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The Morning Risk Report: SEC to Propose More Disclosure Requirements for ESG Funds
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Good morning. Regulators proposed new requirements for investment funds that tap into worries about climate change and social justice, in an effort to address concerns about “greenwashing” by asset managers seeking higher fees.
The Securities and Exchange Commission voted Wednesday to issue two proposals that aim to give investors more information about mutual funds, exchange-traded funds and similar vehicles that take into account ESG—environmental, social and corporate-governance–factors. One proposed rule would broaden the SEC’s rules governing fund names, while the other would increase disclosure requirements for funds with an ESG focus.
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Content from our Sponsor: DELOITTE
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Path to Economic Disaster: Climate Inaction Could Cost $178 Trillion By 2070
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New research shows the potential heavy economic toll of unchecked climate change and the $43 trillion opportunity a worldwide net-zero transition could net the global economy by 2070. Read More ›
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The financial industry is split—between asset managers and those who buy their products—on the need for more SEC oversight of ESG funds. The Investment Company Institute, which lobbies Washington on behalf of asset managers, said it planned to closely review the proposals with its members but had a number of concerns, including about costs that it said investors will ultimately bear.
The boom in what advocates call green or sustainable investing has posed a challenge to regulators in recent years. Assets in funds that claim to focus on sustainability or ESG factors reached $2.78 trillion in the first quarter, up from less than $1 trillion two years earlier, according to Morningstar.
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From Risk & Compliance Journal
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Cryptocurrency Companies to Remain in U.S. Crosshairs
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Cryptocurrency companies can expect to remain a focus for U.S. financial-crime enforcers, officials with the Justice Department and Commodity Futures Trading Commission said.
The landmark prosecution of cryptocurrency derivatives platform BitMEX, which saw the Justice Department and CFTC bring actions against the company and its founders, is likely the first of many such actions, Gretchen Lowe, acting director of the CFTC’s enforcement division, said Wednesday.
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Treasury to Study How Russians Could Use Hedge Funds, Private Equity to Evade Sanctions
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Russian oligarchs and elites might look to use investment advisers as a low-risk way to evade U.S. sanctions because of the industry’s vulnerability to illicit finance, a top U.S. Treasury Department official said.
Brian Nelson, the Treasury’s undersecretary for terrorism and financial intelligence, said Wednesday at a conference hosted by the Securities Industry and Financial Markets Association that his agency is scrutinizing the illicit finance risks facing the investment adviser industry and wants to engage with it to determine whether additional rules are needed to help prevent the sector from being used for nefarious purposes.
Mr. Nelson’s remarks come as concerns grow that Russian oligarchs and elites are seeking to evade sanctions imposed on them after the country’s invasion of Ukraine. Mr. Nelson said the U.S. is working with its allies to “prevent sanctions evaders from exploiting financial loopholes to hide and move their wealth.”
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ESG Standards Need to Make Sense for Smaller Companies, Too, Officials Say at Davos
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Efforts to create a global framework for disclosures on environmental, social and governance issues bring “challenges all over the place,” such as the risk of leaving smaller businesses behind, said Emmanuel Faber, chair of the newly created International Sustainability Standards Board.
The ISSB, which sets sustainability-related disclosure standards that jurisdictions can choose to adopt, was founded in late 2021 by the IFRS Foundation, the London-based nonprofit organization that oversees the International Accounting Standards Board. The purpose of the ISSB is to provide companies with a “common language” to speak about ESG with bankers, insurers and investors, Mr. Faber said Wednesday at the World Economic Forum in Davos, Switzerland.
The ISSB released two draft sustainability standards in March, with comments due by the end of July. With small companies in mind, proportionality is crucial, Mr. Faber said. “You can’t request the same thing from a $10 million company, and a $100 billion company. You can’t.”
Having global sustainability standards is necessary, even though these can end up being too complex for smaller businesses, said Bank of America Corp. Chief Executive Brian Moynihan. “In order to get this right, you’re going to have to have $3 million revenue companies, $300 million revenue companies, $3 billion revenue companies, $30 billion revenue companies and $300 billion revenue companies all be able to do it,” Mr. Moynihan said at Davos.
—Jennifer Williams-Alvarez
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Roman Abramovich spent lavishly over the years to reshape Chelsea into a powerhouse. PHOTO: TONY OBRIEN/REUTERS
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The U.K. government signed off on a deal to sell soccer club Chelsea FC for £4.25 billion, equivalent to around $5.3 billion, to a group led by Los Angeles Dodgers part-owner Todd Boehly.
The U.K. Premier League team previously belonged to Roman Abramovich, a Russian oligarch who was sanctioned in the wake of the invasion of Ukraine. After Mr. Boehly’s consortium struck a deal with Mr. Abramovich, the U.K. government had to sign off on the transaction to ensure it complied with sanctions restrictions.
Meanwhile, Russia is open to easing its blockade of Ukraine’s ports along the Black Sea if sanctions on Moscow are lifted, a Russian official said Wednesday, a move that could increase grain exports and help relieve rising food inflation and shortages.
