The Municipal Securities Rulemaking Board will be releasing a comprehensive summary in July of the comments it received as part of its request for information on environmental social and governance considerations in the muni market.
The board received 52 comments in response to its request for information, many of which centered around the MSRB’s lack of authority on ESG and questioned what the board intends to do on this topic. The anticipated report is expected to address why the board is pursuing this matter and provide a summary of the viewpoints expressed.
Pressed by members of the debt committee at the Government Finance Officers Association’s annual meeting whether the report will provide more than what can be assessed in reading the actual responses, Carol Kostik, a public member of the MSRB’s board of directors and chair of the Audit and Risk Committee said the report will provide little analysis but will serve as an important first step.
“We have 52 letters now,” she said. “We understand what's happening but it doesn't really reflect how we learn and move forward as an organization.”
The MSRB is still unsure about where these responses will lead it but Kostik said the board isn't exploring the issue with a regulation-first approach.
“We don’t know what the next step is, it’s a learning process and this is the first step in the learning process” Kostik said. “We’re not looking to lead with a regulatory foot.”
ESG and its applicability in the muni market has been up for debate for some time, but Dave Erdman, capital finance director for the State of Wisconsin celebrated the MSRB’s efforts in this effort for getting the market talking in the right direction.
“One good thing that came out of the RFI is it got groups talking,” Erdman said. “Better communication, better understanding of the concepts.”
“Before the RFI came out, you mentioned ESG and people mixed up the credit and designation into one category,” Erdman said. “Now, I think you're starting to see better separation of that.”
During GFOA’s debt committee meeting, the board took the opportunity to update some of its best practices with a closer orientation towards diversity, equity and inclusion considerations, and the MSRB is making an effort to do the same.
“We think a market functions best when it has the broadest pool of diverse participants,” Kostik said.
The board is focused on ensuring its DEI strategy encompasses all and is working on a joint project with FINRA to get a better understanding of smaller firms, Kostik said. The MSRB is also conducting a retrospective review of its rules to understand what DEI impact they may have.
But those aren’t the only internal developments that the MSRB is at work on. The MSRB is in the midst of a multi-year data and technology update that will make its EMMA, EMMA Labs and MSRB.org platforms more closely aligned.
Brian Anthony, chief data officer for the MSRB said that although EMMA and EMMA Labs are often viewed as large filing cabinets, you’ll soon be able to customize your own interface on EMMA Labs based on what’s most important to each user.
“One of the things that we're planning for is to allow you to want to log into EMMA but then customize it to the things that you're interested in seeing, as opposed to having to wade through everything,” Anthony said. “It's definitely a multi-year journey,” he said. “The more that we hear from you guys at this stage, the easier it is to incorporate a lot of those kinds of ideas.”
