Good morning. The environmental, social and corporate governance movement has become a point of contention, with some politicians taking aim at it.

• The argument: While detractors say ESG concerns take the focus away from a company’s core objective—making money—proponents assert that such long-term thinking is actually good for business. The controversy even touches on the name “ESG” itself.
   
• Controversy not thwarting Tillamook exec: Paul Snyder, executive vice president of stewardship at Tillamook County Creamery Association, an Oregon-based cooperative that sells cheese, ice cream and other dairy products nationwide, explained in a recent interview with Risk & Compliance Journal’s Richard Vanderford why he remains an ESG backer despite the controversy.
   
• Fight a ‘schoolyard scruff’: About the recent controversy over the term ESG, Snyder said, “It feels a bit like a schoolyard scruff, right? It actually is a good term, meaning it encompasses those long-term risks that responsible companies successfully manage around environments, societal and governance. Part of me is going, ‘Are we really going to argue about the term?’”

You can also listen to the interview by visiting the WSJ Special Access series of podcasts on Spotify.

The WSJ Pro Sustainable Business Forum on Oct. 12 will include a discussion about risk and resilience in corporate sustainability programs with Maryam Golnaraghi, director of climate change and environment at The Geneva Association, and Torolf Hamm, head of physical catastrophe and climate risk management at Willis Towers Watson.

Other sessions will cover reporting to U.S. and European standards, the role of artificial intelligence and what corporate decarbonization measures are proving effective. Register here.

California companies defer billions in taxes, interest-free, as borrowing costs rise.

Some of the largest and most profitable U.S. companies are postponing billions of dollars in tax payments—interest-free, at a time when borrowing costs are rising—because of disaster-related deferrals. The relief is boosting profits and cash flows.

In California, the Internal Revenue Service delayed the tax deadline for victims of last winter’s severe storms, flooding, landslides and mudslides that have caused fatalities, disrupted thousands of lives and led to billions of dollars in damages. With the concentration of corporate headquarters in the state, significant benefits are going to some of the most profitable American companies.

Companies stall climate action despite earlier promises.

The world’s largest companies have committed to slashing their emissions to address climate change. Many of them have overpromised and underdelivered because of higher costs, slow advances in technology and political pressure.

One big factor is a lack of trust in voluntary carbon markets. Many companies had intended to use carbon credits to offset emissions that are hard to reduce, such as the burning of jet fuel by airlines.

Those credits were supposed to cover short-term commitments. Companies are now backing off of these goals while maintaining they are committed to long-term targets. It is a sobering conclusion two years after the 2021 United Nations climate summit in Glasgow jump-started several climate initiatives.

FinCEN fines Puerto Rico’s Bancrédito $15 million.

The Treasury Department’s Financial Crimes Enforcement Network has fined Puerto Rico’s Bancrédito International Bank and Trust $15 million for failures in its anti-money-laundering program. 

FinCEN said Friday that Bancrédito admitted to violating the Bank Secrecy Act between October 2015 and May 2022 by not reporting suspicious transactions in a timely manner, not establishing a due diligence program for correspondent accounts held at Bancrédito by foreign financial institutions, and for failing to implement and maintain an AML program.

The Office of the Commissioner of Financial Institutions of Puerto Rico, which supervises and regulates banks operating there, is overseeing a wind-down of the bank. A representative of the bank’s receiver didn’t immediately return a call for comment.

FinCEN publishes beneficial ownership guidance.

The U.S. Treasury Department’s Financial Crimes Enforcement Network on Monday published guidance on how small businesses should comply with its beneficial ownership information rule, a reporting requirement slated to go into effect Jan. 1.

The rule, meant to thwart money laundering through anonymous shell companies, will require a host of small businesses to begin providing details on their owners to FinCEN. Small business groups previously have sued to block the rule, citing the burdens of compliance.

• Five Americans who had been wrongly imprisoned in Iran were on their way home Monday after the U.S. released billions of dollars in revenue from Iranian energy sales that had been frozen under sanctions, senior U.S. officials said.
   
• President Biden’s son Hunter Biden sued the Internal Revenue Service on Monday, alleging that his privacy rights were violated when agents aired concerns to Congress and the media about the handling of the investigation into his taxes and business dealings.

Why a soft landing could prove elusive.

On the eve of recessions in 1990, 2001 and 2007, many Wall Street economists proclaimed the U.S. was on the cusp of achieving a soft landing, in which interest-rate increases corralled inflation without causing a recession.

Similarly, this summer’s combination of easing inflation and a cooling labor market has fueled optimism among economists and Federal Reserve officials that this elusive goal might be in reach. Fed officials are set to hold rates steady this week after raising them to a 22-year high because they don’t want to blow a shot at achieving a soft landing. 

The goal, however, faces four threats: the Fed holds rates too high for too long, economic growth accelerates, energy prices rise or a financial crisis erupts.

American business confidence in China slumps to lowest in decades.

U.S. companies are painting the bleakest picture in decades over doing business in China as tensions between Beijing and the West are compounded by a deteriorating environment for their operations.

Just over half of 325 members surveyed by the American Chamber of Commerce in Shanghai were optimistic about their five-year business outlooks, the lowest since the survey began in 1999, the group said Tuesday. As recently as 2021, the figure stood at 78%.

• The United Auto Workers union threatened Monday to widen strikes against Detroit’s carmakers, while Wall Street analysts tallied potential hits to the companies’ bottom line from wage increases that now seem certain.
   
• American consumers face the headwinds of inflation, a softening job market and the resumption of federal student loan interest and payments. On top of all that, they have a lot of auto loans to pay off.
   
• China’s giant housing industry is lurching into a new crisis that threatens to be the country’s worst yet.
   
• As Derna grapples with extreme loss and grief after a deadly flood in the Libyan coastal city last week, many residents are calling for an international investigation into the disaster that killed thousands in an area where a Russia-backed warlord rules with an iron grip.

Clorox warns of product shortages following cyberattack.

Clorox’s quarterly earnings will take a hit from a recent cyberattack, which has disrupted operations and dented availability of the company’s products.

The cleaning-products maker said Monday in a securities filing that the fallout from the attack will cause a material impact to its current-quarter financial results. The longer-term impact is uncertain, given the continuing recovery.

• Canadian Prime Minister Justin Trudeau told lawmakers Monday that authorities are investigating “credible allegations” of Indian government involvement in the killing of a Sikh independence leader shot in June in a temple parking lot.
   
• The Marine Corps said late Monday that it had located the wreckage of an F-35B jet fighter that disappeared after its pilot ejected in South Carolina on Sunday.
   
• China’s top diplomat was set to begin a four-day visit to Russia after a surprise stopover in Malta for weekend talks with White House officials, as Beijing lays the groundwork for separate meetings between Chinese leader Xi Jinping and his U.S. and Russian counterparts.
   
• Saudi Arabia is in talks with Tesla about setting up a manufacturing facility there, people familiar with the discussions said.
   
• While many companies have been cutting staff and freezing new hires this year, the government is laying out the welcome mat.

Follow us on X at @WSJRisk. Follow Risk & Compliance editor David Smagalla @DSmagalla_DJ and reporters Mengqi Sun @_MengqiSun, Dylan Tokar @dgtokar and Richard Vanderford @VanderfordRich.

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