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The Morning Risk Report: Which Are the Most Ethical Companies? Good Luck Figuring That Out
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There are at least 200 providers of ESG ratings, experts say. PHOTO: JAMES YANG
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Good morning. Investors have become choosier about their portfolios, increasingly flocking to companies that align with their values related to the environment or social issues. But that raises a difficult question: How can investors identify those companies?
Fortunately, they have more tools than ever to judge companies based on their values. Unfortunately, there are so many tools that they may be obscuring, instead of illuminating, the path to righteous investing, the Risk & Compliance Journal’s Kristin Broughton reports.
[Continued below...]
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ESG ratings firms, such as MSCI Inc. and Sustainalytics, have long scored companies on emissions, labor policies and other nonfinancial factors. Equity analysts and, in recent months, credit-rating firms also have ramped up efforts to flag potentially material environmental, social and governance risks for investors—aspects of products or operations that could leave companies open to regulatory fines or damage their reputations.
The flurry of firms attempting to grade companies on ESG factors, and the array of techniques and methodologies used to arrive at those scores, has led to mixed signals in the marketplace.
“Imagine if the major ratings agencies for a corporate bond disagreed, and one said a bond was investment grade and another said it was high yield,” says Will Kinlaw, head of State Street Associates, the research and advisory unit of State Street Corp. “That’s where we are with ESG today. It is very hard to navigate.”
Also...
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Director of U.K.’s Serious Fraud Office Talks AI, Finding Truth
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AUSTIN, Texas—Lisa Osofsky, the director of the U.K.’s Serious Fraud Office, spoke at the Association of Certified Fraud Examiners conference here on Monday. Some highlights:
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Teams that focus on seizing digital information and analyzing it with artificial intelligence are playing a bigger role in SFO investigations, Ms. Osofsky said. The SFO is handling more international cases and, like other enforcement agencies, it has come under pressure to obtain evidence that can stand up in courts around the world. “It has become much more global and far more digital,” she said.
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Ms. Osofsky, who began her career as a federal prosecutor in Chicago, offered advice to fraud examiners. Throughout her career, she said, she has learned to keep a clear and simple question in mind while pursuing an investigation: “Who told what lies to get people to give the money?”
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She also cited the practices of historian Robert Caro, who has said he writes notes to himself alongside his interview questions to remind himself to stop talking. That is important for fraud examiners, Ms. Osofsky said, because it is their job to listen to witnesses for subtle clues or identify changes in body language. “Think clearly. Listen. Find the truth,” she said.
—Kristin Broughton
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From Risk & Compliance Journal
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Securities and Exchange Commission headquarters in Washington. PHOTO: ZACH GIBSON/BLOOMBERG NEWS
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The Securities and Exchange Commission doesn’t plan enforcement action after ending a probe into potential U.S. foreign-bribery violations by a company that distributed products for Misonix Inc. in China, Misonix said. Misonix in 2016 disclosed it had voluntarily told the SEC and the U.S. Justice Department that it may have had knowledge of business practices by an independent Chinese distributor that raised questions under the U.S. Foreign Corrupt Practices Act, Misonix said in a regulatory filing at the time.
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President Trump speaks at a roundtable last year. President Trump signed an executive order imposing new sanctions on Iran Monday. PHOTO: EVAN VUCCI/ASSOCIATED PRESS
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President Trump signed an executive order imposing new sanctions on Iran, including against its supreme leader and its foreign minister. Speaking to reporters in the Oval Office, where he signed the order, Mr. Trump described the sanctions as hard-hitting and said they would deny Iran’s supreme leader, Ayatollah Ali Khamenei, and others access to financial instruments. Iran responded on Tuesday, saying the new sanctions closed the door on diplomacy and threatened global stability. Meanwhile, the U.S. and Israel are working to convince Russia to join them in reining in Iran during an unusual gathering of the three countries’ national security advisers this week.
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Bristol-Myers Squibb Co. said its $74 billion merger with Celgene Corp. would be delayed as the company works to allay concerns of federal regulators by selling off Otezla, Celgene’s anti-inflammatory drug that had global sales of $1.6 billion last year.
