Today: Huge Financial Flows as the U.S.A. Aids the Business Community and Workers, Families…How Is the Flow Facilitated?

April 28, 2020 –   #WeRise2FightCOVID-19  Excellent in Corporate Citizenship on Display in the Coronavirus Crisis – #18

Introduction
These are the times when actions and reactions to crisis helps to define the character of the corporation and shape the public profiles of each of the corporate citizens. For the managements of companies, these are not easy times.

Important decisions are to be made, many priorities set in an environment of unknown unknowns — and there are many stakeholders to be taken care of.

The Good News 
Corporations are not waiting to be part of the solution – decisions are being made quickly and action is being taken to protect the enterprise.  This is no easy task while protecting the corporate brand, the reputation for being a good corporate citizen, watching out for the investor base and the employee base — and all stakeholders.

What are companies doing? How will the decisions made at the top in turn affect the company’s employees, customers, hometowns, suppliers, other stakeholders?  Stay tuned to our series.

by Hank Boerner – Chair & Chief Strategist – G&A Institute 

The government of the United States of America is directing hundreds of billions’ of dollars toward individuals, families, business enterprises, and local and state governments to aid in the response to the coronavirus emergency.  How do the much-needed funds reach the intended recipients?

As the U.S. Congress, the Federal Reserve System and the Treasury Department (and other agencies) make the moves to provide continuing financial support for small businesses, laid off and furloughed employees, and major industries like airlines, the ramping up of the enabling technologies to facilitate the financial flow is a herculean task.

Take the first round of financial aid to small business, with funds channeled from the Small Business Administration (SBA) through big banks, regional banks, community banks, credit unions, and other qualified lenders.

As U.S. banks and credit unions faced the “instant” onslaught of a huge volume of applications for financial aid, FIS (working with a growing number of financial institutions) leveraged its “Real-Time Lending Platform” to digitize and automate the lending process. The platform is now processing a high volume of loans and can be scaled to meet demand as needed.

FIS created a COVID-19 Online Resource Center to provide its clients with options and information to “adapt and rebound” to virus emergency challenges. Link:  https://www.fisglobal.com/response-center

About the Company
FIS is a leading provider of technology solutions for merchants, banks and capital market firms worldwide.  The company has more than 55,000 people “globally dedicated to advancing the way the world pays, banks and invests by applying its scale, deep expertise and data-driven insights”.  FIS is a Fortune 500 enterprise and is included in the S&P 500® Index. (FIS:NYSE)

FIS is now using its technology platforms to enable U.S. banks and credit unions to provide loans and other economic relief to small businesses and merchants under the Small Business Administration (SBA) “Paycheck Protection Program” (that is within the CARES ActCoronavirus Aid, Relief and Economic Security Act).

The PPP authorizes lenders (in the first round) to provide up to $349 billion in funds to U.S. small business and merchants that are impacted by COVID-1. Loans can be forgiven in time if used for payroll costs and certain other expenses; all funds must be used by June 30th.

FIS is also waiving minimum monthly service charges for April for U.S. and U.K. merchants and providing free virtual terminal access for U.S. merchants and retailers enrolled in the Worldpay from FIS IQ online portal (for remote processing).

The company is also providing online grocery shopping for SNAP benefit recipients (SNAP is a U.S. Department of Agriculture program – the Supplemental Nutrition Assistance Program).

Using FIS technology, SNAP benefit recipients in a piloted program (rolled out in Washington State, Oregon and Nebraska) can use their Electronic Benefit Transfer (EBT) cards to make online purchases of groceries through authorized retailers – such as Walmart and Amazon.

FIS government agency clients in the states of Arizona, Florida, Idaho and California were next in line for the program. (Typically, EBT users have to make their purchases at brick & mortar retailers.)

In 2017 CEO Gary Norcross became a signatory of CEO Action for Diversity and Inclusion, a network of 500-plus CEOs in 85 industry categories.

Talk About Overload
In the context of describing FIS’ involvement in the Federal aid programs, consider the complexity of banks, credit unions and lenders managing the load of loan applications.  In FY 2019, SBA managed just $28 billion in loans.  That was for 52,000 loans totaling $23 billion under the flagship 7A program and 6,000 loans for $5 billion under the SBA 504 program.

