Official photo of Congressman Maxine Waters
Guest essay by Eric Worrall
It is never enough; Despite recent moves to green their portfolios, great hedge fund manager Chris Hohn has accused Blackrock and Vangard of not doing enough. But that push for more climate change is just the tip of a much larger threat that I believe hangs over the heart of Corporate America.
Chris Hohn beats up BlackRock and Vanguard over climate change
The multi-billion dollar hedge fund manager urges big money managers to challenge companies to global warming
Attracta Mooney, Investment Correspondent OCTOBER 25, 2020
Billionaire hedge fund manager Christopher Hohn has accused BlackRock and Vanguard of behaving like sheep on climate change, arguing that large asset managers are taking "inadequate and ineffective measures" against global warming.
His letters are the latest example of the deep scrutiny of the $ 89 billion wealth management industry for its role in fighting climate change. Many large fund managers, who immensely affect the world's largest companies, have warned that global warming could hurt investment returns.
But Sir Christopher accused "most asset managers" of "total greenwash", arguing that they were far too complacent about the risks of global warming.
"The wealth management industry is kidding about what it is actually doing (in terms of climate change)," he said. "They talk, but they really don't do anything effective."
Read more: https://www.ft.com/content/2ea426f2-b338-4921-882b-7c99076489fe
The reality is Blackrock and other big companies are fully involved in the green agenda. Your biggest obstacle to an activist attack on the American economy is President Trump.
The path to greener investments is not assured as other companies are still shaking off the new threat posed by asset managers. "Our companies are not concerned," said Charles Crain of the National Association of Manufacturers, of which ExxonMobil is a member.
There is a growing recoil in the US against investors as climate warriors. Asset managers prepare for a dispute with the Trump administration about a new proposal that endangers the ability of investors to integrate IT G Principles in pension portfolios. At the same time, many well-known asset managers are still reluctant to vote against the management, which means the vast majority of climate resolutions will not be passed.
Read more: https://www.ft.com/content/78167e0b-fdc5-461b-9d95-d8e068971364
ESG (Environmental Social and Governance) is fully on the democratic agenda. In August 2020, the U.S. Congressional Committee on Financial Services was established under the direction of Maxine Waters, made a number of policy recommendations that should send a chill down the spine of anyone looking for a return on their investments.
H. R. ____: ESG Disclosure Simplification Act of 2019 (Rep. Vargas): According to this law, public companies must disclose certain ESG metrics, which the SEC must set in a rule. The bill also requires public corporations to publish in their proxy statements annually a description of the company's views on the relationship between ESG metrics and long-term business performance and the process by which the issuer determines such impact. In addition, The bill incorporates the sentiment from Congress that the ESG metrics set by the SEC are automatically considered material for investors. Finally, this draft law establishes an advisory committee on sustainable finance within the SEC, which makes recommendations to the SEC that public companies should be obliged to disclose ESG metrics. would submit a report to the SEC within 18 months outlining the challenges and opportunities for investors in sustainable finance; and would regularly recommend policy changes that would encourage the flow of capital towards sustainable finance.
____: Shareholder Protection Act of 2019: This bill required of public companies Submit quarterly reports to the SEC and investors, detailing the amount, date, and nature of the company's spending on political activities. If the political spending was made in support (or rejection) of a particular candidate or to a trade association, the company must disclose the candidate and / or the trade association. The bill also requires public corporations to disclose in their annual reports all political spending over $ 10,000 in the previous year and the type and amount of political spending the company plans to make in the coming year.
____: Human Rights Risk Assessment, Prevention and Mitigation Act of 2019: According to this law, public companies must each year identify human rights risks or human rights impacts in their value chains and classify them according to their severity. Companies must also disclose any measures they have taken to avoid or mitigate the human rights risks and impacts identified in the annual report or, if no action has been taken, an explanation of why the company has not taken any action.
____: Requesting issuers to file an annual or quarterly report in accordance with the Securities Exchange Act of 1934 to indicate the total amount of corporate income tax paid by that issuer in the period covered by the report and for other purposes: This law requires public corporations (in their 10-Qs and 10-Ks) to disclose all of their pre-tax profit and total amounts paid in state, state, and foreign taxes. The bill also stipulates that companies must disclose a number of specific tax items for each of their subsidiaries and on a consolidated basis, e.g. B. Total accrued tax expense, reported capital, and total accumulated profit.
H. R. ____: Climate Risk Disclosure Act of 2019 (Rep. Casten): This bill requires public companies to provide information in their annual reports relating to the financial and business risks related to climate change. The bill also stipulates that the SEC, in consultation with other relevant federal agencies, sets industry-specific metrics and guidelines for disclosing risks related to the climate and that companies must provide both quantitative and qualitative disclosures.
Read more: https://financialservices.house.gov/uploadedfiles/hhrg-116-ba16-20190710-sd002_-_memo.pdf
In my opinion, to put all necessary actions under the auspices of shareholder disclosure would create a tremendous financial risk and burden on US companies.
Defining ESG (Environmental Social and Governance) as automatically “material” for investors would mean that companies would be liable for disclosure errors. You could be sued for making misleading ESG statements or failing to reveal an ESG issue.
But the ESG itself isn't well defined, it means pretty much anything activists want. The definition changes every time someone discovers a new right to complain. Even when a company does its best to comply with such laws, there is always room for an annoying activist lawsuit based on a new, imaginative take on ESG issues.
Big companies would fight. Many small businesses, in my opinion, could be wiped out by compliance costs and constant legal harassment.
Activists have tried to punish companies on ESG issues, but at the moment the law tends not to advocate frivolous ESG lawsuits or even activist shareholder resolutions. President Trump has been particularly active in blocking this type of abuse.
Maxine Water's legislative proposals could change all of that.
My guess is that in the scenario where Maxine Water's proposed laws are passed, companies will find it easier to simply increase their Danegeld payments to try to buy off activists. Of course, activists would probably still file lawsuits on occasion to remind the responsible companies.
Enhancing the hand of activists demanding payouts would likely scare US corporate confidence, in my opinion.