Describe how you identify emerging ESG issues.
Research by Ethics Metrics, dating back 40 years on financial crises in the U.S. banking system, identifies a core violation of the OECD Corporate Governance Principles. Federal bank regulators and many large Bank or Depository Institution Holding Companies (DIHCs) are not disclosing formal supervisory enforcement actions. This intentionally conceals material information from investors thus undermining the integrity of the global financial markets for large U.S. DIHCs and their global investors. Ethics Metrics' publishes its research through public comments to the Securities and Exchange Commission on Bank Holding Company disclosure issues. See the papers submitted to the SEC at this URL: https://www.sec.gov/comments/s7-02-17/s70217.htm
Describe some of the emerging ESG issues you have identified in this process.
Federal bank regulators and many large U.S. DIHCs are intentionally classifying material information as confidential supervisory information while this same information is disclosed by federal bank regulators and small DIHCs thus creating a bifurcated market or unlevel playing field with information asymmetries or superior information. Disclosure of this information results in an average 39% default rate, within an year of disclosure, for small DIHCs. Their subsequent mergers with large DIHCs, many of whom intentionally conceal this same information, have created an inefficient market for large DIHCs that is characterized by artificially low default rates and risk profiles and corresponding inflated equity values and underpriced bond and swap values.