TBLI BLOG The world will benefit when the economy supports well-being.

In a recent article in the Guardian, Elena Moya, wrote how Wall Street investment banks were losing business as a result of reputation and their association with the financial crisis.
The headline read “Europe bars Wall Street banks from government bond sales • Leading US banks blamed for triggering financial crisis • Policymakers propose a rival European monetary fund” http://www.guardian.co.uk/business/2010/mar/08/us-banks-european-bond-trading

She went on to write:
European countries are blocking Wall Street banks from lucrative deals to sell government debt worth hundreds of billions of euros in retaliation for their role in the credit crunch.
For the first time in five years, no big US investment bank appears among the top nine sovereign bond bookrunners in Europe, according to Dealogic data compiled for the Guardian. Only Morgan Stanley ranks at number 10.
Goldman Sachs doesn’t make the table. Goldman made it to number five last year and in 2006, and number eight in 2007, the data shows. JP Morgan was in the top ten last year and in 2007 and 2006 but doesn’t appear this year.
“Governments do not have the confidence that the excessive risk-taking culture of the big Wall Street banks has changed and they still cannot be trusted to put the stability of the financial system before profit,” said Arlene McCarthy, vice chair of the European parliament’s economic and monetary affairs committee. “It is no surprise therefore that governments are reluctant to do business with banks that have failed to learn the lesson of the crisis. The banks need to acknowledge the mistakes that were made and behave in an ethical way to regain the trust and confidence of governments.”

We had written about the potential of reputation loss, last year, and the impact on investment banks. The association with Shell-Brent Spar & Nigeria, and Dow Chemical during the Vietnam War was quite similar, except the vulnerability of the banking sector was far greater. It will be interesting to see how this plays out this year. Will investment banks actually learn from the past and start working in the interest of clients and other stakeholders.

Norwegian Government Pension Fund announces that it will commit 5% to Green Real estate investments, which at present rates represents $ 16 billion, according to Responsible Investor.

Norges Bank Investment Management (NBIM), who is the fund manager, will be required by the government to produce an annual report of the portfolio, including an “assessment of how it conforms to responsible management and the exercise of ownership rights. The bank will be allowed to hire external managers and outsource operational functions, with returns benchmarked against a customised version of the Investment Property Databank’s Global Property Benchmark.”

Take a look at this video.

I was reading the New York Times and came across this article with the following headline:
Wall St. Helped Greece to Mask Debt Fueling Europe’s Crisis

Surprise is not the appropriate word. My only question is why do institutional investors continue to work with an organization that continues to sabotage the financial system for its own person greed. Where are all the pension funds that signed the PRI and claim to work towards a more values based finance system:
Here are the principles:
1 We will incorporate ESG issues into investment analysis and decision-making processes.
2 We will be active owners and incorporate ESG issues into our ownership policies and practices.
3 We will seek appropriate disclosure on ESG issues by the entities in which we invest.
4 We will promote acceptance and implementation of the Principles within the investment industry.
5 We will work together to enhance our effectiveness in implementing the Principles
6 We will each report on our activities and progress towards implementing the Principles.

Where is the outrage and disgust? If you look at a recent study done on mba’s, the shock is even greater.
“The bank’s reputation remains strong among aspiring MBAs. It was ranked the fourth-most-desirable place to work in a survey of 6,207 MBA candidates at 67 business schools from December 2008 through March 2009 by Universum Group, a Stockholm-based marketing company. Goldman Sachs, which was rated third the previous five years, trailed No. 1 Google Inc., based in Mountain View, California, and the consulting firms McKinsey & Co., in New York, and Bain & Co., in Boston.
Unflagging Interest

Goldman Sachs hasn’t seen any decline in job inquiries from MBA students since last year, Sandra Hurse, vice president for global recruiting, wrote in an e-mail.

“Our applications numbers remain on par with previous years, and attendance at our recruiting events on campus this year were high,” Hurse said.

I guess dying rich in any way possible is still the mantra. However, I do believe that what Dow Chemical, experienced during the Vietnam War and what Shell experience with Nigeria and Brent Spar with respect to reputation will happen to Goldman Sachs. Perhaps, it will take longer, but in the long run, we need a finance system based upon values and less on macho ego. If not, the same melt down will happen over and over again.
We are already starting to see large institutional investors (pension funds, family offices, etc.) do their own financial engineering. It’s not rocket science, and many of the so called whiz kids on wall street, are not that smart. Recently, a large investment bank approached me for an introduction to a $ 100 billion low carbon infrastructure project. I tried to facilitate, but my friend (the client) said that the balance sheet of the investment banker was not strong enough for them. I referred this information to the investment bank, and they said in a pathetic attempt to boost up their ego “Oh. That is debt. We only do M&A”. It was hysterical and sickening to listen to this garbage.
“Dude you cut and paste text to be in compliance. You are not curing cancer and providing education, food, and water to billions of poor people”. Our standards for financial service industry providers need to be higher. There are many companies to choose. Whatever happened to the client is king.
I guess they never worked with Wall Street Investment Bankers.