The World’s Eyes on the USA as FSOC Agencies Engage on Climate Risk

October 31, 2021 – As The Family of Nations gathers for COP 26 climate talks in Glasgow – the USA is back at at the table. 

What is President Joe Biden and the American delegation bringing with them to Scotland?  A big announcement from the White House just a few days ago that signals “we are serious”. Especially in regulatory and financial matters.

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

The gathering of the family of the world’s nations in Glasgow, Scotland for “COP 26” (the annual UN climate summit) is at hand!

There has been an increasing flow of news and opinion related to the big event as the United Nations, almost 200 sovereign governments, NGOs, corporations, and other constituencies announce a widening range of developments related to the summit now underway

In the United States, a significant announcement came in October as the Federal government’s FSOC – the Financial Stability Oversight Council “engaged on climate change”.

We’re sharing the important background with you:

You may recall that in May 2021, soon after taking office, The Biden-Harris Administration detailed the policies and actions of its “whole of government” approach to climate change in the “U.S. Climate-Related Risk Executive Order” (the “EO”) originally issued in May 2021.

The EO set out the federal government’s climate risk accountability framework and the implementation strategies for the “whole of government” approach to climate-related financial risk.

Think about the agencies affected by the EO: NASA; DoD; Labor; Interior; HHS; Education; the Federal Acquisition Council (considering GhG emissions when making buying decisions)…and many more.

The policies in the EO and in then implementation steps by Federal agencies are again in public view as President Joe Biden prepared to participate in the COP 26 meetings.

The White House reminded us of EO 14030 in a news announcement (“A Roadmap to Build a Climate-Resilient Economy”) on October 14th.

This was the backdrop for the announcement from the powerful FSOC via U.S. Treasury Department for planned measures to protect retirement plans, homeowners, consumers, businesses and supply chains, workers, and the federal government from the financial risks of climate change.

Policies and actions were outlined for us as the FSOC on October 21 at identified climate change as an emerging and increasing threat to financial stability.

To review: there are six important “workstreams” in the Federal government’s framework to address climate-related financial risk:

• Protecting the resilience of the U.S. financial system.
• Protecting life savings and pensions.
• Using Federal procurement (federal agencies are the largest buyers of goods and services in the nation).
• Incorporating the risks into Federal lending and underwriting.
• Incorporating the risks into the Federal financial management and budgeting.
• Building resilient infrastructure and communities.

In the historic May 2021 EO “financial regulation” was among the issues addressed; now we are seeing the implementation plans of the government’s Financial Stability Oversight Council (the FSOC), the member group of key regulators as the agencies of the council spell out approaches to engagement on climate change issues.

Important: the work of the regulatory agencies in the FSOC affects many aspects of the American society: the Federal Reserve System and 12 district banks; Department of Treasury; the Office of Comptroller of Currency (OCC), part of Treasury that regulates national banks; Securities & Exchange Commission (SEC); Commodity Trading Futures Commission (CTFC); and, Federal Housing Finance Agency (FHFA).

The FSOC’s new report demonstrates the Council’s and member Federal agencies’ commitment to building on and accelerating existing efforts on climate change through “concrete recommendations” to the individual member agencies.

In our conversations with corporate managers and investment professionals we often explain that after the 2008 financial crisis, the member nations of the G20 came together to address financial risk matters in the new Financial Stability Board (FSB). This is a “think tank” approach to developing policies that each G20 nation can bring back to their regulatory agencies for consideration.

The FSB created the TCFD (Task Force for Climate-related Financial Disclosure), chaired by Michael Bloomberg. Important to keep in mind: the representatives to the FSB are the Secretary of the Treasury; the Federal Reserve chair; and, the SEC chair.

Each of those regulatory agencies and their leaders are members of the Federal government’s Financial Stability Oversight Council.

Commenting on the latest developments at FSOC, former Federal Reserve chair, now Secretary of Treasury Janet Yellen noted: the FSOC report puts climate change squarely at the forefront of the agenda of [Council member agencies] and is a critical first step forward in addressing the threat of climate change…it will by no means be the end of this work…”

We share the important documents related to these development as President Joe Biden and his delegation start their conversations at COP 26. 

Top Story/Stories

U.S. Financial Stability Oversight Council Engages on Climate Change
https://home.treasury.gov/news/press-releases/jy0426

Secretary of Treasury Janet Yellen Comments
https://home.treasury.gov/news/press-releases/jy0424

From the White House: Executive Order #14030
https://www.whitehouse.gov/wp-content/uploads/2021/10/Climate-Finance-Report.pdf




More Details Roll Out – Biden-Harris Administration’s “Whole of Government” Climate Policies & Actions

June 2021  – This is a biggie!

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

The Biden-Harris Administration continues to roll out details of new or proposed or adjusted policies, rules, programs, Federal government financing and various actions to address what the leaders characterize as “the climate crisis”.

What we have now more details of the “Whole of Government” approach for these United States in addressing a widening range of climate change issues. 

In most crisis situations for large organizations, dramatic changes-of-course are always necessary – new paths must be followed.  And so we see…

President Joe Biden certainly being ambitious in navigating the way forward for the public sector in meeting the many climate change challenges (for actions by Federal, state, region, local governments).

President Biden signed yet another order for policy changes and various actions by the many agencies of the national government: “Executive Order #14030 on Climate-Related Financial Risk”.

The new EO #14030 sets out policy and actions to be taken by the whole of America’s public sector, a number of actions intended to be implemented in partnership with state & local governments and financial services sector institutions, and corporate and business interests…”designed to “better protect workers’ hard-earned savings, create good paying jobs, and position America to lead the global economy”.

EO  #14030 builds on the framework for climate change policies and actions set out in President Biden’s January 27th action: “Tackling the Climate Crisis at Home and Abroad” (that is EO #14008).

This and other execute branch orders are designed to “…spur creation of well-paying jobs and achieve a net-zero emissions economy no later than 2050”.

The new EO is intended to “…bolster the resilience of financial institutions and rural and urban communities, States, Tribes, territories…by marshalling the creativity, courage and capital of the United States…and address the climate crisis and not exacerbate its causes to position the U.S. to lead the global economy to a more prosperous and sustainable future…”

The latest order addresses the need for greater financial transparency of the Financial Services Sector — addressing banking, insurance, fiduciary duties of those managing assets — as well as addressing the aspects of Federal financing for business, governments and institutions, and Federal government budgeting both short- and long-term.

For example, the Secretary of the Treasury as chair is instructed to work with the other members of the Financial Stability Oversight Council (FSOC) to assess climate-related risk to the stability of the U.S. financial system; to facilitate sharing of climate-related financial risk data among the members of FSOC; to publish a report in six months on actions / recommendations related to oversight of Financial Institutions.

FSOC members are the influential of Financial Services regulation and oversight:  Treasury Department; the Office of Comptroller of the Currency (inside Treasury, overseeing national banks and foreign banks operating in the USA); chair of Securities & Exchange Commission; chair of the Federal Reserve System; head of FDIC; head of Commodity Futures Trading Commission; as well as a state insurance commissioner; a state banking commissioner; a state securities commissioner.

Addressed in the Executive Order:

  • disclosure and reporting by publicly-traded entities;
  • insurance industry “gaps” of climate-change issues that need to be addressed at Federal and state levels for private insurance;
  • the protection of “worker savings and pensions” (with ERISA and the Department of Labor in focus);
  • Federal level lending and underwriting, including financial aid, loans, grants of such agencies as the Department of Agriculture (farm aid);, and
  • Housing and Urban Development (funneling funds to local and state agencies as well as Federal level financial transactions); and,
  • Department of Veterans Affairs.