As of April 24, 2020 the volume is:  38,984 loans totaling $7,967,174,888 under just the SBA Disaster Assistance Nationwide National Economic Injury Disaster Loan program!

And no doubt there is more Federal financial aid to be on the table as the coronavirus continues.

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G&A Institute Team Note
We continue to bring you news of private (corporate and business), public and social sector developments as organizations in the three societal sectors adjust to the emergency.

The new items will be posted at the top of the blog post and the items today will move down the queue.

We created the tag “Corporate Purpose – Virus Crisis” for this continuing series – and the hashtag #WeRise2FightCOVID for our Twitter posts.  Do join the conversation and contribute your views and news.

Do send us news about your organization – info@ga-institute.com so we can share.   Stay safe – stay healthy — keep in touch!

 

It’s Earth Day Again – Let’s Celebrate – and Pledge Again to Defend Mother Earth!

For Earth Day – Plus 50 – April 22, 2020

By Hank Boerner – Chair & Chief Strategist – G&A Institute

The first Earth Day was the idea of and championed by a United States Senator, Democrat Gaylord Nelson of Wisconsin on April 22, 1970. Fifty years ago!

Let’s also celebrate his life (1916-2005) and the environmental movement he helped to launch as we observe Earth Day 2020.

For those of us who were not around back in the day, I will also offer up some background for you as we celebrate the 50th Earth Day.

Why Earth Day?
In 1970, there were too many assaults on the nation’s environment. On Our Good Earth with air, water, soil polluted – in many parts of the nation, we were really heavily polluted!  (There are still SuperFund sites being cleaned in many states.)

The American landscape was rich with manufacturing facilities and processing plants, located in every state. Our manufacturing and processing exports in the post-WW II period comprised fully one-quarter and more of all world trade.

The generosity of the U.S. in creating the Marshall Plan to help our former wartime enemies build up their economies and our WW II allies’ economies fueled the exports of American-made goods. 

Even today, U.S. manufacturing (really cleaner!) accounts for half of U.S. exports. U.S. manufacturing today by itself makes up the world’s 10th largest economy (ahead of China, Japan, Germany and many other manufacturing centers). But back in the day…

The Importance of U.S. Manufacturing in the Post War
After World War II, the U.S. was the dominant manufacturing center of the world. Germany and Japan factories were coming back on line, having suffered tremendous damage [to each country’s industry].

Early in the post-WW II period many European companies began setting up factories in the U.S. (chemicals, pharma) — and many of those companies were serious polluters here, as they were in Europe. (One reason why European investors were early adopters of ESG approaches – not often discussed.)

In 1951, “re-armament” was in full gear and the Cold War was on. Military production was greater than for consumer goods – and that meant many more plants would be turning out goods without necessarily protecting the environment around the plant. (“In the national interest…”)

Solvents used for manufacturing would go into the ground. Emissions from toxic fumes, into the air. Solid and liquid waste – into ground, or waters (streams, bays, rivers, oceans). As consumer goods manufacturing rose, a “Guns & Butter” economy emerged in the U.S., with the factories running in two or three shifts. Out put steadily rose. So, too, nasty byproducts.

The steady assault on Mother Earth by industry and governments steadily rose.

Among the catalysts for action after two decades:

The Cayuhoga River, flowing through Cleveland, Ohio, the industrial city on the Great Lakes, caught fired and the junk on top burned. (Noontime, June 22, 1969 – a five story fire flashed out of the river in the downtown!) Info at: https://clevelandhistorical.org/items/show/63

A huge oil spill just offshore fouled the beaches of Santa Barbara, California. January 28, 1969 – 3 million gallons of crude spilled off the shoreline of the beautiful city by Union Oil (now Unocal), leaving an oil slick of 35 miles in length along the California shores…killing bird, fish, mammals (and tourism!). 1,000 gallons of oil per hour flowed for a month.

The federal government had relaxed the regulations on casing around the drilling hole and an explosion ripped the sea floor. (Sound too familiar in 2020?)

The federal government did stop offshore drilling for a few years (in the state’s waters) but then that restriction was relaxed and The Los Angeles Times (which has covered the story for five decades) says today there are 23 oil and gas leases in state waters.

