Page 18 - Investment Advisor April 2021

ESG HORIZONS

By Bernich Napach

New Index Rates Companies on Racial Justice Criteria

Also, the SEC is reviewing climate-related disclosures.

former marketing manager of Corporation Finance to enhance its
at TruTV, Vice Media and focus on climate-related disclosure in
A ABC News has developed the public company filings.
Black Dollar Index (BDI), a platform She is asking SEC staff to review
that rates publicly traded companies the extent to which public companies
according to their contributions to address topics identified in the com-
racial justice or injustice. mission’s 2010 guidance concerning
The idea is to inform Black consum- climate change disclosure and com-
ers, who spend about $1.4 trillion on ply with current disclosure obliga-
consumer goods annually, about cor- tions under the federal securities laws,
porate practices so that they can hold according to a statement.
companies accountable. “Now more than ever, investors are
“The Black Dollar Index is an considering climate-related issues
accountability tool that we can build Black as well as the share of employ- when making their investment deci-
upon for generations to come,” said ees who are Black compared with the sions,” Lee said in her statement on this
Kelle Rozell, BDI Founder, in a state- broader U.S. population. initiative. “It is our responsibility to
ment. “Our goal is to work hand-in- The qualitative factors are diversity ensure that they have access to material
hand with these corporations to make and inclusion initiatives at a company and information when planning for their
real, infrastructural change because as at its suppliers as well as known negative financial future.”
Americans, we want racial justice and as racial claims made against a company and SEC staff will use insights from their
consumers we want options.” significant investments in Black initia- reviews and from engagement with
The index grew out of protests in tives — both made over the past five years. companies on those issues to begin
2020 following the murders of Breonna Rep. Hakeem Jeffries, D-N.Y., who updating the commission’s 2010 guid-
Taylor, George Floyd and others, which chairs the House Democratic Caucus, ance, also taking into account develop-
spurred many corporations to pledge said the index is “important work that ments over the past decade, according to
their support for social justice efforts. sits at the intersection of racial and eco- Lee’s statement.
“It became imperative to create a plat- nomic justice … [and] will provide the In early February, Lee named Satyam
form for consumers to hold corporations necessary information to allow us to be Khanna, a former SEC attorney to the
accountable and seek transparency on better change agents for racial equity.” new position of senior policy advisor for
these commitments moving forward,” According to the BDI website, the rat- climate and ESG (environmental, social
according to BDI. ings of financial firms run the gamut from and governance) in the acting chair’s
near-bottom ratings for private equity office of the SEC.
THE BDI SCORING SYSTEM firms like KKR, Blackstone and the Carlyle The 2010 SEC guidance instructs
The BDI index rates companies on a Group, to relatively high ratings for finan- companies to consider disclosing the
scale of 1 to 100 according to five quan- cial giants like American Express, Bank material impact of existing and pending
titative factors, which contribute a total of America and Wells Fargo — all scor- climate-related legislation and regula-
80% to their scores, and four qualitative ing above 70. In between were Goldman tions, including international accords,
factors, which contribute the remaining Sachs and Morgan Stanley — scoring in on their operations. They are also
20%. A company that scores under 70 the 40s — and JPMorgan and Citigroup, instructed to consider disclosing the
is deemed “not yet approved.” A score scoring in the 60s. impact of physical climate change risks,
between 71 and 80 is “fair,” between 80 such as property damage and business
and 90 “good,” and from 91 to 100, “great.” SEC STEPS UP REVIEW OF CLIMATE- interruption, on their business. VideoFlow/Stock.adobe.com
The quantitative factors behind these RELATED DISCLOSURES
ratings are the percentage of directors SEC acting Chair Allison Herren Lee Bernice Napach can be reached at
and other company leaders who are has directed the commission’s Division [email protected].

16 INVESTMENT ADVISOR APRIL 2021 | ThinkAdvisor.com