Racial Injustice Will Have Greater Weight in ESG Scores, S&P Global Says

About 217 businesses in the S&P 500 have publicly supported the Black Lives Matter movement to show solidarity and protect their reputations. Question: How sincere are they?

Shareholders continuing to speak out against racial injustice have brought the issue to the fore for many companies. And how well a company supports this endeavor will have a bigger impact on corporate environmental, social, and governance (ESG) scores, S&P Global Ratings analysts said.

Exactly how much it will impact sustainability ratings is unclear. But analysts consider the growing civil and corporate responses to George Floyd’s death to be a tipping point as stakeholders increasingly demand businesses reflect their social values.

Companies receive ESG scores—which a growing number of investors use to help select where to put their money—from various organizations, including Standard & Poor’s, Refinitiv, and Institutional Shareholder Services (the parent of CIO).

About 43% of companies in the S&P 500, or 217 businesses, have publicly made statements to show their solidarity for the Black Lives Matter movement and to protect their reputations, according to the S&P Global Ratings report. The companies most likely to have made public responses were in consumer goods or the financial sector, while the businesses least likely to announce support were in energy, industrials, or materials, the report found.

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But making public statements is not enough to appease internal or external stakeholders. Some companies supporting Black Lives Matter are late to the cause, and get chided, particularly from Millennials or Gen Zers, who question the business’ sincerity.

Financial institutions that have opened their purses to support the Black Lives Matter movement have been knocked for a history of discriminatory lending. While Black-owned firms are more likely to apply for bank loans, less than 47% of applications are approved, according to Federal Reserve data. In 2017, JPMorgan Chase settled a lending discrimination lawsuit for $55 million. In 2012, Wells Fargo reached a $175 million settlement with the Justice Department for allegedly charging higher interest rates and fees to Black American and Latino clients.

After taking to social media to express support for Black Lives Matter, French beauty giant L’Oréal was sharply criticized for dismissing Black model Munroe Bergdorf from a 2017 campaign after she wrote a post denouncing racism at the “Unite the Right” rally in Charlottesville, Virginia. “Where was my support when I spoke out? Where was my apology? I’m disgusted and writing this in floods of tears and shaking,” Bergdorf wrote last month on Instagram.

Instead, S&P analysts reported increasing investor interest in whether companies are addressing the lack of diversity among their ranks, the report said. Companies such as cybersecurity firm Fortinet, Gilead Sciences, Morgan Stanley, and Mastercard have promised to better disclose information on their demographics after shareholder motions were filed.

Other ESG leaders have also advocated for better disclosures from businesses. Last month, the chief executive of responsible investing firm Calvert said he will push companies to provide information on racial demographics, as well as pay equity across race and gender.

Calvert CEO John Streur wrote: “We need information from companies about the outcomes they are achieving, not only the values they espouse, and it is our duty as shareholders to hold them accountable for inaction.”

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Tags: environmental social and governance investing, ESG, George Floyd, Investment, racism, Socially Responsible Investing

The co-founder of cryptocurrency firm Centra Tech has pleaded guilty for leading a scheme to lure victims to invest more than $25 million dollars’ worth of digital funds in his company, which falsely claimed to sell cryptocurrency-related financial products.

Sam Sharma, 29, pleaded guilty in a federal court to one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, and one count of conspiracy to commit mail fraud, each of which carries a maximum sentence of five years in prison. He also agreed to forfeit 100,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Miami-based Centra Tech.

According to court documents, in July 2017, Sharma and co-defendants Raymond Trapani and Robert Farkas founded Centra Tech, which claimed to offer cryptocurrency-related financial products, including a purported debit card known as the Centra Card. The card was touted for allowing users to make purchases using cryptocurrency at establishments accepting Visa or Mastercard payments.

Over the next four months, the Centra Tech founders solicited investors to purchase unregistered securities in the form of digital tokens issued by Centra Tech known as “Centra tokens” or “CTR tokens” through an initial coin offering (ICO) and other means.

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Sharma and his co-defendants sent out oral and written offering materials over the internet that made false claims about Centra Tech in order to lure investors. They claimed the company had an experienced executive team with impressive credentials, including a CEO named Michael Edwards who had over 20 years of banking industry experience and a master’s degree from Harvard. Edwards did not exist. They also lied about having formed partnerships with Bancorp, Visa, and Mastercard to issue Centra Cards.

Additionally, the three claimed that there was a “Centra Token Rewards Program” that entitled investors to share in Centra’s future earnings. Investors were told that token holders would be paid “rewards” of 0.8% of the total revenue that Centra earned from Centra Card transactions.

Based in part on the company’s false claims, victims invested tens of millions of dollars’ worth of digital funds for the purchase of Centra Tech tokens. At the end of Centra Tech’s fundraising efforts in October 2017, the digital funds raised were worth more than $25 million, and at certain times in 2018 grew to more than $60 million.

Centra Tech “lured victims into investing digital currencies worth millions of dollars based on false claims about their company and its purported products,” Ilan Graff, chief counsel to the acting US attorney, said in a statement. “Sharma and his co-conspirators concocted a fake CEO, fake partnerships, and fake licenses. Fraud is fraud, whether it occurs in digital securities markets or over traditional exchanges.”

Trapani and Farkas have already pleaded guilty to the same charges.