For companies providing services and products to the Federal government (largest buyer in the United States), there are numerous policy changes and actions to be taken by agencies that will affect many businesses in the U.S. and abroad.

For many companies this will mean much more disclosure on GHG emissions data, adoption of Science-based Emissions Reduction Targets, and disclosure of ESG policies and actions.

Federal agencies will be guided by policies to look more favorably on companies that bid on contracts [and have] more robust climate change policies and targets in place.

We are bringing here you news coverage and shared perspectives on the important new order and a link to the White House Executive Order in our Top Stories (below).

G&A Institute Perspective:  This EO builds on standing orders of recent years by prior presidents and the orders issued “since Day One” of the Biden-Harris Administration to address what is characterized as the “climate crisis” by President Joe Biden in his campaigning and since taking office.

There are announcements of actions taken and new and proposed policy changes just about every day now, following out of cabinet departments and other agencies of the Federal government.

This is all of the “Whole of Government Approach” to addressing climate change challenges, short- and long-term.

We’re seeing both significant and subtle changes taking place throughout the public sector, at Federal, State and local levels, actions that will increase the pressure on the corporate sector and capital market players to start or to enhance their “sustainability journey” and greatly increase the flow of ESG data and information out to both shareholders and stakeholders/constituencies.

The disclosure and reporting practices of publicly-traded and privately owned/managed corporate entities will be addressed through a variety of Federal agencies, including of course the Securities & Exchange Commission.

SEC has an invitation out to individual and organizations to suggest ways to enhance reporting of the corporate sustainability journey (or lack thereof).

The instructions to Federal agencies in the latest EO will result in stepped up demands by Federal agencies for companies to disclosure more ESG information, such as in bidding on projects and contracts, or seeking financing of various types.

There are many more details in the G&A Institute’s Resource Paper, click here to download a copy.

Let our team know what questions you have!

Top Stories

And related information:  The International Energy Agency (IEA) Report coverage:

Federal Policymakers & Regulators Embrace or Reject ESG / Sustainability Factors – a Complicated Story of To & Fro

March 23, 3021

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

Federal policymaking and regulation with respect to investor risk and opportunity in the United States of America is a complicated story played out over almost a century. 

The modern era of laws passed/rules adopted to implement got underway in earnest in 1933 and 1934 following the October 1929 “Black Tuesday” stock market crash and subsequent failure of Wall Street firms and banks.

The Securities Act of 1933 and The Exchange Act of 1934 are the solid foundations of most of the investor protection laws and rules that have followed.

For example, the comprehensive package of changes and reforms that comprised the Sarbanes-Oxley Act of 2002 (assembled as “Public Companies Accounting Reform and Investor Protection Act” in the US Senate [and] “Corporate and Auditing Accountability, Responsibility, and Transparency Act” in the House of Representatives, with 11 separate “titles” in what we today call “Sarbanes-Oxley”) was in part constructed on the solid foundation of the 1934 legislation.

An important driver for SOX moving ahead in the Congress were the collapse of Enron and WorldCom and other firms – dramatically impacting many investors who clamored for change.  (Ah, such crisis events – quicken the pulse and move legislators do the their job.)

The passage of the Employee Retirement Income Security Act of 1974 (“ERISA” for shorthand) following collapse of some retirement plans and reports of negative practices at others was intended to protect plans and participants and address fiduciary duties; included was provision for greater transparency for (private industry) retirement and health plans and those who manage them.

Part of ERISA provides fiduciary responsibilities for managers / those who are in control of plan assets. The agency responsible for enforcing the rules:  The U.S. Department of Labor, a cabinet office of the Executive Branch. And subject, of course, to the political winds of the day.

It’s important to note that the critical elements of the above sweep of Federal government policymaking (enacting laws, assigning responsible arms of government, developing rules, procedures, interpretations & guidance for players involved) are protection. 

The independent Securities & Exchange Commission, as example, was established in 1934 under The Exchange Act to enforce both the ’33 and ’34 acts — essentially to protect investors.

Protection – Guidance:  All good and well.  But these important creations of political bodies are subject to the politics of the time, the era, the whims of people elected to high office and the people they in turn appoint to manage regulatory agencies.

And so, we come to today’s sustainable investing and corporate sustainability topics.

We ask:  are the operating rules, guidance, enforcement, agency management philosophies…keeping up with important changes? Like the emergence of investor preference for sustainable products, including in their retirement and health plans?

Many eyes are on the SEC these days with the Biden-Harris Administration putting forth an aggressive “climate crisis” agenda; with the Federal Reserve System adopting climate change-related policies; and a few days with the easing-off-leading-to-reversal policy of the US DOL with regard to guidance on consideration of ESG in investment decision-making by fiduciaries of plans.

The last is in focus for our Top Stories in this issue of the G&A Institute weekly newsletter.

As a brief example of the to and fro of political positioning by regulatory agencies – from Trump-era decision to Biden-era decision (reversal).

The changes moved quickly at Labor (November 2020 to March 2021).  The decisions to be made at the SEC, sought by many investors to address both ESG risk (protection) and opportunity for investors is a much more complicated story.  No doubt in weeks to come there’ll be welcome news there to share with you in the newsletter.

The sturdy foundations of the ’33, ‘34’ ’74, ’02, and 2010 and other laws and rules can be built on to address both corporate and investor ESG needs & wants in 2021.

For now – take a look at the to and fro of current ESG policies at the US Department of Labor ERISA situation.

TOP STORIES

Picking Up Speed – Adoption of the FSB’s TCFD Recommendations…

January 21 2021

by Hank BoernerChair & Chief StrategistG&A Institute

Countries around the world are tuning in to the TCFD and exploring ways to guide the business sector to report on ever more important climate related disclosures.  Embracing of the Task Force recommendations is a key policy move by governments around the world.

After the 2008 global financial crisis, the major economies that are member-nations of the “G20” formed the Financial Stability Board (FSB) to serve a collective think tank and forum for the world’s leading developed countries to develop strong regulatory, supervisory, and other financial sector policies (guidance, legislation, regulations, rules).

Member-nations can adopt the policies or concepts for same developed collectively in the FSB setting back in their home nations to help to address financial sector issues with new legislative and/or adopted/adjusted rules, and issue guidance to key market players. The FSB collaborates with other bodies such as the International Monetary Fund (the IMF).

FSB operates “by moral suasion and peer pressure” to set internationally-agreed to policies and minimum standards that member nations then can implement at home. In the USA, members include the SEC, Treasury Department and Federal Reserve System.

In December 2015, as climate change issues moved to center stage and the Paris Agreement (at COP 21) was reached by 196 nations, the FSB created the Task Force on Climate-related Financial Disclosures, with Michael Bloomberg as chair.  The “TCFD” then set out to develop guidelines for corporate disclosure on climate change-related issues and topics.

These recommendations were released in 2017, and since then some 1,700 organizations endorsed the recommendations (as signatories); these included companies, governments, investors, NGOs, and others.

Individual countries are taking measures within their borders to encourage corporations to adopt disclosure and reporting recommendations. There are four pillars -– governance, strategy, risk management, and metrics & targets.

A growing number of publicly-traded companies have been adopting these recommendations in various ways and publishing standalone reports or including TCFD information and data in their Proxy Statements, 10-ks, and in sustainability reports.

The key challenge many companies face is the recommendations for rigorous scenario testing to gauge the resiliency of the enterprise (and ability to succeed!) in the 2C degree environment (and beyond, to 4C and even 6C),,,over the rest of the decades of this 21st Century.

Many eyes are on Europe where corporate sustainability reporting first became a “must do” for business enterprises, in the process setting the pace for other regions.  So – what is going on now in the region with the most experienced of corporate reporters are based?  Some recent news:

The Federal Council of Switzerland called on the country’s corporations to implement the TCFD recommendations on a voluntary basis to report on climate change issues.

