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by George Strobel, Forbes Financial Council Member

Environmental, social responsibility and good governance (“ESG”) standards for business conduct continue to rise in importance as a result of the economic chaos and human suffering caused by the Covid-19 pandemic. While companies are developing more comprehensive criteria, the standards are far from consistent. The reasons for the inconsistencies are numerous, but of greatest concern is the bias of ratings and the lack of public disclosure about the criteria and standards used in making those ratings.

Consequently, unlike financial information reporting, which has relatively standardized, disseminated and objective criteria, the information provided to ratings agencies varies widely by company and lacks verifiability. Even worse, the basis used for evaluating this information is secretly maintained and lacks peer or public review. The result is that the investing public is provided ratings scorecards that are at best inconsistent, subjective and nonverifiable. At worst, the ratings mislead the investing public. The SEC has made note of these failings in its investigation of purported “ESG” focused funds.

One positive outcome of the pandemic is the increased focus on social and governance factors.

Given the desire for more balanced ESG reporting, now should also be the time for the generation of a more functional ESG rating framework. That requires the adoption of objective standards among ratings agencies. By implication, that means subjective criteria and evaluations must play a reduced role in the final ratings report. The objective is for thepublic to have access to the standardized ESG reports, the outcomes of which are not dependent on the firm preparing the report. The goal would be to move far closer to what investors receive in the financial reporting world where the results of a financial audit are not dependent on whether it is prepared by a global auditing firm. The same cannot be said for today’s ESG reporting.

Read the full article here.

by George Strobel

References to concepts like ESG, impact investing, social responsibility, carbon footprint initiatives, sustainable investing, climate change, green or sustainable funds and other related concepts are at every turn now in the business media. Collectively, these can be referred to as “do good” precepts. This is not a new development. It’s been ongoing for the past 20-30 years.

Whether or not you believe in climate change, sustainable renewable energy — which is cheaper in many cases and cleaner than fossil fuels — makes sense. Urging corporations to be mindful of the impacts they have on the communities they operate in is not a bad thing. While Europe is 20 years ahead of the U.S. in the integration of these concepts in standard business mantra, attention to these concepts in the U.S. is accelerating. But the new focus is on more than just climate change. What are these concepts, and how are they affecting business?

ESG

Today, it is standard for a public company to have an ESG report, a sustainability report or perhaps a social impact report included in a U.S. public company’s annual report. So first, let us briefly discuss many of these more popular concepts. ESG stands for “environmental, social and governance,” and it generally represents the most broadly applicable factors for evaluating the stewardship of a business.

The “environmenal” part of ESG examines how the business is operated in a sustainable manner from a global ecological perspective. This would clearly include attention to mitigating the business’s carbon footprint and other global warming concerns, such as energy consumption, energy efficiencies and sustainability of the materials it uses, and its manufacturing and business processes. It would also include issues like water quality, waste removal and processing, etc.

The “social” prong of ESG relates to the overall social impact, both internally and externally, of the business and its products in the communities it serves. Does it have policies to combat discrimination of employees based on sex, gender, religion, age or any other relevant basis? Does it have programs or spend money assisting the communities in which it operates and serves with preventative health programs, medical assistance, basic educational assistance or similar programs? In other words, are the communities in which the business operates otherwise enhanced aside from the jobs and taxes created by the business?

The “G” part of ESG stands for “governance.” This prong entails several things. For instance, is the decision-making process of the business open and straightforward? In times of crisis, does the company hold back information, or is it open with the public? Does the voting regime of the company reflect the economic rights of its shareholders?

Related Concepts

Read more on the related concepts and lack of standards here.

Company continues to focus on strengthening leadership talent

ATLANTA — Monarch Private Capital (MPC), a nationally recognized tax-advantaged investment firm that develops, finances, and manages a diversified portfolio of projects that generate federal and state tax credits, announced today that Ian Chomat has been promoted to Chief Financial Officer for the organization. Chomat moves into the role after serving as the Controller.

“One of Monarch’s key attributes is our talent. Ian’s arrival was part of a concerted effort to bring in top talent with experience to grow and expand our position in the industry,” said MPC Co-CEO and Managing Director of Tax Credit Investments, George Strobel. “The structure and discipline that Ian has brought to MPC’s financing and accounting departments is a testament to his leadership ability and financial acumen.”

About Ian Chomat, Chief Financial Officer

Chomat has over fifteen years of experience in construction finance, development, and real estate industries. Prior to joining MPC, Chomat worked as Controller for a company which specialized in the development, construction, and syndication of low income housing tax credits.  He’s held various positions including Chief Financial Officer and was a consultant for both privately held and publicly traded companies. Chomat’s career began in public accounting where he practiced both tax and assurance services for privately held companies.

“I’m excited for this opportunity and to continue to contribute to the growth of Monarch as a leader in tax equity investments,” said Chomat.

Chomat earned a Bachelor of Arts in accounting and business from Flagler College. He is a Certified Public Accountant and Chartered Global Management Accountant.

