Investor Relations Week: Pledge on ESG Divestment, Himalayan Yogi Indian Stock Exchange Scandal and JPMorgan Enter Metaverse
– “We believe that active involvement and engagement with portfolio companies, rather than adopting a divestment strategy or avoiding the asset class, actually leads to better returns in terms of investor protection” , John Galloway, Global Head of Investment Management at Vanguard Group, Told S&P Global Market Intelligence this week. “We see the value of continued engagement in terms of the progress companies make over time in response to us and other investors.” Speaking of the green transition, Galloway said the complexity of moving to a low-carbon economy “makes us confident that our approach of remaining invested and actively engaged with these companies will lead to better outcomes.”
– Reuters reported a case of “bizarre misconduct” which constituted a “flagrant violation” of Indian National Stock Exchange regulations. Chitra Ramkrishna, the former head of India’s biggest stock exchange, shared confidential information with a yogi and asked his opinion on crucial decisions, a market regulator investigation has revealed, ahead of the stock exchange’s long-awaited public listing . Ramkrishna shared information – including financial projections, business plans and the stock exchange’s board agenda – with an alleged spiritual guru from the Himalayas, the Securities and Exchange Board of India.
– Coindesk reported that JPMorgan, the largest bank in the United States, has become the first lender to arrive in the metaverse, after opening a lounge in Decentraland, a virtual world based on blockchain technology. Along with the unveiling of the Onyx trade show (Coinbase said the name refers to the bank’s Ethereum-based suite of licensed services), JPMorgan published an article exploring how businesses can find opportunities in the metaverse.
– In other Metaverse news, CNBC reported that “metaverse ETFs are booming” in South Korea, with retail investors “stacking” and buying into funds focused on the new frontier of technology. South Korea’s first four metaverse ETFs were launched in October and attracted $100 million in just under two weeks, according to Rahul Sen Sharma, managing partner at index provider Indxx. As of Jan. 19, eight metaverse ETFs were listed in South Korea, attracting more than $1 billion in inflows, according to data from Samsung Asset Management, which launched two of the ETFs. CNBC said that of that amount, more than $800 million was invested in four equity-focused ETFs tied to the South Korean metaverse, while more than $338 million was funneled into more global metaverse ETFs, according to the data.
– According to FinancialTimes (paywall), Tesla has accused the SEC of going ‘beyond pallor’ and harassing its chief executive Elon Musk for his compliance with a 2018 agreement over his use of social media – something the newspaper describes as “the latest salvo in a long dispute between Musk and the US stock market regulator”. Earlier this month, the electric car maker revealed that it had been subpoenaed by the SEC over its compliance with the settlement, part of which required a company lawyer to pre-approve any tweets from Musk containing “important” information. The SEC had requested information on “governance processes around compliance” with the order.
– The Wall Street Journal (paywall) noted that most public companies report the value of their assets, accounts receivable and inventory, but not human capital, while investors want employers to consistently report specific data points using standardized measures in order to be able to compare one company with another. A growing number of large companies are including workforce statistics in their annual sustainability reports, but the data is not standardized. Almost none quantify this information in quarterly or annual financial statements.
Some fund managers use big data, scouring websites such as Glassdoor and LinkedIn to estimate workforce trends at the companies they cover. Others reiterate longstanding calls for regulations that would require companies to report employee data, including compensation, training, job satisfaction, demographics, and hiring and promotion rates.
CalPERS is a leader in the campaign for mandatory reporting. The pandemic has highlighted just how critical human capital risks are for companies and their investors, a CalPERS spokesperson said. The SEC is expected to unveil a rule in the coming months that would require the disclosure of standardized human capital data.
– Institutional investor reported that about half of US allocaters plan to increase their investments in hedge funds in 2022, according to the latest report from the Alternative Investment Management Association (Aima). In December, the group surveyed 224 dispatchers across the country, including 49% working in foundations and endowments, 15% in public pensions and 11% in family offices. While private equity remains the top choice for investors, Aima found that hedge funds have started to attract attention again.
– CNN said that according to a report by a group of 28 non-governmental organizations, financial institutions funneled more than $1.5 billion into the coal industry in the form of loans and subscriptions from January 2019 to November 2021, while even many made zero net promises. Reducing coal use is a key part of efforts to reduce greenhouse gases and get emissions to net zero by mid-century, and governments, businesses and financial institutions are are committed to action. But the research found that banks continue to fund 1,032 companies involved in coal mining, trading, transportation and use. The study says banks in six countries – China, the US, Japan, India, the UK and Canada – were responsible for 86% of global coal financing during the period.
– The Financial Stability Board (FSB) said policymakers must act quickly in crafting rules covering the digital asset market, given its closer connection to the traditional financial system, the FT reported. “There is clearly a higher degree of urgency,” said Klaas Knot, the Dutch central bank governor who became FSB chairman in December, describing how the board had previously been “comfortable” saying that there was no material crypto risk due to its size and lack of connectivity to traditional financial markets.
So far, global regulators have greeted crypto with a patchwork of measures, including a tough crackdown in China, and UK efforts to restrict crypto advertisements and register crypto firms for money laundering. and counter-terrorism compliance. The FSB also warned that big banks and other systemically important financial institutions were “increasingly willing” to expose themselves to crypto and pointed out that global stablecoins pose particular risks to financial stability.
– According to an assessment approved by China’s cyberspace regulator and reported by South China Morning Post. The finding, included in “expert opinions” the Cyberspace Administration of China has posted on its website, shows how the regulator is shaping up to be a key guardian of overseas listings, even as the new law, which came into effect this week, does not specifically mention Hong Kong, the newspaper said.
Questions remain over whether or not mainland businesses seeking to register in Hong Kong need to apply for a cybersecurity review. The document stresses that Hong Kong is not a “foreign market”, but is run as a separate legal system under the “one country, two systems” framework.