The California spill is considered a catalyst for the modern environmental movement. Richard Nixon was a California native — then sitting in the Oval Office — and was moved to action shortly after the spill.

The LA Times coverage is at: https://www.latimes.com/local/lanow/la-me-ln-santa-barbara-oil-spill-1969-20150520-htmlstory.html

In the eastern U.S., the trees on mountaintops were constantly seared and leaves gone, branches standing naked of greenery. The “acid rain” coming from parts of the nation to the west wafted high up and denuded New York and New England mountaintop greenery (that was SOX, NOX, etc from smokestacks carried far to the east on the higher winds).

Those with light color cars would be scrubbing the dark stains running vertically on the vehicle. Acid rain streaks. We saw those on our homes (the white paint, the rain gutters, these would be streaked with black stain).
https://www.sciencedaily.com/releases/1998/09/980928072644.htm

Personal Remembrances
As a boy, heading in the car to Manhattan or Brooklyn with family, I remember being curious about the large black, brown, yellow clouds hovering above the Empire State Building or Chrysler Building in midtown. Wafting along, at leisurely pace. You could “smell” the city as you approached. There was often a coating of soot on my shirt or coat when I returned home.

“Smog” enveloped many American and European cities. (Fog and smoke.) I have written a few times about my flying through or over city smog. Looking down below from the cockpit, thick yellow clouds often blanketed Manhattan on hot summer days. Flying through (at lower levels) I would be on instruments until I was safely over New Jersey’s rural parts heading west. And clean air again filled the cockpit!

You could always see the bellowing smoke coming out of New York City’s electric generating plants, furnaces fired by coal in those days.

For a time, to build flight hours, I flew around the city and suburbs on weekends broadcasting as “Captain Hank, Your Eye-in-the-Sky” for radio stations WGBB and WGSM. Checking on traffic to the beach, open spaces Jones Beach parking fields, fishing offshore, surfing at Gilgo Beach, and the like. Quite often I would be dodging in and out of smog banks that drifted eastward.

Up in Connecticut, driving one day along a river road, I was startled to see “rubber rocks” along the river bank. A large rubber tire company’s outflow of waste from the factory to the river had coated the rocks before heading downstream into Long Island Sound and then to the Atlantic Ocean. Everything would just disappear into the seas, right? (Prevalent thinking of certain business leaders at the time – externalize the crap and let someone else pay for results.)

Up in The Bronx (boro of New York City) and the northern parts of Manhattan, trucks would idle for hours as they picked up or dropped off food at the terminals…the children of minority populations living there had high rates of asthma. Part of the payment for the necessary local industry that employed their parents.

New York City – the Manufacturing Center!
It is hard to believe here in 2020, but New York City was once a mighty manufacturing city for goods now produced in Asia — apparel, footwear, jewelry and accessories. Also, for food and beverages (local beer manufacturers, sugar processing factories, colas). The Brooklyn Navy Yard produced mighty battleships and repaired aircraft carriers damaged in battle (the USS Enterprise).

Manufacturing is still big in Gotham City – but it is far cleaner, safer, more responsible in operations — by many magnitudes. https://nycfuture.org/data/manufacturing-in-nyc-a-snapshot

City of Transportation
New York has a magnificent harbor. The shorelines of Manhattan and Brooklyn boasted of many ocean shipping terminals for both passengers and cargo. Railroads ran along the shoreline (one abandoned line is now the High Line, an important Manhattan tourist attraction). The line brought carloads of meat to the west side, and then on to giant cruise ships of yesteryear.

Trucks ran uptown and downtown (my father owned a local trucking company and I would ride along on school breaks). The driver would back a truck up to the dock, load it, run around the city to deliver and pick up, bringing freight to the waiting rail cars along the docks, which would go on large barges over to New Jersey and out to the nation.

All of this activity pouring engine emissions into the air of New York, and with drip-drip-drip from transport machines (oil, gas, fluids) tricking down into the sewers and out to the rivers and out to the ocean.

This was at the height of 20th Century industrial America, the Arsenal of Democracy of World War Two. From east to west coasts and all through the heartland, factories poured out war materiel, and then shifted to peak production of peacetime goods for 1950s and 1960s consumer purchase. Along with Cold War materiel. Guns & Butter.

We were the world’s major manufacturing exporters, then, not China.