For more information on MPC’s programs and services, please contact George Strobel at 404-596-8032 or gstrobel@monarchprivate.com.

About Monarch Private Capital

Monarch Private Capital positively impacts communities by investing in tax credit supported industries. The company is a nationally recognized tax equity investor providing innovative capital solutions for affordable housing, historic rehabilitations, renewable energy, film, and other qualified projects.  Monarch has long term relationships with institutional and individual investors, developers, and lenders that participate in these types of federal and state programs.  Headquartered in Atlanta, Monarch has offices and tax credit professionals located throughout the U.S.

Published by Michael Novogradac

State (and local) tax incentives play an often underappreciated role in the success of federal tax incentives.

The low-income housing tax credit (LIHTC), new markets tax credit (NMTC), historic tax credit (HTC), renewable energy investment tax credit (ITC) and production tax credit (PTC), and opportunity zones (OZ) incentive are all part of the federal tax code, but state incentives to complement them make a significant difference.

This issue of the Novogradac Journal of Tax Credits highlights various state-level tax incentives and how they interact with the federal versions. Two things are obvious: State tax incentives are important and certain types are more successful.

How state tax incentives are structured varies widely. Many states have incentives that largely mimic the federal version (especially in the cases of the LIHTC and HTC), while others are more targeted, such as to specific types of businesses, geographic areas, or demographic groups. Some states embrace tax-based incentives for community development, others are averse to using the tax code to incentivize such activities.

State tax incentives are important–and it’s worth looking at the big picture of what states are doing, what works and how different states are adapting. Most importantly, it’s worth examining what works best when it comes to state-level incentives for affordable housing, community development, historic preservation and renewable energy.

Read more about why state tax incentives matter.

Clarifications from April 22 The National Law Review. See excerpt below. Read the full article here.

The U.S. Department of the Treasury issued its second set of proposed regulations related to the new Opportunity Zones (OZ) tax incentive.

The guidance makes it easier for funds to ensure compliance with the requirement that a fund has 90 percent of its assets invested in OZs and expands the working capital safe harbors. The proposed regulations also provide clarity on treatment of gains on long-term investments, ownership and operation of the business, and what constitutes Qualified OZ Business Property.  For the full guidance click here.

Below are the highlights:

“We are pleased to issue guidance that provides greater flexibility for communities and investors as we continue to encourage investment and development in Opportunity Zones,” said Secretary Steven T. Mnuchin.  “This incentive will foster economic revitalization, create jobs and spur economic growth that will move these communities forward and create a brighter future.”

New investment vehicle benefits underserved communities

ATLANTA — Monarch Private Capital (MPC), a nationally recognized tax-advantaged investment firm which develops, finances and manages a diversified portfolio of projects that generate federal and state tax credits, is pleased to announce the launch of three Opportunity Funds (O-Funds) targeting market rate investments in qualified Opportunity Zones (O-Zones).

An O-Fund is a new investment vehicle created as a result of the Tax Cuts and Jobs Act of 2017 to encourage long-term investments in underserved communities that need developments to jump-start their economies. MPC has successfully created, operated and managed numerous tax credit funds over the past 13 years that have included investments in recently designated O-Zones, and as a result, is naturally positioned to offer O-Funds.

“The launch of these O-Funds is in response to the demand we have seen for quality investments from developers that have had previous success in economically challenged environments” said Alice Nolen, Director of Sales and Special Projects for Monarch Private Capital. “We’re excited to offer what we think are compelling opportunities with experienced developers in underserved communities where all of us can have a positive impact.”

O-Funds enable investors to defer taxes on recent capital gains and, if requirements are met, they can reduce their tax payment up to 15%.  In order to maximize the tax reduction, the current program necessitates the majority of investments to be made by December 31, 2019 and to be held for at least seven years to meet the program end date of 2026.  Investors may also benefit from an elimination of taxes on the appreciation of their O-Zone investments subject to a 10-year hold period.

“Now that the Treasury has given us adequate guidance around the tax code, it is time to take advantage of this opportunity before the seven year tax benefit expires,” said Billy Huger, Managing Director of Monarch Private Capital Advisors. “While the benefits of this program are an incredible incentive for investors to allocate capital to underserved communities, they can also make a meaningful impact by increasing the after-tax returns of the investments.”

As with any new investment program, investors are being cautious as they get up to speed on the opportunity and the market. “While many, rightly so, are hesitant to commit to O-Zone projects with core market commercial developers, they need to realize there are developers that have been successful working in some of these economically challenged areas throughout a variety of market cycles,” said Huger.

For more information about these funds or other MPC programs and services, please contact Billy Huger at bhuger@monarchprivate.com.

About Monarch Private Capital

Monarch Private Capital positively impacts communities by investing in tax credit supported industries. The company is a nationally recognized tax equity investor providing innovative capital solutions for affordable housing, historic rehabilitations, renewable energy, film and other qualified projects.  Monarch has long term relationships with institutional and individual investors, developers, and lenders that participate in these types of federal and state programs.  Headquartered in Atlanta, Monarch has offices and tax credit professionals located throughout the U.S.

