Principles for Responsible Investment Calls for Reversal of Anti-ESG Trump Policies

Fiona Reynolds, the CEO of the United Nations-backed Principles for Responsible Investment (PRI), is calling on the incoming Biden administration to reverse the rollback of environmental, social, and governance (ESG) investing progress instituted under the Trump administration. This includes rejoining the Paris Agreement and nixing proposed Department of Labor (DOL) rules to curb ESG investing.

“The integration of ESG considerations in investment policy and regulation has fallen behind in the last four years compared to progress in Europe and Asia,” Reynolds wrote in a blog post on PRI’s website. “The new administration must reverse the course that has been set by American regulators over the past few years.”

Reynolds said investors worldwide will be looking closely at what the Biden administration will do, and urged the incoming government and the private sector to work together to address climate change, fight the pandemic, and create green jobs to help speed up economic recovery.

She said the new administration needs to address climate change in its economic policies and create a plan to achieve carbon net-zero by 2050. Reynolds said reaching net-zero requires a focus on six key areas: climate ambition and governance, zero carbon power, buildings, road transport, industry, and land use.

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“Beyond reversing the tide of anti-ESG regulation from the Trump administration, US policymakers will need to advance new policies that support sustainable investing and strengthen accountability, good governance, and shareholder rights,” Reynolds said.

Reynolds said that through the Congressional Review Act, legislators will have the opportunity to overturn a controversial new DOL rule that was spurred by a 2019 executive order from Trump that stymies ESG investing. She also said Congress should examine recent Securities and Exchange Commission (SEC) rules that make it more difficult for investors to participate in proxy voting to advance ESG goals.

“The DOL itself acknowledges that ESG factors can create business risks and opportunities, yet it is actively trying to prevent investors from considering those factors in their investment decisions,” Reynolds said. “It’s no wonder that more than 95% of public comments on the proposed rule opposed it, including one from the PRI.”

She also said the Biden administration should prioritize establishing mandatory ESG disclosure for publicly traded companies.

“Investors need access to consistent, comparable data about material ESG factors in order to efficiently incorporate that data into their investment practices,” she said. “The SEC could mandate such disclosures, or Congress could direct them to institute these requirements.”

Additionally, US regulators should require pension and investment fiduciaries to integrate material ESG factors into their investment processes, she said, adding that “laws and regulations from the DOL and SEC need to be updated to eliminate any uncertainty that fiduciaries have an obligation to consider ESG issues.”

And, at the international level, Reynolds said US needs to re-join the Paris Agreement, and that climate action at the G7 and G20 levels need to be revitalized as it has been “effectively stifled” since 2016.

“For the last four years, the Trump administration did a significant disservice to the standing of the US among global leaders on responsible investing, sustainability, and climate action,” she said.

Reynolds also urged the US to join the more than 70 regulators from around the world that have formed the Network for Greening the Financial System to advance a sustainable financial sector. Reynolds said the inclusion of the US into the group will help central banks and financial regulators accelerate efforts to address systemic climate risks.

“The Biden administration can begin to turn the tide,” Reynolds said. “With a strong commitment from day one … there are real opportunities to make American finance great again.”

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Tags: Biden, Climate Change, Donald Trump, ESG, Fiona Reynolds, Net Zero, Paris agreement, Principles for Responsible Investing, SEC, UN, United States Department of Labor (DOL)

A US District judge has given the green light for a class action lawsuit against Apple led by a UK pension fund that accuses CEO Tim Cook of misleading investors about declining demand for iPhones in China that lead to huge losses for investors.

Judge Yvonne Gonzalez Rogers of the Northern District of California ruled that shareholders led by UK-based Norfolk Pension Fund can sue the tech giant over comments Cook made during an analyst call on Nov. 1, 2018. During the call, Cook said the company was experiencing weak sales for its new iPhones in certain emerging markets, but that this didn’t include China. Earlier that day, the company had released revenue guidance for the first quarter of 2019 of between $89 billion and $93 billion, which would have been an all-time record.

Two months earlier, in September 2018, Apple released the iPhone XS and iPhone XS Max, as well as the iPhone XR, which ranged in price from $899 for the XR to $1,349 and $1,449 for the XS and XS Max, respectively. During the November call, analysts questioned whether the expensive phones would have strong sales in the economic climate of that time. One of the analysts asked Cook about how well the phones would sell in emerging markets and specifically asked about China.

“The emerging markets that we’re seeing pressure in are markets like Turkey, India, Brazil, Russia,” Cook said. “In relation to China specifically, I would not put China in that category. Our business in China was very strong last quarter.” Cook also said during the call that “the XS and XS Max got off to a really great start, and we’ve only been selling for a few weeks.”

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Then, two months later, Cook sent a letter to investors saying that Apple would miss its earnings guidance by up to $9 billion, explaining that while the company “anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic declaration, particularly in Greater China.”

In the letter, Cook also blamed the missed guidance on China’s economy beginning to slow in the second half of 2018 as well as trade tensions with the US.

In its defense, Apple said Cook’s statements about China were not false or misleading because he was referring to the previous quarter, not the current one. The company also said that even if the statement had referred to the current quarter, the plaintiffs failed to allege that it was false or misleading when it was made.

However, the judge was not swayed by Apple’s argument.

“Defendants fail to persuade on both counts,” Rogers said in her ruling. “The court has carefully reviewed the context of the China-related statements and finds that they plausibly refer to the present.” She added that “the court finds that plaintiff plausibly alleges that Cook represented that Apple was not experiencing pressure in China.”

Rogers also didn’t find that the trade tensions between the US and China were a valid argument from Apple.

“It strains credulity that Cook would not have known about the trade tensions and their potential impact on Apple’s business, particularly where Cook opined on those tensions on the Nov. 1 call,” she wrote.

Apple said the accusation of fraud against it “does not make sense” because the company did not profit from the alleged fraud. But Rogers was not convinced by this argument either.

“None of these allegations, by themselves, raise a strong inference that Cook knew that Apple experienced pressure in China in October 2018,” Rogers said. “However, they raise a strong inference that Cook knew about the risk of such pressure from economic deceleration and trade tensions in China when he made the challenged statements.” She added that “the holistic analysis raises a cogent and compelling inference that Cook did not act innocently or with mere negligence.”

Apple declined to comment on the case.