HỌC VIỆN NGÂN HÀNG

KHOA NGÂN HÀNG HỆ CHẤT LƯỢNG CAO

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MIDTERM 2: PROJECT

Giảng viên: Trần Thị Thu Thủy

Sinh viên thực hiện:
1.Trần Phương Linh - 26A4011367
2.Lê Việt Hoàng - 26A4010484
Photo: Workshop 1: Keynote II: Is ESG non-pecuniary? (27/10/2023)
Workshop 2: Market behavior and Efficiency (28/10/2023)
 Transcribe

Workshop 1: Keynote II: Is ESG non-pecuniary?

Time: 00:00 - 10:01
Using ESG as a basis for investments by designated lawful retirement fund vehicles.
Because in the United States, there is a long since 1970s, a set of laws that govern the
investment of retirement called ERISA. And part of a big part of that is that you cannot
use values that investments should be done for peculiar reasons. And in this talk, I try to
prompt the notion that maybe ESG really is pecuniary. I think you can argue it a few
ways.
There certainly are funds in the United States that are religious based. You know a lot of
these faith-based Christian funds as well as Islamic finance funds that are not allowable
under the ERISA for being designated. As for the tax purposes and so on in retirement.
So some of my arguments could well apply to them, but in some respect, it comes down
to perhaps what is a religion? and what is something else? What is signaling trust and
signaling good citizenship? And can that really be police as something that investment
funds cannot consider? Well, anyway, without more ado. So this came down in February
2022, a lawsuit to the federal government by 25. Not surprisingly, Republican state level
attorneys jet and ripples in the United States. And it was also joined by a lot of senators
showing support in the US that they're suing the US Labor Department over this ESG
rule.
And required as I mentioned, the term of plan sponsors.This allows more freedom to
consider environmental, social, and government factors when selecting investments. And
and some of this might come down to the idea of maybe, and of course, I'm not a mind
reader, I have not to pay for motivations. But is it really the fossil fuel community? That
doesn't really want to see environmental aspects as a value system. But in any case,
there's a legal challenge here that relates to, as I mentioned, the ERISA law from the
1970s. The lawsuit asked the court to toss out the ESG rule, calling it arbitrary and
capricious in the violation of both the ERISA and the Administrative Procedure Act. You
know all the details in the US and so on.
But you know, the Investment Duties rule that was put in in 2022 contravenes ERISA
clear command, according to the lawsuit that Fiduciaries Act with the sole mode of
promoting the financial interests of land, participants and their beneficiaries. As they'll
know later in the talk, there's just an enormous amount of focus on ESG by mutual funds
now, including not just overt signaling, but many funds that can be discerned as
emphasizing ESG that actually make no mention of it at all. But anyway, I'm catching
ahead of myself.
So does the Department of Labor adequately justify its decision to permit fiduciaries to
consider non-definitary factors and so on and so forth? I think it has a there's a certain
landmark nature to this that would have widespread impact depending on how it
eventually gets settled. So as a first step, I would just introduce some concepts that
maybe we all know by now from the theory of social trust in finance. Just reviewing
those, for instance, the general notion from Oliver Hart and Hart and Moore from the 90s,
all through the 2017 and so on, is that all contracts are incomplete.
And we know as finance scholars that the notion of the firm and the notion of financing a
nexus of contracts goes back at least to the 1930s with Burl and Mead. That when there
are incomplete contracts, no contract can fully plan for every contingency. Not every
contingency can be thought of. There's always residual control rights. But there's also the
transaction costs of entering the contract. So when you enter into say a retirement fund,
for instance, there's a transaction cost of vetting the trustworthiness of the fund. And
whether they are good citizens or not. And it's fundamental to the transaction cost
economics of Williamson and so on as a fundamental pillar.
I would say a finance scholarship trust and transaction cost. Fukuyama and his book trust
makes the point very simply that a lack of trust is a tax on all transactions and a tax on
everybody. It's the blue that cements incomplete contracts. But I mean really this idea
goes back to Kenneth Arrow is very fundamental in this. And of course, a whole slate of
more recent research, you know USAP incidents in Bali’s and so on. So if as the first
question I would ask, and this is an ongoing suit of some importance to the US. I would
ask is if ESG enhances trust, then can we really say it's not a pecuniary or should we say
it is dis pecuniary.
Now, you know granted the the sort conservative faith-based community in the US would
say, well, religion enhances trust and so on. But that may be a plausible argument. But
however, religions tend to be a subset of values that apply to those members that are
members of that religion. You know, whether they be Christian, Islam, etcetera. Whereas
concern generally for the public good, which is the focus of, say, the E and the ESG
environmental, is that something that maybe stands aside something other than that, than
just a general values and good citizenship, but also one that enhances trust and therefore
offers a pecuniary value.
Now I remember just to be a little bit playful when I was a kid a long time ago. Now, my
dad was also in finance and he laughed at this one thing that happened in the 1970s and I
can’t. I couldn't find the original article but in the 1970s there was a certain fraudster that
went around to all the large banks in London and was able to convince these large banks
to give him substantial loans that were based on fraud. However, there was one bank that
did not give him a loan that declined the loan. And so after this was all covered and the
criminal was apprehended and so on, they asked him, asked the bank with one bank that
had declined to give him a loan. You know what was your secret here? Why were you
smarter than the other banks? And this is simply we are, it’s quite simple.
We would never issue a loan to somebody that wore brown shoes. Well, okay, is it a
brown shoe? Is it a value system? or Is it simply a signal? Albeit a faulty one. But
someone person’s signaling of trust may not be another person's. And of course, here
today you still have the playful notion that brown shoes could cost you a job in the US
and UK banking but signaling trust. So the lawsuit of the attorneys general does not
assert that ESG is a faulty signal of trust. Rather, it suggests that ESG creates preference
for E, environmental things, or over F fossil things.
There are many signals of trust. You know, obviously, black versus brown shoes, maybe
somebody's. Maybe not mine, but you know, somebody's. So I was going to argue that
signaling of trust really does have a pecuniary aspect, even if it is for some fault. So,
retirement funds shifting away from fossil fuel industries to green energy firms. This
seems to be the context and the motivation of the lawsuit. It is not given that a green
industry will return more than investors in fossil fuels, but it might, right? Does the
lawsuit really depend on showing that it can never be?
Well, if so, then yes, I mean there may well be green industries that return more than
investors. Maybe not all. Is E in separation from ESG pecuniary or not pecuniary? Well, I
would argue E is a public good. Trust is a public good. And it's not uncommon in
governments to consider that there's a clustering of public goods, meaning that.
 Reflection