Consider the leading corporations of that nation — Nestle, ABB, Novartis, Roche, LarfargeHolcim, Glencore — their sustainability reporting often sets the pace for peers and industry or sector categories worldwide.

Switzerland — noted the council — could strengthen the reputation of the nation as global leader in sustainable financial services. A bill is pending now to make the recommendations binding.

The Amsterdam-based Global Reporting Initiative (GRI) is backing an EU Commission proposal for the European Financial Reporting Advisory Group (EFRAG) to consider what would be needed to create non-financial reporting standards (the group now advises on financial standards only). The dual track efforts to help to standardize the disparate methods of non-financial reporting that exist today.

The move could help to create a Europe-wide standard. The GRI suggests that its Global Sustainability Standards Board (GSSB) could make important contributions to the European standard-setting initiative.

And, notes GRI, the GSSB could help to address the critical need for one global set of sustainability reporting standards.  To keep in mind:  the GRI standards today are the most widely-used worldwide for corporate sustainability reporting (the effort began with the first corporate reports being published following the “G1” guidelines back in 1999-2000).

The United Kingdom is the first country to make disclosures about the business impacts of climate change using TCFD mandatory by 2025.

The U.K. is now a “former member” of the European Union (upon the recent completion of “Brexit” process), but in many ways is considered to be a part of the European region. The UK move should be viewed in the context of more investors and sovereign nations demanding that corporations curb their GhG emissions and help society move toward the low-carbon economy.

In the U.K., the influential royal, Prince Charles — formally titled as the Prince of Wales — has also launched a new charter to promote sustainable practices within the private sector.  He has been a champion of addressing climate challenges for decades.

The “Terra Carta” charter sets out a 10-point action plan designed to reduce the carbon footprint of the business sector by year 2030.  This is part of the Sustainable Markets Initiative launched by the prince at the January 2020 meeting in Davos, Switzerland at the World Economic Forum gathering.

Prince Charles called on world leaders to support the charter “to bring prosperity into harmony with nature, people and planet”. This could be the basis of global value creation, he explains, with the power of nature combined with the transformative innovation and resources of the private sector.

We closely monitor developments in Europe and the U.K. to examine the trends in the region that shape corporate sustainability reporting — and that could gain momentum to become global standards.  Or, at least help to shape the disclosure and reporting activities of North American, Latin American, Asia-Pacific, and African companies.

It is expected that the policies that will come from the Biden-Harris Administration in the United States of America will more strenuously align North American public sector (and by influence, the corporate sector and financial markets) with what is going on in Europe and the United Kingdom.  Stay Tuned!

TOP STORIES FOR YOU FROM THE UK AND EUROPE

Items of interest — non-financial reporting development in Europe:

US Banks and Climate Change – What’s the Exposure to Climate Risk?

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

October 27 2020

Banks have long been at the center of the U.S. economy, and federal policies (federal legislation, rules) for the last century have been designed to support, encourage and protect banking institutions, and the customers the banks serve.

The Federal Reserve System – America’s vital central bankers – was one of the last central banks of the industrial nations to be organized (through the 1913 Federal Reserve Act). The Fed plays a critical role in U.S. bank oversight and support.

There is also a robust state-level banking oversight and protection system. Take New York State  — for many years, the state’s bank licensure activities were second only to the Federal governments. Many foreign banks “land” in NY and obtain a state license to begin to operate.

In all this oversight and protection [of the banking system], in all the laws, rules and regulations for the U.S. banking sector, risk is regularly addressed. It is central to bank regulation and the foundation of rules etc.

The questions centered on risk become more critical in this, an era of fast-rising climate change challenges.

What is the broad scope the financial services sectors’ (and the banking industry’s) responsibilities and accountabilities as seas rise, super storms roar ashore, flood waters rise, enormous wildfires occur, and more?

The Ceres organization’s “Ceres Accelerator for Sustainable Capital Markets” looked at the U.S. banking sector’s exposure to climate risk – to ask and try to answer: what are the systemic and financial risks of climate change for stakeholders, for the banking industry, and the broader economy?  That’s our Top Story pick for you this week.

The researchers looked at the risk associated with the syndicated lending of major U.S. banks in climate-relevant sectors of the economy. Key quote: “Our future depends on banks’ understanding of, and disclosure of, their exposure to major risks like climate change” (Steven Rothstein, MD of the accelerator).

The good news is that a growing number of the major U.S. banks have announced moves to look more closely at climate change impacts. Bank of America, for example, joined other big banks in disclosing the “E” effect of its lending practices. The big banks (like Citi Group) have joined forces in the Partnership for Carbon Accounting Financials Initiative.

Some 70 banks and investors from five continents are involved (with US$9 trillion in AUM). Lots going on in banking circles related to climate change challenges these days!

TOP STORIES

The Ceres Accelerator for Sustainable Capital Markets report on banking:

Something we were pleased to be a part of — WSJ Feature Section on “Leadership and Sustainability”. Journalists Dieter Holger and Fabiana Negrin Ocha interviewed the G&A leadership team in the “Show Us The Numbers” feature:

Reporting and Disclosing Corporate ESG & Sustainability Results– Key Resources Roundup

By Kelly Mumford – Sustainability Reporting Analyst Intern – G&A Institute

Sustainability, Corporate Responsibility, and Environmental Social Governance (ESG) – these are some of the key buzz words circulating in capital markets’ circles that have become increasingly more important to both investors and corporate leaders as the risks of climate change to business organizations steadily increase.

We are now at the critical tipping point where it is necessary for all businesses to publicly report on and in various ways amply disclose how climate related risks — and related opportunities – and other issues such as Human Rights and Human Capital Management (HCM) might affect their business. And, to disclose what they are doing to address and mitigate such risks.

A recent institutional investor survey report by the Harvard Law School Forum on Corporate Governance that focused on ESG risk and opportunities found that investors recognize the growing risks of non-financial factors such as climate change, which is at the top of the agenda.

Climate change issues and human capital management were cited in the 2020 survey as the top sustainability topics that investors are focusing on when engaging with their boards.

Regardless of sector, all companies understand the importance of engaging with these topics. With that said, ESG and sustainability topics are playing a more concrete role in the private sector.

The good news is that there are significant resources available to help companies measure and report on sustainability and ESG, promote greater transparency, demonstrate better risk management, talk about improved performance, and in turn better promote the corporate brand value and reputation.

Such corporate disclosure and reporting have been shown to help to create higher shareholder returns and improve corporate economic performance.

With this in mind, standardized frameworks and indices are being used by corporations to provide more accurate and transparent information to their investors as well as all of their stakeholders.

However, as more diverse resources become available (examples are sustainability and responsibility frameworks, indices, and standards) there is also a need for distinctions to be made among them. To group all of these resources together would be inaccurate and misleading as each has unique advantages and distinction for both investors and corporate reporters.

Some of the key resources available in this space include: SASB, MSCI, Sustainalytics, Institutional Shareholder Services (ISS), Dow Jones Sustainability Index (the DJSI), TCFD, CDP, SDGs, and GRI.

To more easily understand their similarities and differences these can be grouped into broader categories. Such categories include: reporting standards, ESG ratings, indices, disclosure frameworks, investor surveys, and international goals. We’ll explain these in this commentary.

ABOUT CORPORATE REPORTING STANDARDS
The leading reporting standards present an effective way for companies to structure and publicly disclose “non- financial” information — such as strategies, actions, performance and outcomes for governance, environmental, and social impacts of the company. (That is, impacts affecting stakeholders, including investors.)

These important disclosures can be identified in the form of “sustainability, corporate responsibility, corporate citizenship” reporting.  Many such corporate reports explain how a company measures ESG performance, sets goals, and manages programs effectively – and then communicates their impact to stakeholders.

