Policy Priorities for a New Administration
In my role on the national policy committee of the socially responsible investment (SRI) industry’s trade association, USSIF: The Forum for Sustainable and Responsible Investment, we had a wonderful legislative priority document prepared in October for the new President. Like many others, we expected to have the opportunity to build on the many successes of our advocacy with the Obama Administration on a variety of issues to protect the public from systemic abuse by the financial industry, encourage wider adoption of SRI by fiduciaries, and facilitate investment in the green economy. For responsible investors, the Obama years were very encouraging indeed, and we at USSIF had an ambitious agenda ready to share with the Clinton Transition Team to expand on these victories for investors and the public.
Naturally with the election result, everything has changed, and we now find ourselves in a radically different political climate that demands a defensive stance to protect recent laws and regulations from being dissolved. When it comes to issues of importance to sustainable and responsible investors, the Republicans in Congress, long opponents of most regulations—especially relating to business and investing—now have an ally in a President who shares their belief in small and minimally intrusive government. That’s why within the first months of this Administration we’re already seeing efforts to unravel the reforms to the financial system that were established during the Obama Administration. They’ve already removed the Dodd-Frank provision that required companies to disclose payments (i.e., bribes) to foreign governments to extract fossil fuels and minerals from often-oppressive governments.
The Republicans have their pitchforks raised in outrage over a broad array of regulatory protections, and the fight is now on to:
- protect the Consumer Financial Protection Bureau
- preserve the CDFI Fund that provides capital to community development credit unions, banks, and loan funds
- prevent the repeal of the CEO-to-worker pay ratio rule
- prevent the repeal of the fiduciary rule that prohibits investment advisors from selling products that benefit them rather than investors, and
- maintain the rights of shareholders to file resolutions on environmental, social, and governance (ESG) issues
- commit to the Paris Climate Agreement and the Clean Power Plan
We have our work cut out for us to stop an all-out assault on important protections of labor, consumer, and investor rights, as well as to prevent the warming and desecration of the planet. The current Administration seeks to go back to the Wild West days of unabashed capitalism, where government oversight and corporate transparency are seen as undue interference with profitability, and where the environment has no inherent value other than as an externality to be exploited.
To this end, we have been focused on our industry’s primary regulatory body, the Securities and Exchange Commission, and the Administrations proposed SEC Chair Jay Clayton. We have provided key Congressional allies with questions to use in his confirmation hearing, including:
- What steps will you take to ensure that the interests of small investors are protected?
- How would you characterize the SEC’s mission to serve the public interest?
- What is the SEC’s role in addressing the significant financial and economic risks of climate change? Do you support greater disclosure of corporate policies regarding climate risks and opportunities to provide better information for the efficient functioning of financial markets?
- How do you plan to protect the voice of American investors and maintain the integrity of the shareholder proposal process?
- What is your intention to continue to pursue better and greater corporate social and environmental disclosure demanded by investors as indicated in their responses to the SEC’s recent Disclosure Proposal?
- In 2011, you wrote a paper critical of the Foreign Corrupt Practices Act. As SEC Chair, would you commit to vigorous enforcement of the Act?
- More than a million people havecalled on the SEC to require companies to disclose political spending. Do you believe that disclosure of corporate political contributions is material to investors?
It is our hope that the answers to these questions will reveal that Mr. Clayton should not be confirmed as SEC Chair, but it is likely that as you read this he has already taken the seat.
The Silver Lining
On a positive note, the federal government’s positions are activating significant opposition, and many people who have remained on the political sidelines are now passionately engaged in a variety of issues in both red and blue states.
We also will happily support any significant investment in public infrastructure, especially if it improves access in rural communities, improves public safety, encourages public transportation, and expands the use of renewable energy.
From a more contrarian perspective, the SRI industry is seeing increased interest in responsible investing, as people are fed up with the status quo (and the Wells Fargo fraud didn’t help matters). Assets invested using one or more strategies of sustainable, responsible, and impact investing have been on an upward trajectory for decades, and saw a 33% increase in the past two years alone. This trend will continue regardless of what the federal government does.
And if important environmental and social issues (such as climate or political contributions) are not addressed by this President and Congress, the private sector along with state and local governments will pursue this path more aggressively, likely leading to a further acceleration of sustainable investment.
We will remain committed to the policies we have long advocated, including mandatory corporate ESG disclosure, a national plan to remediate climate change, sustainable investment options in the Federal Thrift Savings Plan, completion of Dodd-Frank regulations, promoting the ability of corporate pension plans to add ESG options, and ensuring that funding for community investing financial institutions remains robust.
We know the likelihood of success in the immediate future is unlikely. But just as investors do, we maintain a long-term perspective on change, and we recognize that mid-term elections are only 18 months away. Laws and regulations change depending on the political winds, but fortunately, American society overall continues its remarkable progress towards a more ethical, just, sustainable, and conscious form of capitalism.
This article first appeared in the Spring 2017 edition of the Natural Investment News
Welcome to my archive of newsletter articles and blog posts. For more information on my service offerings, please go to my advisor webpage.