Jan. 16, 2024
To all involved at the SEC: I am urging the SEC to NOT allow the NYSE to list “Natural Asset Companies” or NACs, pursuant to File No SE-NYSE-2023-09. Throughout my 45+ year career in finance and investment management, I have been a capitalist and will remain so for the rest of my life. Believing in capitalism does, however, require ground rules, which cannot and must not be manipulated to keep the playing field level, fair and to engender positive outcomes. The continued intense efforts to financialize productive natural resources to subvert the legal system, to pervert the capital markets, and to cause harmful outcomes for both investors and US citizens/taxpayers cannot be permitted. From an investor protection perspective, NAC’s bastardize the capital markets to further a political objective. NAC’s are not just a ‘new type of company’, which is unusual and should require intense scrutiny, but also plan to employ their own type of accounting system. This comes directly from the creator of “NACs”, IEG’s Chairman & CEO, who said. “We created a new accounting system , which we called Statements of Ecological Performance, which account for the flow of ecosystem services in finance terms.” (Source: investingineregenerativeagriculture.com/2022/11/29.) Even if they use GAPP accounting within NAC financial reporting, their hubris that there is some separate accounting measures to be used within the financial markets raises too many red flags to ignore and should disqualify them immediately. NAC’s seek to use other peoples’ money, including that raise in the capital markets, to buy the ability to control or ‘manage’ productive public and private land and other natural resources. Their stated purpose in doing so is not to make a profit or to be productive, but rather to protect, conserve, restore and preserve these natural ‘assets’, based on whatever their own definitions of those activities are. As you know, there is a very clear reason a company goes public---to broadly access capital providing both funding for growth and liquidity for existing investors, providing opportunities for investors to participate in future growth for the risk they take on by investing in said companies. Companies are supposed to have strong merits and provide a path to growth for public investors in exchange. It is a rigorous and costly process both to go public and to stay public, and it is not for every business. These NACs are a bastardization of that purpose. They are not intended to manage resources to improve their earnings potential, rather they would often be seeking to eliminate the productivity of these assets in the name of some type of climate justice. Not only could this impact our ability to generate and access energy, critical minerals, water and food, but it also put those decisions in the hands of institutions, such as foreign governments and their sovereign wealth funds, who could invest in these NACs and have de facto control over America’s precious natural resources. The SEC’s focus/mandate is protecting investors. NACs allow investor money, especially those deployed through entities that they may not control, such as pension funds or sovereign wealth funds, for example, to be used to decommission resources rendering them non-productive to achieve political objectives. American and the SEC cannot let that happen. If you have any doubts on whether this is a political tool meant to subvert the legal process, read the words of IEG’s Chairman, who said, “We were looking for a private-sector approach that wasn’t dependent on policy. It wasn’t dependent on traditional taxes, regulation or philanthropy to price in these assets and give investors the opportunity to invest directly in nature, whether that’s for climate or biodiversity.” (Source: eenews.net/articles/Invest in nature/JenniferYachnin). The bad outcomes from creating/enabling NACs include a subjugation of the fiduciary duty to do what is in the vest interest of investors. Critial natural resources will be subject to the consolidation of and ownership by a handful of wealthy and powerful individuals. And even more concerning, control of productive resources—including our food supply, water, energy, tourism, and more—could end up in the hands of foreign nations and their sovereign wealth funds or other bad actors. Wall Street often gets a bad reputation and the SEC is supposed to be a counterbalance to make sure the markets are free and fair for everyone and have the interests of all investors at heart. Please do the right thing, and not that which is politically-pushed and elite power- driven; do not allow NAC’s to access our capital markets via NYSE listings or ortherwise. Thank you for your thoughtful consideration. Carol A. McFate