Reporting standards help to streamline the process of corporate reporting and allow stakeholders to better identify non-financial disclosures against widely used and accepted standards.

THE GLOBAL REPORTING INITIATIVE (GRI)
This is a long-established, independent organization (a foundation) that has helped to pioneer sustainability reporting. Since 1997 the organization has been working with the business sector and governments to help organizations (corporations, public sector and social sector organizations) communicate their impact and sustainability issues –such as climate change, human rights, governance and social well-being.

The current GRI sustainability reporting standards evolved out of four prior generations of frameworks dating to 1999-2000 (when the first reports were published, using “G1”) — and today is one of the most commonly-used with diverse multi stakeholder contributions to standards-setting.

GRI has been responsible for transforming sustainability reporting into a growing practice and today about 93% of the largest corporations report their sustainability performance using the GRI Standards.

  • Advantage of use for reporters: corporate reporting using the GRI standards helps to create consistent disclosures and facilitates engagement with stakeholders on existing and emerging sustainability issues. Further, use of GRI standards helps to create a more consistent and reliable landscape for sustainability reporting frameworks for both the reporters and their constituencies, especially including investors.

THE SUSTAINABILITY ACCOUNTING STANDARDS BOARD (SASB)
These more recent standards enable business leaders to identify, manage, and communicate financially-material sustainability information to investors. There are now 77 industry-specific standards (for 11 sectors) available for guidance.  These standards for an industry (and many companies are classified in more than one industry) help managers to identify the minimal set of financially-material sustainability topics and associated metrics for companies in each industry.

SASB standards help company managements to identify topics most relevant to their enterprise, and communicate sustainability data more efficiently and effectively for investors.

  • Can be used alone, with other reporting frameworks, or as part of an integrated reporting process. The G&A Institute team in assisting companies with their reporting activities use a hybrid approach, using both GRI and SASB as best practice.

 

ESG RATINGS/ DATA SUPPLIERS
A growing number of independent third-party providers have created ESG performance ratings, rankings and scores, resulting from assessment and measurements of corporate ESG performance over time against peers for investor clients. These ratings often form the basis of engagement and discussion between investors and companies on matters related to ESG performance.

There are several major ratings with varying methodology, scope, and coverage that are influencing the capital markets. Keep in mind there are numerous ESG data providers and ratings providing information to investors and stakeholders; however, for the scope of this post not all are mentioned.

INSTITUTIONAL SHAREHOLDER SERVICES (ISS) — ESG GOVERNANCE QUALITYSCORES(R)
ISS is a long-time provider of “corporate governance solutions” for institutional asset owners, their internal and external managers, and service providers. ISS provides a variety of ESG solutions for investors to implement responsible investment policies. The firm also provides climate change data and analytics and develops a Quality Score (for G, S and E) that provides research findings on corporate governance as well as social and environmental performance of publicly-traded global companies for its investor clients.

The ESG Governance QualityScore is described as a scoring and screening solution for investors to review the governance quality and risks of a publicly-traded company.

Scores are provided for the overall company and organized into four categories — covering Board Structure, Compensation, Shareholder Rights, and Audit & Risk Oversight.

Many factors are included in this score but overall the foundation of scoring begins with corporate governance, the long-time specialty of this important provider.

  • ISS Advantage: as a leading provider of corporate governance, the ISS ESG Governance QualityScore leverages this firm’s deep knowledge across key capital markets. Further, these rankings are relative to an index and region to ensure that the rankings are relevant to the market that the public company operates in.

MSCI ESG RATINGS
MSCI has a specific ESG Index Framework designed to represent the performance of the most common ESG investment approaches by leveraging ESG criteria. Indexes are organized into three categories: integration, values, and impact.

MSCI also creates corporate ESG ratings by collecting data for each company based on 37 key ESG issues. AI methodology is used to increase precision and validate data as well as alternative data to minimize reliance on voluntary disclosure.

Consider:

  • MSCI is the largest provider of ESG ratings with over 1,500 equity and fixed-income ESG Indexes. The firm provides ESG ratings for over 7,500 global companies and more than 650,000 equity and fixed-income securities (as of October 2019).
  • Advantages for investors: Focuses on intersection between a company’s core business and industry-specific issues that can create risks and opportunities. ESG ratings gives companies a rated score of AAA-to-CCC, which are relative to industry peers. Companies are rated according to their exposure to risk and how well they manage risks relative to peers. Companies are analyzed on calendar year basis and are able to respond to the profile developed for investors by MSCI analysts.

SUSTAINALYTICS
This organization rates sustainability of exchange-listed companies based on environmental, social, and corporate governance (ESG) performance. The focus is on ESG and corporate governance research and ratings.

What makes them unique: their ESG Risk Ratings are designed to help investors identify and understand material ESG risks at the security and the portfolio level.

The corporate ESG risk rating is calculated by assessing the amount of unmanaged risk for each material ESG issue that is examined. The issues are analyzed varying by industry and depending on industry, a weight is given to each ESG issue.

  • Key: The assessment focuses on most material risks, using a two-dimensional lens to assess what risks the corporation faces and how well leadership manages the identified risks. Absolute ratings enable comparability across industries and companies for investors; corporate governance ratings are integrated into the ESG risk rating, and controversy research is also considered for the risk ratings. The performance is based on both quantitative metrics and an assessment of controversial incidents, allowing for the complete picture to be demonstrated with the ESG ranking.
  • Unique point: Total ESG risk score is also presented as a percentile so it can be compared across industries. This allows for a better understanding of how the industry performs as a whole, so to better assess how well a company is performing relatively.

SOME OF THE LEADING INDICES
Indexes / benchmarks help to make capital markets more accessible, credible, and products or approaches better structured for investors. They allow for performance benchmarks to represent how equity and/or fixed-income securities are performing against peers.

Specialized ESG indices specifically have been gaining in favor over the recent years as investors become more interested in responsible / sustainable investing. This out-performance is evident in the time of the coronavirus crisis with ESG funds inflow exceeding outflow of traditional indexes. Investors see this as a sign of resilience and excellence in risk performance for ESG companies.

It is evident that ESG index funds have been outperforming key core indexes — such as the S&P 500 Index(r). (The new S&P 500 ESG Index has been outperforming the long-established sister fund.)

Also, the growing abundance of ESG data and research has helped to promote the development and embrace of corporate ESG ratings, which in turn allows for the construction of even more such indices.

Because these indexes represent the performance of securities in terms of ESG criteria relative to their peers, it helps define the ESG market and availability of sustainable investing options.

There are now numerous ESG Indices available to investors – to cover them all that would require another blog post. So, for the sake of this brief post only DJSI is mentioned, as it is one of the mostly widely-known and frequently used by global investors.

DOW JONES SUSTAINABILITY INDICES (DJSI)
This is a family of indices evaluating the sustainability performance of thousands of publicly-traded companies. DJSI tracks the ESG performance of the world’s leading companies in terms of critical economic, environmental, and social criteria. These are important benchmarks for investors who recognize that corporate sustainable practices create shareholder value. The indexes were created jointly with Dow Jones Indexes, and SAM, now a division of S&P Global Ratings (which owns the DJSI).