Also: U.S. Sanctions Russian Companies Accused of Helping Iran’s Revolutionary Guard
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The U.K. government on Wednesday began a national-security probe into a Chinese-controlled company’s purchase of a British computer-chip factory, a move that could lead it to unwind the deal almost a year after it was completed.
The scrutiny is the latest sign that countries are becoming increasingly protective of their semiconductor industries amid a global chip shortage.
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Iran secured access to secret United Nations atomic agency reports almost two decades ago and circulated the documents among top officials who prepared cover stories and falsified a record to conceal suspected past work on nuclear weapons, according to Middle East intelligence officials and documents seen by The Wall Street Journal.
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Lawmakers are probing how Equifax Inc., Experian PLC and TransUnion handled consumer complaints about errors on their credit reports during the pandemic.
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A standard-setter in carbon offsets is clamping down on cryptocurrency projects in the sector, saying they add confusion to the fast-growing market that companies tap to compensate for their emissions.
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Walt Disney Co. has become entangled in a corruption scandal unfolding in Anaheim, the southern California city where its Disneyland Resort is based, that this week prompted its mayor to resign.
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U.S. Food and Drug Administration Commissioner Robert Califf signaled potential overhauls to his agency’s food safety division and took aim at “shocking” safety lapses at Abbott Laboratories’ Michigan baby formula plant.
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The co-founder of Enochian BioSciences Inc. was arrested this week after being indicted on charges he was involved in a murder-for-hire scheme that led to the death of a Vermont man in 2018.
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European officials said the pandemic and the Ukraine war highlighted the need for a multinational solution to help data move between countries with legal clarity on what can and can’t be done with it. PHOTO: OLIVIER HOSLET/SHUTTERSTOCK
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Russia’s invasion of Ukraine is putting more pressure on governments to work toward a global data-privacy agreement as digital communication tools continue to grow in importance, European officials said.
Moscow’s assault shows a sharper “dividing line” between democratic countries with rules to protect privacy and more authoritarian nations that could misuse data, said Bruno Gencarelli, an official responsible for negotiating international data deals on behalf of the European Union.
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China’s Covid-19 lockdowns in cities such as Shanghai are hurting consumer spending.
PHOTO: ALY SONG/REUTERS
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China’s strict Covid-19 lockdowns are hurting consumer spending for everything from coffee to sneakers and hotels, weighing on multinationals with a big presence in the country and blunting the postpandemic rebound that other parts of the world have experienced.
Starbucks Corp., Adidas AG and InterContinental Hotels Group PLC are among companies that reported significant declines in their China-generated revenue as consumers stayed home or tightened their belts as the economy weakens.
Meanwhile, Premier Li Keqiang acknowledges the business impact of lockdowns and touts vaccinations in meetings with foreign executives, marking a contrast with President Xi Jinping.
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Countries around the world have enacted a wave of export curbs on food since the start of the Ukraine war, a trend that economists say risks aggravating shortages and global food-price inflation.
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The country that dominated discussions at this year’s annual meeting of the World Economic Forum isn’t even there. Organizers of the forum withheld invitations to Russians after President Vladimir Putin ordered the invasion of Ukraine on Feb. 24, and the country’s absence from the meeting in Davos is freighted with symbolism.
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The worst energy crisis in a half-century is disrupting the West’s transition to cleaner sources of energy by providing new momentum to invest in fossil fuels, business and government leaders said at Davos.
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Wind turbines at a wind farm in Rio Vista, Calif. PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS
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The U.S. accounting standard-setter will consider crafting rules for how companies should account for climate-related transactions, a key step to providing clarity for firms and investors on deals involving items such as renewable-energy credits and carbon offsets.
The Financial Accounting Standards Board on Wednesday said it would add the project to the technical agenda featuring its rule-making priorities, which might produce a new rule U.S. companies would need to follow. The board earlier this month added a project on accounting and disclosure for certain digital assets such as bitcoin and Ethereum to its agenda.
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Carl Icahn’s animal-rights campaign at McDonald’s had been seen as a long shot from the start.
PHOTO: JOSHUA ROBERTS/REUTERS
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McDonald’s Corp. is poised to prevail in a proxy fight with activist Carl Icahn, who challenged the fast-food chain over its suppliers’ treatment of pregnant pigs, people familiar with the matter said.
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Elon Musk plans to rely more heavily on equity to finance his $44 billion deal for Twitter Inc. amid a sharp decline in Tesla Inc. stock in recent weeks.
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Aerojet Rocketdyne Holdings Inc. will hold a special shareholder meeting on June 30 to resolve a proxy contest between competing board factions, according to people involved in the process.
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CVS pharmacies will no longer fill certain prescriptions.
PHOTO: GABBY JONES FOR THE WALL STREET JOURNAL
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CVS Health Corp. will stop filling prescriptions for controlled substances ordered by clinicians working for Cerebral Inc. and Done Health, the broadest curbs yet by a major pharmacy chain against the telehealth companies following scrutiny of their prescription practices.
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Local officials in Wisconsin are trying to woo other manufacturers with infrastructure improvements that remain on iPhone assembler Foxconn Technology Group's tab.
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