Welcome to Moral Money and the start of Joe Biden’s presidency later today. For the past three years, Gary Gensler — Mr Biden’s pick to lead the US stock market regulator — has been studying and teaching about cryptocurrencies, an issue he will need to address as the Securities and Exchange Commission chairman.
But his familiarity with environmental, social and governance investing and climate change is less clear. He has not expressed a clear position on mandatory ESG or climate change corporate disclosures.
However, two things are known. First, the SEC’s two Democratic commissioners have supported ESG disclosures and will be helpful guides for the new chairman.
Secondly, we know Mr Gensler can drive regulations into existence. Handed the thankless task of adopting derivatives regulations during the Obama administration, Mr Gensler charged ahead with surprising speed and success. He barrelled over the corporate lobbyists who stood in his way — a trait he might rely on again to advocate for ESG disclosures.
The initial clues about Mr Gensler’s ESG position will come when he testifies before Congress for his new job. Moral Money will keep you updated. — Patrick Temple-West
Since the riot at the US Capitol on January 6, businesses have been scrambling to put distance between themselves and the people who supported Donald Trump’s attempt to undermine US democracy.
But ESG activists are highly sceptical of corporate pledges to cut off political donations to the members of Congress who voted to overturn the election. And groups like Majority Action are looking to ensure that companies and their executives don’t go straight back to business as usual once things calm down.
Over the weekend we had a scoop on Dan DiMicco, a former Trump adviser, exiting the board of Duke Energy after Majority Action launched a campaign calling for his departure, citing posts he made on Twitter and Parler questioning the legitimacy of Joe Biden’s victory.
And Mr DiMicco is only their first target.
In addition to putting pressure on individual board members and companies, Majority Action plans to turn up the heat on asset managers by calling for them to put political spending front and centre in their ESG programmes.
“Given their concentrated shareholder voting power, [investment managers] should be setting standards for comprehensive disclosure of corporate money, including corporate dark money in politics, and holding boards accountable for the alignment of that money with their corporate purpose and objectives,” said Eli Kasargod-Staub, executive director of Majority Action.
But stopping all political donations isn’t the answer, according to Mr Kasargod-Staub. Instead, he’d like to see companies take a more principled stand.
Large investors like the New York City pension funds are making a similar call.
New York City comptroller Scott Stringer last week called on companies to permanently stop donating to members of Congress who objected to the certification of the Electoral College vote, saying that their actions “ultimately resulted in a violent insurrection orchestrated in part by white supremacists, domestic terrorists and neo-Nazis”.
Will this work? It is far too early to tell. The Washington Post found that 20 of the 30 largest corporate political donors had suspended some or all contributions since January 6.
But comments yesterday from Doug McMillon, Walmart chief executive and head of the influential Business Roundtable lobbying group, indicate that companies have no desire to loosen their grip on American politics: “Looking back, the business community has made contributions to strengthen the country,” he said on a conference call. “Not participating in the process as it’s laid out could create other issues . . . I think we’ve got to find a way to participate in the right way.”
As research from professor Shiva Rajgopal at Columbia University shows, political spending is one of the most profitable investments a company can make.
This will almost certainly mean Majority Action and other ESG advocates face an uphill climb, especially once the spotlight fades. But Mr Kasargod-Staub is optimistic about their chances.
“The question is do you countenance elected officials working in concert to overturn a free and fair democratic election, or not? That’s a really clear, bright line question.” (Billy Nauman)
Anne Finucane, vice-chairman of Bank of America sees a bright future for climate activity on the horizon as Joe Biden takes office in Washington.
Ms Finucane said Europe had done the rest of the world a favour by leading on climate legislation. But while “the US may have been slow to the dance” it would soon take charge, Ms Finucane told Gillian Tett in a recent interview.
After a recent conversation with John Kerry, Mr Biden’s incoming climate envoy, Ms Finucane is confident that the government will accelerate climate action not just through regulation, but also through market-based “motivation”.
“The US, certainly more than Europe . . . its economy is built on capitalism. And it’s unapologetic about capitalism. So as a result when you create a market we move quickly.”
The business community was ready, she said. The sheer growth of ESG investing is evidence of this: “From the $110tn assets that are being professionally managed, we are seeing 40 per cent of global financial assets with an ESG consideration. And that will only increase.”
“As soon as you make it a capital market opportunity, it takes off, especially in the US.” (Kristen Talman)
In the early 2010s, the Faang stocks — a collection of high growth technology companies from Facebook to Google — captivated the stock market and became an acronym darling. Subsequently, China’s Bat companies (Baidu, Alibaba and Tencent) took the baton.
Now, we have Gems — green energy majors — a group of European utilities poised for success thanks to the EU’s green deal, according to a report this month from Goldman Sachs. The companies include Iberdrola, Orsted, Enel, Solaria, SSE and others.
Historically, European utilities have provided consistent dividends but were not growing businesses. But now these companies “should enjoy unprecedented growth,” Goldman Sachs said. “The green energy majors are likely to deliver solid growth until 2030.”
The three biggest Gems (Iberdrola, Orsted and Enel) have outperformed Europe’s big three oil majors (Total, BP and Shell) by 300 per cent since 2010, Goldman Sachs said. And there is increasing evidence that the oil majors are scrambling to catch up.
Total on Monday said it acquired a $2.5bn stake in Adani Green Energy, an Indian energy provider with a 2.35-gigawatt solar portfolio.
The success of the European utilities should be viewed enviously by the rest of the world. China, Japan and South Korea have all promised net-zero targets. With a serious capital expenditure programme such as the EU’s green deal, these countries could ignite an acronym darling of their own. (Patrick Temple-West)
When life gives you lemons, make beer. That’s the takeaway for one Japanese brewer, anyway, after it discovered a typo printed on one of its products.
Sapporo’s new, limited-edition beer will hit the shelves early next month in Japan, despite its misspelt “lagar” packaging. The company first announced that it would halt the launching of the product due to the mistake, but four business days later Sapporo reversed the decision because of an outpouring of requests for the company to not waste the product by throwing it away. The misspelt beer also saw support on social media.
Sapporo said that it had received many inquiries about what to do with the cancelled product and offers to buy the beer after the initial announcement. Sapporo added: “We accepted our customer’s voices sincerely. After a series of thorough discussions within the company, we decided to cancel the decision of halting.”
The incident demonstrates how consumers’ awareness of social issues, such as food waste, can change corporate behaviour. When the misspelling was first reported, the company called the misprint “embarrassing”. But, which is more embarrassing — a misspelling or wasting drinkable beer? The answer from the Japanese public was loud and clear.