  • This was the first global sustainability index – created in 1999 by SAM (Sustainable Asset Management of Switzerland) and Dow Jones Indices. Today, owned and managed by S&P Global Ratings.
  • Advantage for investors: Combines the experience of an established index provider with the expertise of a sustainable investing analytics to select most sustainable companies for the indexes from across 61 industries. Calculated in price and total return disseminated in real time. This is an important benchmark for many financial institutions.
  • Selection process is based on companies’ total sustainability score from annual SAM Corporate Sustainability Assessment (the important CSA that results in the corporate profile). All industries are included, and the top 10% (for global indices, top 20% for regional indices, and top 30% for country indices) of companies per industry are selected

CORPORATE DISCLOSURE FRAMEWORKS
Disclosure frameworks are used to improve the effectiveness of financial disclosures by facilitating clear communication about certain criteria. There are long-standing frameworks such as created by the Financial Accounting Standards Board (FASB) that establish standards for U.S. corporate financial accounting.

Similarly, there is now a suggested disclosure framework related to the corporation’s financial information but that focuses on climate related risks and opportunities — the Financial Stability Boards’ “Taskforce on Climate-related Financial Disclosures” — or TCFD. (The FSB is an organization of the G20 countries; member participants are the securities and financial services administrators and central bankers of the largest economies.  The U.S. members include SEC, the Federal Reserve System and the Treasury Department.  The FSB considers future regulations that could be considered in the member countries.)

As the capital markets players interest in corporate sustainability and ESG grows, and public policy makers recognize the threat of many ESG issues to the health of their nations, it is not surprising that there would be a specific resource developed for corporate climate-related financial disclosures.

Investors have a heightened awareness of the risks that climate change issues poses to their holdings, so it is now considered to be a best practice for company managements to report and disclose on these risks and responses to address them – using among other resources the TCFD recommendations for disclosure.  Here is what you need to know:

TASKFORCE ON CLIMATE RELATED FINANCIAL DISCLOSURES (TCFD)
Developed by the Financial Stability Board (FSB) to encourage voluntary, consistent, climate related financial disclosures that could be useful to investors. N.Y.C. Mayor/Bloomberg LP founder Michael Bloomberg serves as the chairman and founder of the task force (which has a 32-member board).

The “TCFD” recommendations for corporate disclosure are intended to help both publicly-traded companies and investors consider the risks and opportunities associated with the challenges of climate change and what constitutes effective disclosures across industries and sectors.

This approach enables users of financial information to better assess risk and helps to promote better corporate disclosure. The recommendations call for disclosure around four core areas — governance, strategy, risk management, and metrics and targets.

To keep in mind:

  • The initial recommendations applied to four financial sector organizations (bankers, insurers, asset owners, asset managers). And to four industry categories – oil & gas; food & agriculture; transport; building materials and management.
  • Advantage for companies: following the TCFD recommendations represents an opportunity for companies following the recommendations to bring climate-related financial reporting to a wider audience.

INVESTOR-FOCUSED SURVEYS – CORPORATE RESPONSES
Investor interest surveys — such as those conducted by CDP – can provide an advantage for companies in responding to disclose important ESG data and take part in the movement towards building a carbon-neutral economy.

The information provided to CDP by companies makes up the most comprehensive dataset tracking global climate progress. Investors use these volumes of data on climate change, deforestation, supply chain management and water security to inform decision-making, engage with companies, and identify risks and opportunities.

Corporate response to the annual, global surveys benefits investors and provides companies with ways to inform investor engagement strategies.

CDP
Established by investors 20 years ago as the Carbon Disclosure Project, CDP today is an organization that supports the movement of cities and companies toward greater measurement, management and disclosure of key data and information to promote a carbon neutral economy.

These data helps to manage risks and opportunities associated with climate change, water security and deforestation. More than 2,000 companies in North America and 8,000 globally disclose data through CDP.

Disclosure is key, not only for measuring impact but also for setting goals and targets that enable climate action. CDP has been at the forefront of the disclosure movement to track and measure global progress towards building a more sustainable world.

  • Advantage: reporting to CDP is advantageous because it helps companies get ahead of regulatory and policy changes, identify certain ESG risks, and find new opportunities to manage those risks in a way that is beneficial for both business — and the planet.
  • TCFD Connection: The CDP response questions have been aligned with the TCFD and a good comprehensive CDP response can provide a baseline for a majority of the necessary disclosures for TCFD.

INTERNATIONAL GOALS – THE SUSTAINABLE DEVELOPMENT GOALS (SDGS)
The United Nations Sustainable Development Goals are unique in that they are a set of widely-accepted international goals. Countries, cities, and companies all over the world and use these goals as a way to inform and inspire action on sustainable development goals. The goals are very broad in aims so it allows for parties to adapt and use the goals that are most relevant. They are non-binding and therefore their implementation depends on local government or corporate polices to be upheld.

These are a United Nations-developed plan to [among the goals] end extreme poverty, reduce inequality, and protect the planet. The SDGs succeeded the Millennium Goals (2000-to-2015) and extend collaborative and independent action out to year 2030 by public, private and social sector organizations.  The goals (17 in all with 169 underlying targets) have been adopted by 193 countries and emerged as a result of the most comprehensive multi-party negotiations in the history of the United Nations.

The SDGs focus on ways to generate impact and improve the lives of all people. The goals are related to themes such as water, energy, climate, oceans, urbanization, transport, and science and technology.

  • The SDGs are not focused on any sector or stakeholder in specific. Instead they serve as a general guidance that can be used at any level.
  • Distinctions: as one of the most widely recognized frameworks for corporate consideration, companies and stakeholders can use the Goals as a way to guide their sustainability initiatives. Many companies recognize them in corporate reports and many align certain aspects of their mission to relevant SDGs.

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AUTHOR’S CONCLUSION
As asset owners and asset managers now expect – and demand – greater corporate disclosure on climate change-related topics and issues, there are numerous resources available for managers to create and inform comprehensive, compelling reports for public access.

It is up to company leaders to identify the category of resources that would best benefit them, whether that be aligning with a disclosure framework, answering a CDP survey, or using ESG ratings. Most leading companies are taking a hybrid approach and utilizing the best features of the most common frameworks to maximize the ROI of their investments in this area.  We’ve identified some of the most-utilized here but there are still many more resources available in each category depending on industry, sector, geography, nature of the business, and other factors.

While the large universe and diversity of sustainability and ESG disclosure and reporting resources might be confusing to make sense of, it is increasingly obvious that investors are relying on ESG factors when making decisions and that the importance of climate change is only growing.

The team at Governance & Accountability Institute are experts in helping corporate clients work with the frameworks, etc. profiled here.  I serve as a reporting analyst-intern at, reviewing literally dozens of corporate sustainability / ESG / citizenship – responsibility – citizenship et al reports each month.

ABOUT KELLY MUMFORD 
Kelly Mumford is a graduate of the Development Planning Unit at the University College London. She graduated with a Master’s of Science in Environment and Sustainable Development (with Merit). Her course focused on environmental planning and management in developing countries and culminated with a month of field work in Freetown, Sierra Leone. She led a group during their research on the water and sanitation practices of a coastal community in the city of Freetown. Her work in preparation for this fieldwork includes a policy brief, published by their partner research organization.

Kelly has been very active in the environmental sector and prior to this interned at Natural Resources Defense Council. She holds a Sustainability Associate Credential from the International Society of Sustainability Professionals and has been an active member of the organization, planning and executing a successful N.Y.C. chapter’s whale watching event. She holds a B.A. in Environmental Studies and a minor in Spanish studies from the University of Delaware. She plans to pursue a career in sustainability, focusing on ESG and leveraging her research experience and knowledge of sustainability reporting.

ADDITIONAL RESOURCES

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.

* * * * * * * *

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!

 

G20 & Central Banks Response on COVID-19 — Global Challenge Requires Global Response

By Sofia Yialama – Sustainability Reporting Analyst-Intern, G&A Institute

Exploring how the G20 leaders plan to preserve the global financial safety.

The G20 Group, representing both developed and developing countries and the 80% of the world’s economic output, recently expressed its willingness and responsibility to undertake an immediate, coordinated and bold response on the current global health and economic crisis.