But at a cost. And so the rivers burning, smog choking the cities, creeks and bays and inlets and rivers and then oceans polluting.

Earth Day Helped to Change All of This – Looking Back, Rather Quickly
Senator Nelson was impressed by the 1960s “social revolution” with protest across the country as especially young men and women voiced their opposition to the status quo. Sit-ins were staged at universities to protest the draft and the Vietnam War. Marches took place in the south despite the marchers suffering beatings and arrests.

The senator was fascinated with civil rights sit-ins at southern soda fountains and marches by both black and white leaders — including many clergy and public officials. By the early organizing efforts to protect and ensure the rights of females and passage, state-by-state of the ERA – the Equal Rights Amendment (which failed to reach the votes to become part of the Amendments to the U.S. Constitution).

According to the Earth Day origin story, Senator Gaylord Nelson was thinking to himself: “If we could tap into the environmental concerns of the general public and infuse the student ant-war energy into the environmental cause, we could generate a demonstration that would force the issue onto the national political agenda.” And he did!

He set up an “Environmental Teach-in” (like civil rights counter “sit ins”!) to tell the story of the environmental degradation of the country and send a call to action to college campuses and schools. (Hey, let’s do that again today — so many youngsters are at home in the digital classrooms during this virus crisis!)

The result in 1970 was that 20 million people — roughly one-of-10 citizens — participated that first Earth Day (and that would be like 33 million people celebrating Earth Day today, out of our 330 million population!).

The midterm elections of 1970 saw many long-standing members turned out and a new wave of consciousness sweep the country. President Richard Nixon and the U.S. Congress on January 1, 1970 moved to pass the National Environmental Protection Act – which created the U.S. Environmental Protection Agency (EPA).

Then came passage of Clean Water Act (1972), Clear Air Act, Endangered Species Act, RCRA (waste), SuperFund (CERCLA-1980), Wilderness Act (1974) and many more federal and state regulations.

The good news is that while Senator Nelson hoped to kick off a movement, he did — and observance of Earth Day took hold – the year 1990 (20 years in) saw the peak participation in the U.S. and by 2000 some 184 countries held formal observances. There’s interesting background at: http://www.nelsonearthday.net/earth-day/

Alas, here in April 2020 we are homebound and not able to march or gather in groups. But we do have our electronic platforms of all kinds – so let’s connect and celebrate Earth Day that way.

We only have one (Earth) to protect and in the spirit of Senator Gaylord Nelson and those early organizers, let’s say we are still here, still with you in spirit, and there is much work still to be done!

Happy Earth Day, Mother Earth!

Shared Perspectives
You might be interested in the environmental movement perspectives here from March/April 2005, my column from the former journal, Corporate Finance Review. Popular Movements: A Challenge for Institutions and Managers” – explaining the emergence of ESG and the Sustainability Movement.

When Sustainability Movement Champion Michael Bloomberg was Mayor of New York City, in April 2007 he delivered a wonderful speech – A Greener, Greater New York – presaging his wonderful work in helping many of the world’s cities make their environments safer and more sustainable. This is what great mayors do!

One of the influential voices following the lead of Senator Nelson in our time is Bill McKibben, whose books and extensive writing have helped to influence the more recent sustainability movement. He was interviewed by the Times Union (Albany , New York) newspaper for this year’s celebration. 

You can follow him on Twitter.

Can’t get into the streets today to help celebrate? Earth Institute at Columbia University offers some suggestions on sheltering in place and celebrating

Big News Out of the U.S. Department of Labor For Fiduciaries — Opportunity to Utilize ESG Factors in Investment Analysis and Portfolio Management

by Hank Boerner – G&A Institute Chairman

Back in the late-1960s and early 1970s, as allegations of older worker retirement abuses gained wide media attention, members of the U.S. Congress focused on “retirement security” issues. After high-profile committee hearings, the Congress passed the Employee Retirement Income Security Act of 1974, signed into law by our 40th CEO, President Gerald Ford. The U.S. Department of Labor was assigned to develop and oversee the operating rules-of-the road for retirement plan fiduciaries — including public employee pension systems; corporate retirement plans; endowments; foundations; trusts.

