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Feb 28, 2020

The week in GRC: Buffet presses BlackRock on climate plans, and UBS discloses Americas workforce diversity

This week’s governance, compliance and risk-management stories from around the web

Reuters reported on UBS Group’s disclosure that 38 percent of its employees in the Americas at the end of last year were women and 25 percent were people of color, adding that it plans to increase the diversity of its workforce. Although diversity was greater in hiring – 42 percent of new recruits were women and 38 percent non-white – it declined for promotions. A third of those promoted were women, while only 21 percent were people of color, UBS said in a report.

‘Where we see breakage in the pipelines is roughly around the director level,’ UBS Americas president Tom Naratil said. ‘That is where the pyramid starts to narrow.’ The bank hopes that by voluntarily disclosing the numbers it will be held more accountable on diversity, both internally and externally, Naratil said. UBS intends to achieve 50 percent diversity in hiring, promotion and retention in the Americas, it said, without setting a timeline.

– According to The Wall Street Journal, JetBlue Airways closed a sustainability-linked loan with BNP Paribas, amending an existing $550 million senior secured revolving credit facility. The change includes a sustainability-linked provision for JetBlue to align its strategic initiatives with its ESG performance goals and objectives. BNP Paribas is acting as the airline’s sole sustainability structuring agent.

The loan includes a pricing mechanism related to the applicable margin and commitment fee linked to JetBlue’s ESG score provided by Vigeo Eiris, an international provider of ESG research. JetBlue started to formally review its financial partners’ sustainability strategy and commitments in 2018, shifting business to financial partners with stronger ESG policies.

– The National Labor Relations Board finalized a rule that will make it more difficult to hold companies liable for unlawful labor practices by franchisees and contractors, according to Reuters. The change reverses a more worker-friendly Obama-era standard that was criticized by business groups. The rule requires that companies have direct control over the working conditions of franchise and contract workers in order to be considered their ‘joint employers.’

– Activist investor Edward Bramson is pushing Barclays chair Nigel Higgins to end the bank’s ‘cycle of disruption’ as CEO Jes Staley faces another regulatory probe, Bloomberg reported. Bramson said the bank’s board should take ‘seriously’ the latest scrutiny over Staley’s ties to the deceased financier and sex offender Jeffrey Epstein, according to a letter. The investigation is ‘another example of governance weakness that has led, inevitably, to the recurrent public disappointments and embarrassments that have plagued Barclays for so long,’ Bramson said in the letter to his fund’s backers.

Spokespeople for Bramson and Barclays declined to comment on the letter.

The board has said it fully supports Staley. Barclays disclosed in February that the UK’s Financial Conduct Authority is probing how Staley characterized his relationship with Epstein, who died in his prison cell last year. ‘I thought I knew him well and I didn’t,’ Staley said earlier this month. ‘For sure, with hindsight, with what we all know now, I deeply regret having had any relationship with Jeffrey Epstein.’

Reuters said eight candidates are seeking to become the next head of Norway’s sovereign wealth fund, in charge of managing a global portfolio of stocks, bonds and real estate worth $1.1 trillion. The applicants include the fund’s deputy CEO Trond Grande, according to Norway’s central bank. The board of Norges Bank is tasked with replacing the fund’s current CEO Yngve Slyngstad, who announced late last year he would soon step down after 12 years in the role.

– Senator Elizabeth Warren, D-Massachusetts, who is seeking to be her party’s presidential nominee, pressed BlackRock for details on its recent vows to take more account of climate risks, according to Reuters. Warren sent a five-page letter, also signed by junior senators Sheldon Whitehouse, Cory Booker and Chris Van Hollen, which is the latest feedback BlackRock has received over sustainability matters and reflects the growing interest among some Democrats in making climate change a business issue for financial institutions.

Among other things, the Warren-led group asked BlackRock CEO Larry Fink whether he backs legislation that would require companies to disclose climate-related risks and for details on how it plans to make use of sustainable funds. At present, ‘investors lack access to basic information about the potential risk of the climate crisis on American companies,’ the letter states.

A BlackRock representative said the firm is reviewing the letter.