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FedEx Corp., after botching some deliveries for Huawei Technologies Co., filed a lawsuit Monday to stop the U.S. government from requiring the package giant to enforce a crackdown on the Chinese telecommunications-gear maker.
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The Federal Bureau of Investigation is examining whether lab-testing startup uBiome Inc. used improper billing codes in claims and sought payment for unnecessary tests, tactics that could have inappropriately enriched the company, according to people familiar with the matter.
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President Trump pushed for greater price disclosure in health care, signing an executive order that could make thousands of hospitals expose more pricing information and require doctors, health clinics and others to tell patients about out-of-pocket costs upfront.
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The Supreme Court ruled 6-3 Monday that the government may not deny registration to trademarks it deems “immoral or scandalous,” finding that the Patent and Trademark Office violated the First Amendment when it applied such criteria to brand names.
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The Supreme Court gave the government more leeway to block the release of documents that contain private-sector commercial or financial information, a win for the business community over media organizations and other advocates for public access.
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Carlos Ghosn’s defense team challenged Japanese prosecutors to explain why they didn’t charge Nissan Motor Co. Chief Executive Hiroto Saikawa over allegations that the auto maker failed to report Mr. Ghosn’s compensation properly.
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New accounting requirements aimed at establishing a common set of standards around the world hit Argentine banks in the middle of a recession and runaway inflation.
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President Trump spoke outside the White House on Saturday. PHOTO: SUSAN WALSH/ASSOCIATED PRESS
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President Trump called upon countries to protect their own ships passing through the Strait of Hormuz and questioned why the U.S. has provided such protection for years “for zero compensation.”
“All of these countries should be protecting their own ships on what has always been...a dangerous journey,” he wrote on Twitter on Monday, noting China and Japan specifically.
In the pair of tweets Monday morning, he also said that the U.S. is becoming a self-sufficient energy producer and no longer needs to be in the region.
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Attendees arrive for Nissan Motor’s annual meeting in Yokohama, Japan, June 25. PHOTO: JUNKO KIMURA-MATSUMOTO/BLOOMBERG NEWS
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Nissan Motor Co. shareholders voted to overhaul the company’s board structure, a key goal of Chief Executive Hiroto Saikawa. Following a rowdy meeting where shareholders shouted at current board members, Nissan management and each other, the measure passed in large part due to the support of alliance partner Renault SA, which owns 43.4% of the Japanese company.
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WarnerMedia named BBC Studios-Americas President Ann Sarnoff as head of Warner Bros., choosing an experienced but low-profile executive to steer the iconic Hollywood studio through profound industry changes including consolidation and the rise of streaming. Ms. Sarnoff replaces Kevin Tsujihara, who resigned in March amid an investigation into an extramarital relationship he had with an actress in 2013.
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A Michigan Statewide Carpenters & Millwrights Apprenticeship representative assists a job seeker using a virtual welding simulation machine on Nov. 14, 2018. PHOTO: ANTHONY LANZILOTE/BLOOMBERG NEWS
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The Labor Department released its proposal to create a new type of apprenticeship that would be run by business groups, colleges and other entities, rather than by the federal government. Releasing the proposed guidelines moves a step closer to finalizing President Trump’s goal, laid out two years ago, of expanding access to apprenticeships by removing the Labor Department from day-to-day management of such programs.
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As U.S. employers struggle to fill near-record-high job openings, government training programs aimed at solving that problem are coming up short, according to President Trump’s economic advisers.
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Shoppers leaving a Carrefour store in Beijing in 2011. PHOTO: FREDERIC J. BROWN/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Carrefour SA, one of Europe’s largest grocery retailers, is unloading most of its operations in China, where big-box retailers are struggling to keep up with nimble delivery providers that are winning over shoppers. The move also marks the latest retreat by a Western company in China in the face of stiff competition from homegrown rivals.
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Pioneer National Resources Co. has embarked on an extreme belt-tightening regimen, cutting more than one-quarter of its workforce, as the fracking company seeks to convince investors it can live within its means.
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U.S. airlines are rediscovering the rest of the world after years of ceding market share to rivals and international partners on overseas flights.
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Eldorado Resorts Inc. agreed to buy its larger rival Caesars Entertainment Corp. for about $8.58 billion in cash and stock, a move that would create the largest U.S. casino operator by venue count.
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