Over the next 30 years the Department of Labor’s operating arms for regulating “ERISA” — especially including the Employee Benefits Security Administration — tweaked the rules & regulations with such actions as clarifying letters (such as to the Pacific Coast Roofers Pension Plan and the Northwestern Ohio Building Trades and Employer Construction Industry Investment Plan) and a series of “interpretive bulletins” to clarify the rules for fiduciaries.

The passage of ERISA was a great boon for many Americans. The law opened the door for institutional investors to dramatically expand their investments in other than the traditional “prudent man” vehicles of old, like U.S. Treasury notes, bills and bonds and municipal bond issues. Trillions’ of dollars flowed into the equities market after the 1970s and trading volume (at exchanges) soared.

Many of us benefited directly and indirectly from ERISA, including individuals opening 401-k plans made possible by the legislation. The portfolios of public pension funds in particular soared in total value. (CalPERS, the California public employee plan, has US$300 billion in AUM; $150 billion of these assets are in public equity.)

The financial good times rolled, in large measure due to ERISA!

Periodically, the ERISA officials (working under the political appointees of various U.S. Presidents) would issue guidance. The cottage industry of law firms, accounting firms, pension consultants, actuaries and other ERISA-focused professionals grew by leaps and bounds. And, from the early 1980s on, there was steadily growing embrace of new approaches to investing, and new products ginned up with retirement “security” in mind.

Game Changer: The Emergence of Sustainable Investing

The new approaches included embrace of ESG performance for greater analysis [by asset owners and asset managers], and greater focus on and inclusion of ESG-related products offered by financial services firms for fiduciaries’ portfolios (mutual fund, indexes, benchmarks, etc). The latest survey by the Forum for Sustainable & Responsible Investing (US SIF) established a high water mark: a total of US$6.2 trillion in Assets Under Management were managed using ESG approaches as we entered 2014; that’s $1 in $6 in U.S. equity markets. The US SIF was in the vanguard in getting the Department of Labor guidance clarified regarding ESG investment.

Emblematic of the changes taking place as the Department of Labor prepared its latest guidance, S&P Dow Jones Indices (part of McGraw Hill Financial) busily announced three new climate change index series — two focused on carbon efficiency, and a fossil fuel free index. “Climate change and its impact present a challenge from an investment perspective,” said the index company.

2008 ERISA Guidance — Chilling Effect for ESG

In October 2008, in the waning days of President George W. Bush’s Administration, the Department of Labor issued its Interpretive Bulletin Relating to the Fiduciary Standard in Considering Economically Targeted Investments (“ETIs” in government-ese). The regulators’ guidance was interpreted by many investors as saying that only financial risk and return could be considered by the tens of thousands of fiduciaries in the USA overseeing pension funds, etc. “Other” considerations, such as a company’s ESG performance, were not acceptable.

Never mind that sustainable investing was growing significantly in importance in the U.S. and global capital markets. Never mind that the collapse of the stock market in 2008, thanks to the reckless behavior of the big bank holding companies, and look-the-other way regulators. The dives of stock prices would drive investors to the safety offered by sustainable investing products and instruments. Never mind that a growing army of stakeholders saw sustainable investing — that is, investing with collateral interests as well as the traditional financials — was becoming mainstream.

October 2015 ERISA Guidance – Encouraging!

Institutional investors (asset owners) and professional asset managers began engaging with Department of Labor officials soon after President Barack Obama took office to discuss DoL guidance for plan fiduciaries. Since 2009, of course, ESG-focused investments have soared in volume. One after another academic studies have been published to provide evidence that sustainable investment has clear financial payoff as well as “collateral” benefits. (Think:  Who would not encourage company managements to lower their environmental liabilities, create more “green” products that consumers want, improve policies and actions involving the diversity of their enterprises, avoid regulatory costs including fines, and more, more, more in terms of becoming a more sustainable company attractive to a greater number of investors?)

In late-October, the DoL’s Employee Benefits Security Administration issued an updated Interpretive Bulletin — this time, clearly stating that terms like socially responsible investing, sustainable & responsible investing, ESG investing, impact investing, and economically targeted investing (ETI), while not uniform in meaning…are related to any investment that is selected in party for its collateral benefits apart from investment return to the investor.

