Page 18 - Investment Advisor April 2021
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ESG HORIZONS

                By Bernich Napach




                New Index Rates Companies on Racial Justice Criteria


                Also, the SEC is reviewing climate-related disclosures.


                       former marketing manager                                     of Corporation Finance to enhance its
                       at TruTV, Vice Media and                                     focus on climate-related disclosure in
                A  ABC  News  has  developed the                                    public company filings.
                Black Dollar  Index (BDI), a platform                                 She is asking SEC staff to review
                that rates publicly traded companies                                the extent to which public companies
                according to their contributions to                                 address topics identified in the com-
                racial justice or injustice.                                        mission’s 2010  guidance  concerning
                  The idea is to inform Black consum-                               climate  change  disclosure  and  com-
                ers, who spend about $1.4 trillion on                               ply with current disclosure obliga-
                consumer goods annually, about cor-                                 tions under the federal securities laws,
                porate practices so that they can hold                              according to a statement.
                companies accountable.                                                “Now more than ever, investors are
                  “The Black Dollar Index is an                                     considering climate-related issues
                accountability tool that we can build   Black  as  well as  the  share of  employ-  when making their investment deci-
                upon for generations to come,” said   ees  who  are  Black  compared  with  the   sions,” Lee said in her statement on this
                Kelle Rozell, BDI Founder, in a state-  broader U.S. population.    initiative. “It is our responsibility to
                ment.  “Our  goal  is  to  work  hand-in-  The  qualitative  factors are  diversity   ensure that they have access to material
                hand with these corporations to make   and inclusion initiatives at a company and   information when planning for their
                real, infrastructural change because as   at its suppliers as well as known negative   financial future.”
                Americans, we want racial justice and as   racial claims made against a company and   SEC staff will use insights from their
                consumers we want options.”       significant investments in Black initia-  reviews and from engagement with
                  The index grew out of protests in   tives — both made over the past five years.  companies on those issues to begin
                2020 following the murders of Breonna   Rep. Hakeem Jeffries, D-N.Y., who   updating  the  commission’s  2010  guid-
                Taylor, George Floyd and others, which   chairs the House Democratic Caucus,   ance, also taking into account develop-
                spurred many corporations to pledge   said  the  index  is  “important  work  that   ments over the past decade, according to
                their support for social justice efforts.   sits at the intersection of racial and eco-  Lee’s statement.
                “It became imperative to create a plat-  nomic justice … [and] will provide the   In early February, Lee named Satyam
                form for consumers to hold corporations   necessary information to allow us to be   Khanna,  a  former  SEC  attorney  to  the
                accountable and seek transparency on   better change agents for racial equity.”  new position of senior policy advisor for
                these commitments moving forward,”   According to the BDI website, the rat-  climate and ESG (environmental, social
                according to BDI.                 ings of financial firms run the gamut from   and governance) in the acting chair’s
                                                  near-bottom  ratings  for  private  equity   office of the SEC.
                THE BDI SCORING SYSTEM            firms like KKR, Blackstone and the Carlyle   The 2010 SEC guidance instructs
                The BDI index rates companies on a   Group, to relatively high ratings for finan-  companies to consider disclosing the
                scale of 1 to 100 according to five quan-  cial giants like American Express, Bank   material impact of existing and pending
                titative factors, which contribute a total   of  America and Wells  Fargo —  all scor-  climate-related legislation and regula-
                80% to their scores, and four qualitative   ing above 70. In between were Goldman   tions, including international accords,
                factors, which contribute the remaining   Sachs and Morgan Stanley — scoring in   on their operations. They are also
                20%.  A  company  that  scores  under  70   the 40s — and JPMorgan and Citigroup,   instructed to consider disclosing the
                is deemed “not yet approved.” A score   scoring in the 60s.         impact of physical climate change risks,
                between 71 and 80 is “fair,” between 80                             such as property damage and business
                and 90 “good,” and from 91 to 100, “great.”  SEC STEPS UP REVIEW OF CLIMATE-  interruption, on their business.   VideoFlow/Stock.adobe.com
                  The quantitative factors behind these   RELATED DISCLOSURES
                ratings  are the percentage of  directors   SEC acting Chair Allison Herren Lee   Bernice Napach can be reached at
                and other company leaders who are   has directed the commission’s Division   [email protected].



             16 INVESTMENT ADVISOR APRIL 2021 | ThinkAdvisor.com
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