At the latest virtual G20 Leader’s Summit, the leaders of the world’s largest economies committed to amplify their fiscal, credit and monetary support aiming to bolster the resilience and stability of the global economy, provide adequate stimulus packages and safeguard the global market from a global recession.

In a spirit of cooperation and readiness to support the global economy, the G2O nations, among other commitments, pledged to underpin the global economy with over US$5 trillion, as part of targeted fiscal policy, economic measures, and guarantee schemes.

All together, they expressed their support to the central banks and highlighted the urgent need for cooperation between them and the International Monetary Fund (IMF) and the World Bank in order to mobilize emergency funding.

To surmount the socio-economic impact from COVID-19 and ensure market recovery in all countries, they also mandated their respective Finance Ministers and Central Bank Governors to develop a G20 joint action plan.

Following the G20 Leader’s Communiqué, the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC Ministerial Meeting on 9th April and the G20 Energy Ministers Meeting on 10th April, were both crucial for the global economic stability.

“OPEC+” (“plus”) is joining forces with the G20 to coordinate the supply/demand imbalance in the international oil market and finally work to end the recent oil price war during such exceptionally difficult times. This was characterized as ‘a historic show of cooperation” and “by far the biggest supply deal in history”.

Enough Effort – Is More Action Needed?

Are these actions enough to counteract the detrimental coronavirus impact on the global economy?

Front-line international organizations — such as the United Nations, the International Chamber of Shipping (ICS) and the International Association of Ports and Harbours (IAPH) — have called on G20 leaders to provide explicit support to vulnerable countries and sectors in high risk, respectively.

At the same time, a strong international group, including various former presidents and prime ministers, with an open letter to G20 leaders, asked them to set up a G20 Executive Task-force and accelerate the development of an action plan for COVID-19, along with targeted financial packages to support the global health system and provide essential financial aid to the developing countries, especially in Africa.

These facts showcase that the world needs urgent coordinated action.

Which system will last by the end of the virus crisis? The cooperation pact or the self-protectionism?

How the central banks of key G20 members responded on COVID-19

In 2009, after the 2008 global financial crisis, the G20 group urged the establishment of the Financial Stability Board (FSB) to gather treasury ministries and central bank governors together with the aim of coordinating actions and find solutions for the global financial system’s vulnerabilities.

For this reason, it is highly important now to examine how the central banks of the world’s largest economies have responded during the pandemic.

Central banks have taken surprising credit, regulatory and monetary measures to ensure adequate liquidity in the market and uphold the credit safety of businesses and households.

And at this moment, as the rampant spread of the virus continues, every day each of the banks announce additional financial packages to prevent the economic collapse.

So far, the central banks of key G20 member countries — notably the US Federal Reserve (Fed), the European Central Bank (ECB), the People’s Bank of China (PBOC), the Bank of Japan (BOJ), and the Bank of England (BOE) — have moved to:

  • monetary policy easing and unprecedented cut of interest rates,
  • increasing lending,
  • provision of cheaper loans and new funding schemes,
  • emergency free lending to other financial and non-financial institutions,
  • easing bond issuance, and
  • additional incentives for SMEs.

Further, as a joint response, the central banks of the U.S., Canada, Japan, Euro Area, the U.K., and Switzerland, enhanced further the provision of liquidity via the standing US dollar liquidity swap line arrangements.

The extraordinary measure of cutting rates to near zero started from the U.S. Fed and triggered similar measures by other central banks all over the world — such as in New Zealand, Japan and South Korea and Australia.

As a result, this extreme U.S decision spurred the “domino effect” and so, other non-G20 central banks followed on reducing their interest rates.

Are these coordinated measures enough to save the global financial system?

The answer is still vague, as the pandemic is still ongoing in all the affected countries.

As the title of this document says, a global challenge requires a global response.

The world economies now are called to action in order to secure a sustainable and resilient future.

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About the Author

Sofia Yialama is a GRI-certified Senior Sustainability Research Analyst from Greece. She holds a Bachelor and MSc degree in International and European studies and her areas of expertise include international relations, international cooperation and sustainable development.

As a former E.U Projects Consultant and member in regional Task Forces, she has significant experience in project management in sectors such as

Sustainability in the Blue Economy sectors, Green Economy, Sustainable Tourism and Nature-Based solutions.

Her solid career objective and self-motivation is to inspire, influence and develop initiatives and projects coupled with multilateral partnerships towards achieving “Sustainability Transition” in the private sector.

# # #

References 

  1. https://g20.org/en/media/Documents/FMCBG_Extraordinary_Press%20Release.pdf
  2. https://g20.org/en/media/Documents/G20_PR_Second%20Virtual%20FMCBG%20Meeting_30%20March_ENG%20(1).pdf
  3. https://g20.org/en/media/Documents/Virtual_Leaders_Summit_King_Salman_Opening_Remarks_EN.pdf
  4. https://g20.org/en/media/Documents/G20_Extraordinary%20G20%20Leaders%E2%80%99%20Summit_Statement_EN%20(3).pdf
  5. https://www.theguardian.com/world/2020/apr/07/coronavirus-global-leaders-urge-g20-to-tackle-twin-health-and-economic-crises
  6. https://www.japantimes.co.jp/opinion/2020/04/08/commentary/world-commentary/now-never-global-leadership-covid-19/#.XpMfFMgzbIU
  7. https://www.ft.com/content/150df67ba-839f-455a-9546-6edf72a08df0
  8. https://www.opec.org/opec_web/en/press_room/5882.htm
  9. https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#U
  10. https://www.bankofengland.co.uk/coronavirus
  11. https://www.piie.com/blogs/realtime-economic-issues-watch/timeline-central-bank-responses-covid-19-pandemic
  12. https://www.oecd.org/about/secretary-general/Coronavirus-COVID-19-Joint-actions-to-win-the-war.pdf
  13. https://www.federalreserve.gov/newsevents/pressreleases/monetary20200409a.htm
  14. https://www.boc.cn/en/
  15. https://www.boj.or.jp/en/index.htm/
  16. https://www.ecb.europa.eu/home/html/index.en.html
  17. https://www.seatrade-maritime.com/regulation/ics-iaph-joint-call-g20-support-maritime-sector-and-global-supply-chains
  18. https://www.reuters.com/article/us-health-coronavirus-central-banks-glob/global-central-banks-pull-out-all-stops-as-coronavirus-paralyzes-economies-idUSKBN2130KR
  19. https://www.un.org/sg/en/content/sg/note-correspondents/2020-03-24/note-correspondents-letter-the-secretary-general-g-20-members

Have You Tuned in to The Green New Deal? The “GND”? — You’d Better!

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

Here we are at the start of year 2019 and the nation’s 116th U.S. Congress. Radical and exciting ideas with something for everyone from Wall Street to Main Street to the Corporate Suite and Board Room are now on the table for discussion as this new Congress gets settled in.  We are tuning in to this emerging movement…

Question for you: Have you tuned in to the “Green New Deal”? The “GND” is a concept advanced first by The Green Party in the 2016 election cycle; the concepts gained traction bit-by-bit over time and have been embraced by a fiery new member of the 116th Congress as a platform for re-doing our economic system, our political system, public policies of many kinds.  As well re-structuring our nation’s monetary policy (with creative new stimuli suggested for financing important infrastructure in place to meet climate change challenges) …and more. Much more.

The new champion advancing the GND today is Representative Alexandria Ocasio-Cortez, a first-term democratic socialist from New York City.

The proposals are dramatic, bold, sweeping — with something that some people can love and champion and other condemn and do battle against.

We should recall here for perspective that the original New Deal was ushered in by newly-elected President Franklin Delano Roosevelt upon taking office in March 1933…in the midst of the Great Depression.

