations, an increase of more than 50 percent since 2016. From 2020 to 2022, the size of ESG assets in the United States grew by 40 percent. According to an analysis by the asset manager Pimco, ESG was mentioned on just 1 percent of earnings calls between 2005 and 2018. By 2021, that figure had risen to 20 percent.

….

If the anti-ESG movement has the wind in its sails, that’s in large part thanks to last year’s tumultuous geopolitical events and economic trends, foremost among them the war in Ukraine. The Russian invasion has transformed the ESG debate in two ways.

First, it has underscored the ethical dilemmas ESG champions would rather ignore. For example, many ESG funds rule out investment in weapons manufacturers. Is it really ethical to deny capital to the firms producing the material Ukraine needs to survive? Indeed, the socially responsible position is arguably the exact opposite.

Second, it has transformed the energy conversation in a way that has made many more of us acutely aware of the importance of cheap, abundant and reliable energy — and conscious that it cannot be taken for granted. In other words, each of us is a little more like Riley Moore’s West Virginia constituents, who don’t have much time for net-zero grandstanding given that they will be the ones who pay a heavy price for someone else’s pursuit of feel-good goals. What has always been true is becoming clearer: a financial system that starves domestic energy producers of capital not only hurts those whose savings are being used to pursue political ends, but ends up as a de facto tax on US consumers in the form of higher energy costs. ESG, says Goldman Sachs’s Michele Della Vigna, “creates affordability problems which could generate political backlash. That is the risk — political instability and the consumer effectively suffering from this cost inflation.”

Author(s): Oliver Wiseman

Publication Date: 22 Dec 2022

Publication Site: The Spectator

Wall Street’s Shift South Runs Into Texas, Florida Culture Wars

Link: https://www.bloomberg.com/news/articles/2021-10-05/wall-street-s-shift-south-runs-into-texas-florida-culture-wars

Excerpt:

Wall Street’s three biggest municipal-bond underwriters have seen business grind to a halt in Texas after the state blocked governments from working with banks that have curtailed gun-industry ties. In June, as Goldman Sachs Group Inc. was on the hunt for a new campus in Dallas, Republican Governor Greg Abbott took a shot at ESG initiatives by banning state investments in businesses that cut ties with oil and gas companies.

That’s not to mention the brawls over Covid vaccines and mask mandates, deadly Texas blackouts along the country’s most isolated power grid and new state laws that restrict voting and all but ban abortion. It’s all happening just as Wall Street’s shareholders push the industry to fight climate change, racism and the gender gap.

….

So far, most big banks haven’t taken public positions on the new abortion restrictions. They’re being cautious about requiring Covid-19 vaccinations for employees in places where officials have assailed mandates. But the new Texas gun law is running into both the industry’s efforts to advance social causes and its ability to work with the second-largest state for muni-bond issuance. 

JPMorgan Chase & Co. — which has 25,500 Texas employees, its most in any state outside New York — has said it can’t bid on most business with public entities in Texas because of ambiguities around the law. The biggest U.S. bank is assessing its potential next steps, said a person with knowledge of the company’s thinking. 

Author(s): Max Abelson, Amanda Albright

Publication Date: 5 October 2021

Publication Site: Bloomberg

Goldman, Morgan Stanley Limit Losses With Fast Sale of Archegos Assets

Link: https://www.wsj.com/articles/goldman-morgan-limit-losses-with-fast-sale-of-archegos-assets-11617062028?mod=djemwhatsnews

Excerpt:

The steep losses at Archegos come as a council of top U.S. regulators known as the Financial Stability Oversight Council is already scheduled to meet on Wednesday to discuss hedge-fund activity during the pandemic-triggered crisis. The meeting is the first for the risk council during the Biden administration, which has pledged to scrutinize financial weaknesses revealed by the pandemic-triggered market tumult from March 2020. The council is made up of the heads of the Treasury Department, Federal Reserve and other agencies.

Mr. Dweck, the consultant, pointed to a case that many on Wall Street are hearing echoes of this week: Long-Term Capital Management, a massive hedge fund that blew up in 1998. Firms learned the full extent of the hedge fund’s problems only when government officials summoned them to Long-Term’s offices to pore over its records, he said.

“The upshot is, you’re going to have stuff like this happen,” Mr. Dweck said.

Author(s): Maureen Farrell, Margot Patrick, Juliet Chung

Publication Date: 30 March 2021

Publication Site: Wall Street Journal