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T. Rowe Price “leery” of negative social impact of predatory lending

Investment titan says ESG factors can “tip the scale”

US investment management giant T. Rowe Price has revealed it decided not to invest in several ‘predatory lending’ firms in emerging markets countries because it was “leery” about their negative social impact.

The Baltimore-based firm, which is listed on the New York Stock Exchange, made the revelation in its latest Corporate Social Responsibility Report, released earlier this month.

“We were leery of several debt issuers in Russia, Brazil, and Mexico that practiced predatory lending – loaning money at high interest rates to ill-informed borrowers who could not service the debt,” T.Rowe said, without naming the firms.

“Such companies can earn enormous profits at certain points of the interest rate cycle, but we decided not to invest in any of them, reasoning that this business model has negative societal implications and tends to be a long-term loser, primarily due to potential targeting by regulators.”

It goes on to say that while environmental, social and governance (ESG) considerations alone don’t always “tip the scale” in its investment decision-making, this particular example showed the “significant role” ESG issues and other factors can play.

The firm, which has $773bn in assets under management, was a signatory to a letter that was critical of thedirection being taken by the Principles for Responsible Investment (PRI) that was reported by RI earlier. The firm added that it has increased its support to the most impacted communities in its hometown of Baltimore following riots earlier this year sparked by the death of Freddie Gray.

“Efforts are underway to identify how the firm can provide resources to help address the communities’ urgent needs, as well as some of the long-term issues that precipitated the unrest,” T. Rowe said.

On the same day as it unveiled its CSR report, T. Rowe also named Alan Wilson, CEO and chairman of food group McCormick, as a director. Wilson is also on the board at the National Association of Manufacturers (NAM), a business lobby group often at loggerheads with responsible investors over its stance over climate change and corporate governance issues.

In January this year a shareholder proposal at T. Rowe Price calling on the funds giant to review its voting practices to see if they are consistent with its commitment to the Principles for Responsible Investment (PRI) was withdrawn.
Zevin Asset Management, the Boston-based SRI investor, had filed the resolution ahead of the annual meeting. Link