Sweeping, radical ideas were then needed to literally save the U.S. economy and avoid slipping into some form of communism, fascism, or worse. The stakes were high.

At the time, the country’s economy – and people! – were being crushed by the negative forces of the Great Depression, which followed the disastrous crash of the stock market in October 1929.

Manufacturers’ lots were filled with unsold merchandise, or in many cases factories were being shuttered and workers laid off. There was a global trade war looming (with passage of the Smoot Hawley protective trade legislation). Fascism was on the rise in Europe. European countries were in an expensive arms race. Many countries were not able to pay their debts. U.S. banks were closing by the scores and then in the thousands in this country. There were few safety nets.

Said President FDR: “I pledge you, I pledge myself, to a new deal for the American people. The country needs, and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something.”

Scientists and experts tell us today that climate change challenges represent the kind of threat that the Great Depression did for our nation, and that time is running short for bold action. 

“Try Something” – and so today in part inspired by the historic (and sweeping, long-lasting) New Deal accomplishments, key elements of our population – Millennials, civic leaders, business leaders, elected members of the House and Senate, NGOs – have been advancing some bold ideas for our consideration. Meet the concept of the “Green New Deal”.

Origins: As explained, elements of the Green New Deal originally were developed by The Green Party of the United States as its 2016 election platform — there were four pillars with pages-upon-pages of detail to explain each:

  • The Economic Bill of Rights
  • A Green Transition
  • Real Financial Reform
  • A Functioning Democracy

You can read the details of the Party’s GND here: https://gpus.org/organizing-tools/the-green-new-deal/

Will There Be Action in the 116th Congress?

Newly-installed member of the House of Representative Alexandria Ocasio-Cortez has introduced an 11-page draft text resolution to form a new select committee in the House to rapidly develop a plan of action to finance and implement the GND.

Her draft bill calls for creation of a Green New Deal (“GND”) Select Committee to be composed of 15 House members appointed by the Speaker of the House with authority to develop a detailed national, industrial, economic mobilization plan, for the transition of the economy to GHG-neutral (drawing down GHGs from the atmosphere and oceans), and to promote economic and environmental justice and equality.

The committee would draw on the expertise of leaders in business, labor, state and local governments, tribal nations, academia, and broadly-represented civil society groups and communities.

The actions taken would be driven by the Federal government in collaboration and co-creation and partnerships with these and other stakeholders:  business, labor, state and local governments, tribal nations, research institutions, and civil society groups and communities, the plan to be executed (for the U.S. to become GHG-neutral) in not longer than 10 years from the start.

  • The final Plan would be ready by January 1, 2020. Draft legislation to enact the Plan would be completed by March 1, 2020.

The Plan for a Green New Deal would have the objective(s) of reaching these “bold” and we can say, “radical” outcomes:

  • Dramatic expansion of existing renewable energy power sources and new production capacity to meet 100 percent of national power demand through renewable sources.
  • Build a national, energy-efficient, smart grid.
  • Upgrade every residential and industrial building for state-of-the-art energy efficiency, comfort and safety.
  • Eliminate GHGs from manufacturing, agriculture and other industries (including investment in local-scale ag in communities across the U.S.).
  • Eliminate GHG emissions from transportation and other infrastructure; upgrade water infrastructure to ensure universal access to clean water (UN Sustainable Development Goal #6).
  • Fund massive investments in the drawdown of Greenhouse Gasses.
  • Make “green” technology, industry, expertise, products, services, a major export of the United States, to become the undisputed international leader in helping other countries transition to completely GHG-neutral economies, to bring about a global Green New Deal.

The draft envisions the Plan to be an historic opportunity to virtually eliminate poverty in the U.S., to make prosperity, wealth and economic security available to everyone participating in the transformation. This could be done through job guarantees to assure living wages to every person.

Among the benefits seen:

  • Diversify local and regional economies.
  • Require strong enforcement of labor, workplace safety and wage standards, including the right to organize.
  • Ensure a “just transition” for all workers.
  • End harm faced by “front line” communities posed by climate change, pollution and environmental harm.
  • Protect and enforce sovereign rights and land rights of tribal nations (there are more than 300 in the U.S.A.).
  • Mitigate deeply-entrenched racial, regional and gender-biased inequities income and wealth.
  • Assure basic income programs and universal healthcare.
  • Involve labor unions in leadership roles for job training / re-training and worker deployment.

How to finance all of this? The draft text calls for financing by the Federal government, using a combination of the resources and abilities of the  Federal Reserve System, a [possible] new public bank, or a system of regional and specialized public banks, public venture funds, and other vehicles or structures.

Interest and returns would then return to the U.S. Treasury to reduce the burden on taxpayers and allow for more investments.

Paying For the GND

In the bill’s draft, a Q&A section notes: Many will say, how can we pay for this?

To which the Representative and supporters say:  Let’s look at some of the ways that we paid for the 2008 bank bailout, aid to the auto industry, extended quantitative easing programs, the same ways we paid for World War II and many other wars. New public banks can be created to ensure credit and combination of various taxation tools, including taxes on carbon and other emissions, and progressive wealth taxes) can be employed.  (The immediate news media frenzy was not over the many elements of the proposed actions but on taxing the rich.)

You can read the entire draft text at: https://docs.google.com/document/d/1jxUzp9SZ6-VB-4wSm8sselVMsqWZrSrYpYC9slHKLzo/edit#

More than 40 members of the new Congress endorsed the move, including Senator Bernie Sanders, Senator Corey Booker, Senator Elizabeth Warren — and a few dozen fellow House members with more sure to join the movement.

Emergent: A Movement?

This is now being described by supporters as a movement that aims to enact no less than dramatic, sweeping economic and climate change policies in the 116th Congress — and to in the process “change politics in America.”

The Controversial Conversation about GND

On the CBS “60 Minutes” program segment that will air this coming Sunday (January 6th), the congresswoman argues that the Green New Deal agenda can be financed by imposing a 70 percent income tax on the wealthiest Americans. That would be “a fair share” in taxes to fund an extensive clean energy infrastructure.

Representative Oscasio-Cortez has described herself as a democrat socialist – in the models set by President Abraham Lincoln (citing the Emancipation Proclamation in the midst of a great civil war) and President Franklin Roosevelt (whose New Deal programs re-shaped the American economy and political system).

She has focused on economic, social and racial justice as key issues to be addressed by the Federal government in her campaigning (she upset a long-standing Democrat House member (4th ranking Dem and Caucus Chair Joseph Crowley) in New York State in the November 2018 election. The Green New Deal would help in those efforts, while stimulating economic growth.

Ocasio-Cortez’s campaign platform included tuition-free education, universal health care and the Green New Deal developed by the Green Party as its platform.

During the 2018 campaign, she spent less than $200,000, compared to her opponent’s purse of more than $3 million.

Media Reactions

The right wing publication Washington Examiner warned that the Green New Deal would add trillions of dollars in debt and would represent “the most radical policy shift in modern U.S. history”. (We would ask: what about success of the New Deal of the 1930s  – was it worth the money invested by government?)

Fox News tells viewers that the GND legislation “would eliminate much of the U.S. fossil fuel consumption, dramatically increase America’s already skyrocketing debt, and transform the U.S. into a European-style socialist nation.”

Unfortunately, mainstream media such as CNN and daily newspapers (like the New York News full page headline) have been focusing on the drama of the proposed “tax on the rich” aspects of the concept and not the meat of the sweeping proposals, which American voters and business leaders might see as immediate and long-term opportunities for creating new wealth and a greatly-enhanced economy with many beneficiaries.

