It's been a little over two years since DWS/Deutsche launched the first "ESG" money market fund, and a year since Dreyfus launched its "Impact" or Social MMF and Mischler Financial moved into the institutional cash space. (See our Sept. 7, 2018 Crane Data News, "DWS ESG Liquidity Goes Live; Federated Explains Prime Private Fund; our Nov. 21, 2019 News, "Dreyfus Launches 'Impact' or Diversity Government Money Market Fund;" and our Dec. 5, 2019 News, "Mischler Financial Joins "Impact" or Social Money Market Investing Wave.") Since then, ESG money funds (including BlackRock LEAF, DWS ESG Liquidity, Morgan Stanley Inst Liq ESG MMP, State Street ESG Liq Res and UBS Select ESG Prime Inst Fund) have grown to $6.9 billion, while Social MMFs (including Federated Hermes Govt Ob Tax-Mgd, Dreyfus Govt Sec Cash and Goldman Sachs FS Fed Instr) now total $16.7 billion. (Most of the latter group were fund conversions and not new fund launches.) While we're expecting more news (and webinars) on this front in coming days, we wanted to update you on several minor stories from this week involving ESG and social cash investing.
First, a press release tells us, "Mischler Financial Group, Inc., the oldest diversity-certified broker-dealer owned and operated by military veterans, today announced the appointment of Lt. General Herbert Raymond 'H.R.' McMaster (Ret.), a Hoover Institution Senior Fellow and a former National Security Advisor to the President, as Special Advisor to the firm.... As a Special Advisor to Mischler, General McMaster will offer distinctive geopolitical and global macro insight to the firm's Fortune 500 treasury clients and to the institutional investors and asset managers who rely on Mischler for helping them navigate domestic and global market financial markets."
Principal and CEO of Mischler, Dean Chamberlain comments, "General McMaster is one of our country's most recognized and decorated scholar-warriors; his granular knowledge and insight to global events, coupled with his multi-decade experience as one of our nation's most respected strategic thinkers will prove invaluable to our firm and our firm's capital markets constituents.... It is a rare privilege and a distinct honor for someone such as myself to serve alongside General McMaster."
Next, the U.K.-based publication Treasury Today writes on "Green deposits and sustainable investment," saying, "It's no secret that sustainability and Environmental, Social and Governance (ESG) considerations have become increasingly important in recent years. Where treasurers are concerned, in many cases their role in this topic has historically been focused on operational actions. A survey carried out by the European Association of Corporate Treasurers (EACT) earlier this year found that treasurers' involvement in supporting ESG included making changes to processes and controls (50%) and reducing business travel and encouraging home working (41%) -- both of which have become an even greater focus during the COVID-19 pandemic."
They explain, "Of course, ESG and sustainability extend far beyond these actions. Green bonds and sustainability-linked bonds have gained prominence in recent years, while companies are also exploring opportunities to promote greater sustainability not only within their own companies, but also throughout their supply chains.... Against this backdrop, it should come as no surprise that the topic of sustainable investing is also attracting interest. While only 20% of the EACT survey's respondents said they were investing in sustainable investment instruments, or developing a plan to do so, it is likely that this topic will gain momentum as more sustainable investment opportunities become available."
Treasury Today continues, "For one thing, money market fund providers are increasingly seeking to incorporate sustainability and ESG into their products. In addition, banks are beginning to offer green deposits that enable companies to contribute towards projects that benefit the environment. In November, for example, Citi launched a green deposit solution that enables clients to invest their medium-term excess cash to support environmentally friendly projects."
The piece tells us, "As Stephen Randall, Global Head Liquidity Management, Treasury & Trade Solutions at Citi explains, investments 'will be allocated to finance or refinance a portfolio of green projects that meet the rigorous environmental finance eligibility criteria defined in the Citi Green Bond Framework, established by Citi to finance solutions and developments designed to aim to reduce the impacts of climate change.' He adds that this framework is aligned with ICMA Green Bond principle and was assessed and confirmed by Sustainalytics, an independent provider of sustainability research."
