Asset managers and retirement plan advisers should be aware of how they are managing and presenting ESG funds. According to analysts at Fitch Ratings, recent regulatory actions are likely to continue into 2023. For instance, last week, Goldman Sachs paid the Securities and Exchange Commission $4 million to settle charges of failing to correctly incorporate ESG research into investment procedures and branding. In another example, on May 23, a BNY Mellon Investment Adviser paid a $1.5 million penalty for misstatements and omissions about ESG representation in mutual funds. In a press release on Tuesday, Fitch said “These types of charges are likely to continue as the SEC looks to crack down on greenwashing.” Fitch also noted that these types of charges can “lead to reputational damage that can weaken franchises, particularly if they occur repeatedly.” Earlier in the year, the SEC proposed updates to fund naming rules and a new mandatory disclosure related to ESG investment practices. Fitch said the agency’s actions have resulted in asset managers being more conservative regarding their ESG messaging.

Finsum:With regulatory actions on ESG greenwashing expected to continue, asset managers need to be more conservative with their ESG credentials.

According to data from the financial technology platform 55ip, a record number of financial advisors are taking advantage of tax-loss harvesting opportunities for their clients. Data from its platform revealed that across client portfolios through Q3, the 2022 YTD tax savings benefit for model portfolios of ETF and mutual funds was 2.99%. Going back to 2020, the annualized tax savings across clients in model portfolios on their platform was 2.82%. The tax savings illustrates the value of ongoing tax loss harvesting within client portfolios throughout the year, compared to those not harvested for tax losses. 55ip, which is a wholly owned subsidiary of J.P. Morgan Asset Management, offers advisors trading and rebalancing capabilities, in addition to automated, personalized, and optimized tax outcomes. Paul Gamble, Chief Executive Officer of 55ip stated “The growth of model portfolios is one of the fastest growing trends in asset and wealth management, but concerns about the tax implication of transitioning and managing client accounts have been a major barrier to broad use by advisors. Volatile markets can be emotionally and financially challenging for investors, but our data indicates they can also present potential opportunities for meaningful benefits from a tax perspective.”

Finsum:Based on data from 55ip’s platform, a record number of advisors are implementing tax loss harvesting in their clients’ model portfolios.

CEOs of top U.S. energy companies are speaking less about climate and carbon emissions, according to a Bloomberg analysis of quarterly conference calls held by 172 American oil and gas companies. The data showed how terms such as “climate change”, “energy transition” and “net zero” have been coming up with less frequency in recent conversations with analysts and investors. For instance, in fossil fuel suppliers’ conference calls this quarter, the use of language that alludes to environmental, social, and governance topics was down by more than 40% from peak levels in 2021. In fact, mentions of the terms “climate change,” “energy transition,” “emissions,” and “renewables” have all decreased. The analysis was based on an automated search of terms related to ESG issues in transcripts of quarterly earnings calls from publicly traded energy companies that hold calls in English. Prior to this year, energy companies were under pressure to slash greenhouse gas emissions, which led to a spike in discussions about ESG. But with fossil-fuel profits now soaring, ESG mentions have fallen, signaling that the industry’s focus on ESG might be fading.

Finsum:With fossil-fuel profits soaring, U.S. energy CEOs are speaking less and less about ESG.

According to the Wall Street Journal, investor home buying has fallen 30% over the past year due to high prices and rising interest rates. The Journal cited Redfin data that showed companies bought 66,000 homes across 40 markets in the third quarter of 2022, a 29% drop from the 94,000 homes bought during the same period last year. The declines come after a two-year period in which investors piled into the US housing market as the demand for suburban properties rose. While investors were buying one in every five homes at the start of the year, a combination of rising rates and elevated prices is driving the slowdown. The Federal Reserve tightened rates from near zero in March to a current range of 3.75% to 4%, which pushed mortgage rates higher and curbed demand. The interest rate hikes were in response to escalating inflation. In addition, house prices have remained the same in many areas of the market despite the fall in sales.

Finsum:Investor homebuying dropped 30% year over year due to a combination of rising rates and high home prices.

According to Bloomberg data, the iShares iBoxx $Investment Grade Corporate Bond ETF (LQD) saw $3 billion in outflows on Monday, its largest one-day outflow since the fund’s inception twenty years ago. The exodus was quite the reversal for LCD as the ETF saw six straight weeks of inflows. The fund was up 9% between October 20th and Friday, with investors pouring money back into credit with the hope that the Fed might slow down the pace of rate hikes. However, those hopes fell as St Louis Fed President James Bullard warned that “markets are underpricing the risk that the central bank will have to be more aggressive rather than less aggressive.” In response, LQD dropped 0.7% on Monday, its worst performance in over a month. As of Monday’s close, the ETF was down 19% for the year, its biggest loss ever. Peter Chatwell, head of global macro strategies trading at Mizuho International told Business Insider that “The fund’s recent rebound likely exacerbated the withdrawals as year-end approaches. Clearly, at this time of year, some money gets taken out of the market, particularly if performance has recently been strong, which with LQD it has.”

Finsum:LQD saw its largest one-day outflow ever as St Louis Fed President James Bullard warned that the Fed will need to become more aggressive, not less aggressive.