Important addition to the above:  On January 9, 2019, influential author and New York Times columnist Thomas Friedman weighed in.  He called to readers’ attention “A Green New Deal Revisited!” – his column today about the ideas he floated back in 2007 (that prescient commentary was about a Green New Deal), and expanded on in his best-seller, “Hot, Flat and Crowded”.

In that book (published in 2008 by Farrar, Straus and Giroux) has numerous comments on GHGs, energy, energy efficiency, environmental technology, environmentalism, green collar jobs, green hawks, the green revolution, and the Civil Rights movement and WW II analogies to the emerging green revolution.

Friedman today likes the urgency and energy [the representative] and groups like the Sunrise Movement are bringing to this task. He says:  So for now I say:  Let a hundred Green New Deal ideas bloom!  Let’s see what sticks and what falls by the wayside. 

He wrote today in the column:  Who believes that America can remain a great country and not lead the next great global industry?  Not me.  A New Green New Deal, in other words, is a strategy for American national security, national resilience, national security and economic leadership in the 21st Century.  Surely some conservatives can support that. 

Money, Money, Money!

The projected additions to national debt are of course especially in focus for those in opposition to the plan.

In the discussions we should keep in mind that the “tax reform” package passed by the 115th Congress added almost $2 trillion in national debt, with benefits for a narrower band of constituents; the non-partisan Congressional Budget Office (CBO) projected additional debt (from 2018 to 2028) with not too much criticism occurred short-term. (The commentary about the country’s staggering debt has been increasing lately.) The Republicans in Congress have talked about a second round of tax cuts (“tax reform 2.0”), which would add another $3 trillion to the Federal deficit (to be financed by still more debt).

The Social Media Universe Lights Up

In a Twitter post in December, as the social media universe lit up with mentions of the GND, Congresswoman Alexandria Ocasio-Cortez had tweeted: “…and we have #GreenNewDeal lift-off! Never underestimate the power of public imagination.”

While the first action taken by the new member of Congress called for establishing a committee, she writes on Twitter: “Our ultimate end goal is not a Select Committee. Our goal is to treat Climate Change like the serious, existential threat it is by drafting an ambitious solution on the sale necessary – a/k/a Green New Deal – to get it done.”

Note that the Congresswoman has about 2 million Twitter followers.

There’s a very well done commentary on the Green New Deal concepts for you on Vox: https://www.vox.com/energy-and-environment/2018/12/21/18144138/green-new-deal-alexandria-ocasio-cortez

And the Sunrise Movement has information focused on the political side as the public policy debate continues in the new House: https://www.sunrisemovement.org/gnd/

Putting Things in Perspective

We do live in the age of greater prosperity, compared as to the time when President Franklin D. Roosevelt took the reins of the nation at a very dark moment in our history.

Climate change challenges pose threats to the future of this nation, many experts posit, including many elements of the United States government itself.

Then, in the 1930s, one-in-four-households was unemployed. States and many cities were running out of relief money. Farmers were being foreclosed because of crop failures, lack of foreign markets, the failure of the bigger banks they borrowed from, and poor land management (recall the “dust bowl” crisis in the west). In America, fear was rampant – with men and women wondering where was the next meal or dollar coming from.

The New Deal title was inspired in part by a book of the same name by prominent liberal author / economist Stuart Chase, published in August 1932 (the presidential election was that November). At the conclusion of his screed he observed (about the radical recommendations he put on the table for discussion): “We do not have to suppose; we know that these speculations will be met with a superior smile of incredulity. The funny thing about it is that the groups are actually beginning to form. As yet they are scattered and amorphous; here a body of engineers, there a body of economic planners. Watch them. They will bear watching. If an occasion arises, join them. They are part of what [author] H.G. Wells has called the Open Conspiracy.”

The groups he referred to some eight decades ago were the American voters, small business owners, Big Business leaders, investment bankers, trade associations, chambers of commerce, government leaders, labor unions, farmers, and academics.

These are the stakeholders clearly identified and explained in the 2019 House draft text that may or may not gain traction in the House of Representatives and for sure not in the U.S. Senate, even among rank & file Democrats who should be in favor of many of the elements of the proposal as stated so far.

Some of the 1930s ideas of Stuart Chase (far left wing and radical they were at the time!) very quickly ended up as necessary public policy adopted to bring the nation out of the scary depths of the Great Depression by a new head of state (FDR) and his assembled Brains Trust.

The Green New Deal is a blossoming idea – yes, radical, of course! – that will be both loved and hated, criticized and championed by various segments of society.

Something For Everyone!

But there is something for everyone in the package and the Plan that could emerge if the Select Committee is formed and elements of the plan get implemented, as promised with the key elements of the American Society  participating.  The actions of the public and private sectors could be as breathtaking in the sweep of what is to be accomplished as were the achievements of the 1930s New Deal.

Those actions helped to create the most powerful economy and democratic political structure the world has ever experienced.  The laws, regulations, rules, policies and actions shaped the modern U.S. and global economies that have delivered benefits to many of us.

The Intergovernmental Panel on Climate Change (IPCC) cautioned us just a few weeks back that we had about 10 years to reverse course and accelerate measures to address the challenges of climate change. The supporters of the GND movement cite this clear warning as part of the rationale for radical and dramatic thinking, commitment and action over the next decade.

The Fourth National Climate Assessment was released by the Federal government shortly after that, and echoed the rising threats to our economy, businesses, the public sector, and the American nation’s well-being due to the dramatically rising threats inherent in climate change.

For more details on this, see our comments in our November 30 To the Point management brief at: https://ga-institute.com/to-the-point/tune-in-to-this-important-report-the-fourth-official-climate-science-special-report-issued-by-the-u-s-governments-global-change-research-program/

Possible GND Impact on Politics

Some presidential hopefuls have recently been saying that climate change will be among the top — if not the top — issues in 2020 races.

Billionaire Congressman Tom Steyer (California) said that climate change could help Democrats sweep into office in 2020. He told USA Today in December: “When we talk about what’s at stake here, we’re talking about unimaginable suffering by the American people unless we solve the problem over the next 12 years. And I think we are very far from doing that. And it is unclear to me that we can summon that will without having substantial political victories across the board.”

Re-elected House Speaker Nancy Pelosi has said that climate change will become a front-and-center issue if the Democrats take back the house. She told The New York Times in October days before the elections that she would resurrect the defunct Select Committee on Climate Change if the party wins back the House. (The Republican leaders killed the committee in 2011 when they took mid-term power.)

Representative Alexandria Ocasio-Cortez has taken Speaker Pelosi at her word and put the meat on the table with her draft bill.  (During the orientation of the new members, Ocasio-Cortez led a protest outside the Speaker’s office to draw attention to climate change.)

Ocasio-Cortez in the youngest member of the House, from New York’s 14th District in New York City, upsetting a leading Democratic member in the primary. She is a member of the Democratic Socialists of America and was an educator and community organizer in the [NYC] boro/county of The Bronx before running for office.

Background:  She was a winner of an Intel International Science and Engineering Fair in high school; was graduated from Boston University (cum laude); served as an intern in the office of Senator Edward Kennedy; was an organizer in Senator Bernie Sanders’ presidential campaign; was endorsed by Move On, Black Lives Matter, Democracy for America, and others. Including NY Governor Andrew Cuomo, Senators Chuck Schumer and Kirsten Gillibrand, and NYC Mayor Bill deBlasio.

And so against this background — we’ll see where the GND movement goes from here!

Do tune in and learn more about the critical elements of the plan being championed now in the Halls of Congress as the tempo of the conversation increases.  The “60 Minutes” program on the CBS network tomorrow night is sure to create a national buzz, pro and con, and ensure Representative Alexandria Oscasio-Cortez greater notoriety (and both support and condemnation) in the days ahead.

Created January 5, 2019 – updated January 9, 2019