The Bulletin is being distributed via the Federal Register now to explain to fiduciaries that the 2008 Bulletin is officially withdrawn and replaced with language that reinstates the language dating back to 1994 (setting out the basic advice that fiduciaries should act prudently to diversify their plan to minimize the risk of large losses).

Highlights of the new DoL ERISA guidance:

• In updated terms, guidance includes plan consideration of ESG factors such as environmental, social or corporate governance (ESG) — these do not need special scrutiny (as the 2008 guidance implied). The 2015 Bulletin specifically refers to such current terms-of-art as sustainable & responsible investing.

• Fiduciaries should not be dissuaded from pursuing [such] investment strategies as those that consider ESG factors, even when they are used solely to evaluate the economic benefits of investments and identify economically superior instruments and investing in ETIs [where they are economically equivalent].

• When a fiduciary prudently concludes that such an investment is justified solely on the economic merits of the investment, there is no need to evaluate collateral goals as “tie breakers.” And, setting aside the 2008 advice, there is no need for considerable documentation as to why (for example an ESG investment) was chosen.

• The Labor Department does not believe ERISA (the 1974 law and subsequent rules & regulations, and opinions) prohibits a fiduciary from addressing ETIs or incorporating ESG factors in investment policy statements or integrated ESG-related tools, metrics and analyses to evaluate an investment’s risk or return or choose among otherwise equivalent investments.

Cautionary guidance: In issuing the October 2015 Bulletin the DoL staff reminds fiduciaries that section 403 and 404 of ERISA do not permit fiduciaries to sacrifice the economic interests of the plan participants in receiving their promised benefits in order for the plan to pursue collateral goals. BUT — the DoL has “consistently recognized” that fiduciaries MAY consider collateral goals as tie-breakers when choosing between investment alternatives that are otherwise equal with respect to risk and return over the appropriate time horizon.

ERISA does not direct investment choice where investment alternatives are equivalent and the economic interests of the plan’s participants and beneficiaries are protected if the selected investment in economically equivalent to competing instruments.

Setting the Record Straight

The 2008 guidance appeared to say that investing with collateral goals in mind should be rare, and had to be documented to demonstrate compliance with ERISA’s “rigorous standards.” The 2015 guidance sets the record straight: “Plan fiduciaries should appropriately consider factors that potentially influence risk and return — ESG issues may have a direct relationship in the economic value of the plan investment. These issues are proper components of the fiduciary’s primary analysis of the economic merits of competing investment choices.”

Again, underscoring for the record: The Department does not believe ERISA prohibits a fiduciary from addressing ETIs or incorporate ESG factors in investments….

We could say that investors encouraging such actions as fiduciaries divesting fossil fuel companies because of concerns about “stranded assets” left in the ground (and not be counted as reserves) can breathe easier with the new DoL guidance.

John K.S. Wilson, head of corporate governance and engagement at Cornerstone Capital Group noted in response to the guidance: “An important purpose of this Interpretive Bulletin is to clarify that plan fiduciaries should appropriately consider factors that potentially influence risk and return. Environmental, social and governance issues may have a direct relationship to the economic value of the plan’s investments. Collateral benefits include environmental protection, social equity and financial stability, which Cornerstone considers necessary outcomes for the mitigation of long-term macroeconomic investment risk.” (Wilson is the former director of corporate governance at TIAA-CREF, where he oversaw voting of proxies at the CREF portfolio (8,000 companies.)

Sending a Clear Signal to Plan Fiduciaries

We see the Interpretive Bulletin as sending a clear signal to U.S. fiduciaries that considering ESG factors is recognized as an important part of the fiduciary’s duty in evaluating risk and return. As Social Finance commented in its reaction — “US DOL Announced ERISA Guidance to Unlock Impact Investments.” Over time — the guidance will (unlock ESG investing’s power. that is)!

You can read the U.S. Department of Labor Interpretive Bulletin summary at: http://www.dol.gov/opa/media/press/ebsa/EBSA20152045.htm

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Congratulations to US SIF chief executive officer Lisa Woll and her colleagues in continuing the long engagement with the Department of Labor to get clear guidance on ESG investing. Sustainable investing champions involved in the long engagement with the Department of Labor include Adam Kanzer (Domini Fund); Jonas Kron (Trillium); Meg Voorhes (SIF); Tim Smith (Walden Asset Management).