Summary:
Workshop is transcribed: A legal challenge to the US Labor Department's ESG rule is
discussed, which allows more consideration of environmental, social, and government
factors in investment decisions. The lawsuit argues that the rule violates the ERISA law
and the Administrative Procedure Act. There is debate about whether ESG factors should
be considered financially beneficial or non-pecuniary. The author discusses the role of
trust-based marketing and machine learning in detecting money laundering. Firms with
higher ESG ratings are more resilient and have a stronger reputation, which is part of the
trust aspect. ESG lessens crash risk and companies should take measures to measure it.
Workshop isn’t transcribed: A research paper examines the impact of geopolitical risk on
stock return forecast ability, finding that partitioning the sample based on geopolitical risk
and business cycles improves forecast stability. The study also explores the relationship
between tone dispersion in earnings conference calls and information uncertainty, finding
it to be positively associated. The paper adds value by combining the effects of political
risk and business cycles, but there is room for expansion in describing the results and
linking them to economic literature. This research is relevant to investors and financial
institutions advising clients on geopolitical risk.
Reasons for choosing the topic:
We chose this workshop after significant thought and investigation for some reasons
.Firstly, the seminar was being held directly at the Banking Academy which was so
convenient for us to do our big assignment. In addition, we wanted to know more about
banking and finance as well as the difficulties and challenges that the banking industry is
facing. From there, we are aware of how to make an effort, work for personal growth and
development in line with our majors. Finally, because the topic was rather unfamiliar to
us, we could challenge ourselves to see if we could overcome it.
The three most beneficial things for us by doing this task:
After finishing this task, we gained the three most crucial benefits. Firstly, we could
collaborate effectively and efficiently as a united group. Moreover, we had a basic
understanding of challenging issues and opportunities in banking and finance. Last but
not least, our ability to listen has significantly improved in comparison to our previous
state, we may practically hear the complete native speaker chat.
The three most difficult things we face while doing this task:
Contrary to our early expectations, only when we started working did we realize how
difficult we were facing. Firstly, the task took a lot of time to complete because of our
inadequate listening skills. We had to listen to a video a thousand times to guess what the
word was. Secondly, due to our limited time to collaborate, we struggled to work fairly
and efficiently. Lastly, the subject of the workshop was something we were not familiar
with, so we had to learn about it, which was a bit overwhelming for us.
The lessons learnt from doing the task:
But in the end, all that effort has paid off, teaching us extremely valuable and respectful
lessons. First of all, we learned the importance of sharing and listening to each other’s
opinions in order to achieve optimal work efficiency. Furthermore, we gradually gain a
deeper understanding of the economic laws applied in life, particularly in the banking and
finance industry. Finally, to master listening skills, it is important to recognize the need
for extensive reading and listening to enhance vocabulary and acquire knowledge across
various fields.