CNBC reported that Bob Iger stepped down as Disney CEO and took on the role of executive chair. Bob Chapek, who most recently served as chair of Disney parks, experiences and products, succeeded him immediately. Chapek will continue to report to Iger and be appointed to the board of directors at a later date. Iger said the CEO reporting structure is a way to ensure a smooth transition. ‘We’re not concerned at all about creating any confusion,’ he said of the arrangement.

Iger, who had been CEO of Disney since 2005, will remain executive chair until the end of 2021, according to the company. He had been planning his succession for a while, saying at Disney’s investor day last year that ‘2021 will be the time for me to finally step down.’ On a call with investors shortly after the announcement, Iger said he decided to step down now because he wanted to focus on the creative side of the business now that major projects such as the Fox merger and launch of Disney+ were behind him.

– A group of 39 state attorneys general announced an investigation into e-cigarette maker Juul Labs’ marketing practices, according to Reuters. The probe is led by attorneys general in Connecticut, Florida, Nevada, Oregon and Texas and will look at whether Juul targeted underage users, as well as its claims about nicotine content and safety.

In a statement, Juul said it seeks to ‘earn the trust of society by working co-operatively with attorneys general, regulators, public health officials’ and others to ‘combat underage use and transition adult smokers from combustible cigarettes.’ The company said it wants only adult smokers and does not ‘intend to attract underage users.’

Reuters said that Investindustrial, the top shareholder of carmaker Aston Martin, is aiming to turn investments from theme parks to high-end furniture brands ‘carbon-positive’ by the end of 2020, as buyout funds compete to attract investors increasingly focused on tackling climate change. Investindustrial committed to a series of ambitious ESG goals when raising its seventh €3.75 billion ($4.08 billion) fund last year.

Chair Andrea Bonomi said the firm was on course to become carbon-positive across all of its investments by the end of 2020 – meaning it will offset more than the carbon emissions of portfolio companies. Although most buyout funds tend to showcase ESG credentials to their institutional investors, there is no industry consensus on how to measure their progress.

– The SEC said Jeffrey Boujoukos, director of its Philadelphia regional office, will leave the agency at the end of the month after almost 11 years of service. Boujoukos has led the Philadelphia office since December 2016, overseeing the agency’s enforcement and examinations in the region. Before that, he supervised the enforcement program in the office as an associate director and managed the Philadelphia trial unit as regional trial counsel.

‘Jeff has been an exemplary leader in the commission’s commitment to investors. [He] has led by example in fighting fraud and educating our Main Street investors,’ said SEC chair Jay Clayton in a statement. ‘His dedication to our mission and to the Philadelphia regional office will have a lasting impact in Philadelphia and beyond, and I thank him for his counsel to me and his many years of service to the commission.’

– The UK’s Financial Conduct Authority (FCA) has told the country’s fund managers they must be ready to stop using Libor before it disappears at the end of next year, according to Reuters. The benchmark is being phased out after banks were fined billions of dollars for trying to manipulate it. ‘If your firm has Libor exposures or dependencies, your transition activities should now be underway,’ said Nick Miller, the FCA’s head of asset management supervision, in a letter to asset management CEOs.

Reuters reported that, according to people familiar with the matter, Elliott Management is pressing SoftBank Group for details of almost $10 billion in investment securities on its balance sheet as part of its efforts to improve the value of the Japanese firm. Elliott has asked for improved disclosure on the valuation of assets in its flagship Vision Fund, the people said. It also wants details on $8.33 billion in investment securities sitting on SoftBank’s balance sheet that appear outside of the Vision Fund with no detail as to what they are, the people added.

Elliott declined to comment.

A SoftBank spokesperson referred to filings showing that investments outside its fund include the ride-hailing portfolio that had been warehoused by the group. SoftBank’s founder Masayoshi Son welcomed Elliott as a major investor during the company’s results on February 12 and has said the two have held friendly discussions and are aligned on improving shareholder value and governance.

– According to the WSJ, activist investor Clifton Robbins, who manages $2 billion at Blue Harbour Group, is closing his firm. Last year, his flagship hedge fund gained 33 percent, topping the overall stock market, according to a letter sent to the firm’s investors. So far this year, this fund is down more than 3 percent, in line with the market. At the same time, activist investing is one of the few areas in which fundamental investors have seen strong client demand.

But Robbins says he decided it was time to close his firm and establish a family office. ‘It felt like a good time to wrap up,’ he says. ‘I want to do something else, though I’m not sure what it will be.’