ECONOMIC SILUET: The Street's New Sacraments

Selasa, 17 Desember 2019

The Street's New Sacraments

TUE, DEC 17, 2019

YOUR AFTERNOON NEWS UPDATE AND MARKET ACTION FROM CNBC

AS OF TUE, DEC 17, 2019 • 09:54 ET

DJIA		28244.68
		+0.03%	+8.79

S&P 500		3192.42
		+0.03%	+0.97

NASDAQ		8807.40
		-0.08%	-6.83

EDITOR'S NOTE

Welcome to the Exchange newsletter.

Kelly is still out so today's newsletter is brought to you by CNBC's SVP of Business News, Dan Colarusso. Enjoy!

Ok, time for a pop quiz:

Which one of these quotes came from actual Wall Street CEO?

A.   "We don't have the luxury of that limited perspective any more. The evidence of climate change is clear."

B.    "Greed, for lack of a better word, is good."

C.    "We will use this moment as an opportunity to do better — as leaders, as employees and as human beings."

It must be B, right? No self-respecting master of the universe would publicly fret about climate change or appeal to the humanity of the people around him.

Well, big-time bankers aren't what they used to be, and neither is the world around them. As a result, Wall Street titans have to not only worry about turning a profit but how that profit gets turned. That's why Goldman Sachs' David Solomon (Choice A, for those keeping score) penned an op-ed for The Financial Times talking about how his firm would be focusing on sustainability, and why it would be better for both the clients and employees at a firm commonly known not so long ago as a vampire squid.

And it's why Choice C, the JPMorgan Chase chief Jamie Dimon didn't shy away from addressing a New York Times report that detailed alleged racial discrimination at some JPM Chase branches. He didn't hide behind the dialect of crisis PR. Instead he said what any of us might say – or want our boss to say – in the same situation, that he was "disgusted by racism and hate in any form."

Now, don't get me wrong, Wall Street hasn't necessarily found a new religion, it's just that there are a few new sacraments. One is making sure their clients and employees comply with an emerging set of standards around environment, sustainability and governance. Those ESG tenets – which can cover everything from recycling to splitting the chairman and CEO role – also now guide where major investors put prodigious amounts of cash. Those investors, especially when they are public pension funds, play the tune to which the brokers and banks dance. It's now a crucial business decision to be in step with those and build them into the foundation of day-to-day operations.

It's not just a pure P/L play, either. If, as Sen. Mitt Romney famously said, corporations are people they need to take care of their souls. And those souls reside squarely in the rank-and-file. Today's CEOs, no matter the industry, have to create a culture that attracts the best talent. Increasingly that talent wants employer values to align with personal ones. The most prominent example came earlier this year when tech giants from Alphabet to Microsoft saw employees protest government contracts they find offensive. That ethos won't be contained to the West Coast.

And yes, I know Gordon Gekko (Choice B, which you know if you remember the 1980s) didn't actually exist but the character was the particle-accelerated version of what regular people thought of Wall Street people. The financial industry has always been home to more diverse thought than it's been given credit for. The difference now is that while bank bosses may have privately supported such causes in the past, they chose a public role to be cold-eyed counsels who helped capital find its best use. Now, whether it's on climate change, gender equality and common-sense gun control, they are taking the lead.

Anyone who has spent any time in the markets knows you can't fight the tape. What the tape is telling Wall Street CEOs now is clear: The space between their beliefs and their business models is shrinking and they need to step squarely into it.

Tune in to The Exchange today at 1pm ET!

Kelly Evans
@KellyCNBC

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