It adds, "HSBC, meanwhile, has launched green deposits in the UK, Singapore and India in 2020, with more markets planned for next year. 'HSBC Green Deposits give treasurers a simple way to support environmentally-beneficial projects,' says Diane S. Reyes, Global Head of Liquidity and Cash Management at HSBC. 'The funds deposited are used by HSBC to provide financing for environmentally beneficial initiatives such as renewable energy and energy efficiency projects such as green buildings and clean transportation. Clients receive a quarterly, portfolio-level view of how their funds have been used and they can manage their green account as simply as a regular deposit account.'"
Also, law firm Cadwalader Cabinet discussed potential regulations on ESG funds in its article, "SEC Officials Push Back on ESG Disclosure Recommendations." They write, "At an Asset Management Advisory Committee ("AMAC") meeting, SEC officials considered a subcommittee's proposed recommendations on environmental, social, and governance ("ESG") disclosure. Division of Investment Management Director Dalia Blass questioned whether it is appropriate to recommend different issuer disclosures for ESG material risks than for other potential areas of risk. In relation to the ESG Subcommittee's disclosure recommendations, Ms. Blass identified the following areas of concern: the potential reliance of the SEC on non-SEC unregulated third-party standard setters in the ESG area; the role of disclosure liability in mandated ESG disclosures; and the different types of disclosures that might be required for different types of issuers and for advisers as opposed to issuers."
SEC Chairman Jay Clayton delivered his opening remarks at the meeting saying, "Today's agenda reflects the AMAC's continued focus on key topics within the asset management industry, including updates from the AMAC's subcommittees focusing on private investments, ESG investments -- or, as I like to say, E * S * and G, separately -- and diversity and inclusion within the asset management industry and the financial services sector more generally. I want you to know that this is a matter of importance to the staff and the Commission. I look forward to these panels and presentations and thank you again for your time and efforts."
Finally, IR Magazine published the article, "Asset managers complain CFA's proposed ESG standards will sow confusion, not clarity," which tells us, "CFA Institute's plan to create a global ESG standard has triggered concern among some US and European asset managers already juggling overlapping regulations and rising costs in a crowded space. Virginia-based CFA Institute, which offers chartered financial analyst certification globally, is forging ahead with its consultation, gathering feedback on its proposed principles of voluntary ESG disclosure standards for investment products. It aims to issue a draft voluntary standard in six months."
The piece quotes, "'It is very difficult for investors to find products that are suitable for their needs and preferences,' Chris Fidler, CFA's senior director of global industry standards, tells IR Magazine. 'Once you start evaluating products it gets really confusing, really quickly. That is the problem in the marketplace we're trying to solve.'"
It adds, "In addition to the initiatives already mentioned, plenty more are under way. In the US, the SEC reviews documents to ensure ESG-related fund names are not misleading and that investors are offered accurate, clear disclosures. The commission's Office of Compliance Inspections and Examinations conducts ESG-focused oversight with specific document requests, and the regulator has established an asset management advisory committee with an ESG subcommittee to draft recommendations by December for SEC action."
For more on ESG and Social MMFs, see these Crane Data News pieces: "More Symposium Highlights: Callahan, Cunningham on Future of MMFs" (11/3/20); "More from Mini Fund Symposium: Dechert's Cohen on ESG, RDM, Reforms" (9/2/20); "Hopkins, Lontai, Tobin Talk Major MF Issues: ESG MFs, Sticking w/Prime" (8/31/20); "Federated's Cunningham: Social at Fore of ESG; N-MFP Holds: T-Bills Dip" (8/11/20); "HSBC Files to Launch ESG Prime Money Market Fund; Proprietary Scoring" (2/19/20); "Fitch Ratings, ICD Host Webinars on ESG Money Funds, Cash Investing" (2/6/20); "Goldman Launches Social Class; Tiedemann Adds FICA; and CS Green ABCP (1/24/20); "Mischler Financial Joins "Impact" or Social Money Market Investing Wave (12/5/19); "BNP Insticash Adds ESG Overlay (11/29/19); "Dreyfus Launches "Impact" or Diversity Government Money Market Fund (11/21/19); "Goldman Adds ESG Screen" (11/14/19); "Aviva Investors Discusses ESG MMFs; Fitch Rates MS ESG" (11/6/19); "UBS Asset Mgmt Files to Launch Select ESG Prime Institutional Fund" (11/4/19); "BlackRock Launches First Offshore ESG MMF; ICS LEAF in EUR, GBP, USD" (7/22/19); and, "SSGA Goes Live with ESG Money Market Fund" (7/3/19).