Written by Billy Huger and Brent Barringer

Hailed as the most significant tax-advantaged investment solution of its kind, the Opportunity Zone (OZ) program presents profound tax savings and investment opportunities for investors. Introduced last year in the Tax Cut and Jobs Act, the OZ program intently promotes long-term investments to stimulate designated Opportunity Zones in each state.

How does the program work? Investors place equity into Qualified Opportunity Funds (O-Funds) so the funds can use the equity to fund real estate projects and small businesses in under-sourced rural and urban neighborhoods and communities. In return for their investment, and in addition to a projected return on investment, investors are rewarded with substantial tax incentives that can last more than ten years.

How substantial are the incentives? O-Funds allow for a deferment and reduction of the federal tax liability on the gain from the appreciated assets by:

Opportunity Funds – Exceptional Opportunity

O-Funds present a phenomenal investment opportunity. “For taxable investors, in a yield-challenged environment, it provides them the opportunity to increase the yields on more conservative long–term investments. Wealth managers, high net worth family offices, and major insurance companies can now deploy capital, receive tax advantages and earn a healthy yield while meeting environmental, social, and governance mandates,” said Billy Huger, Managing Director of MPC Advisors.

Not All O-Fund Firms Are Created Equal

There can be a meaningful difference between the perception and reality of the return an investor can get from an O-Fund investment. The capabilities of the investment firms can be very different and a firm’s proven experience investing in economically challenged areas can be the difference between a good and bad outcome.  Investors should tread cautiously, because not every investment firm is equipped to manage O-Funds in a way that provides the highest probability of achieving investor goals. Longevity and a proven history of success are imperative in the complex world of tax incentivized investments, especially when deploying capital in economically challenged areas.

As a nationally recognized and fast growing US tax equity firm, MPC has been deeply rooted in tax-advantaged programs since 2005 – over a decade before the O-Fund program was enacted last year.

“We’re particular about the developers and financial partners we work with – and have proven relationships with the ones we choose. We’ve already financed a number of projects that have fallen into Opportunity Zones. This means we have a history of going through project and developer diligence profitably on these projects. We have a real advantage because we’ve already been in these zones and created opportunity,” said Huger. “When we underwrite these projects, we underwrite them not only from a developer’s perspective, but from an investor’s perspective as well. We have experience with the transaction from both sides. That’s a significant differentiator between Monarch and others,” adds Brent Barringer, Managing Director of LIHTC. “We encourage all investors and constituents to do their homework prior to signing on the dotted line.”

Demand is Creating Opportunities

MPC has recently launched a series of O-Funds in response to their clients’ desire to access and leverage their reputation, experience and relationships with select institutional and individual investors, developers, and lenders. “They come to us because they know of our positive investments and have confidence in our proven, long-standing history,” said Huger. “Our deep expertise, relationships, and resources are extensive and can be used to effectively underwrite opportunities in economically challenged areas like Opportunity Zones. Being able to leverage long-term resources and in-house development teams to meet customized yield and tax attribute goals provides investors with innovative services.

Significant Programs Call for Key Thought Leaders

Barringer, who has over a decade of experience in tax-advantaged programs, shares, “Investors have a unique opportunity to capitalize on what the O-Fund program was designed to do – spur job creation and economic growth in underutilized areas. The ability to receive a true tax benefit and tax deferral by investing in O-Funds yet still receive a healthy economic return is monumental. And the bonus is that the equity goes to areas that are thirsty for investment and can create jobs and growth in the areas that need it most. Our firm has been investing in those areas prior to O-Funds – our history dates back to 2015 on other tax-advantaged investments including multifamily housing, historic preservation, and renewable energy. So, our expertise with O-Funds has been a natural outgrowth of predecessor investment classes. We see attributes in the OZ program that will make it successful as we have seen with other tax-incentivized programs in which we have expertise.”

Based on long outstanding history of past public-private tax-incentivized investment programs (including renewable energy, historic preservation and affordable housing), O-Fund investments appear to be undeniably favorable for investors. “We’re starting to see a domino effect: Not only are Fortune 100 companies considering relocating headquarters to OZs, some of the older tax-incentivized programs are fueling O-Fund development – they recognize that when housing is developed in these zones, business growth and real estate investment will follow. In fact, some affordable housing agencies give points to applicants who develop their site in an Opportunity Zone. Please note that when everyone is buying into the program and when so many constituents buy-in, it becomes a very effective public-private partnership with a self-fulfilling prophecy,” said Barringer.

ABOUT MONARCH PRIVATE CAPITAL – A HISTORY OF POSITIVELY IMPACTING COMMUNITIES

Monarch Private Capital (MPC) was founded in 2005 as a partnership between an Atlanta, GA based low income housing developer, Robin Delmer, and a high net worth family office tax advisor, George Strobel. MPC and its subsidiaries have now originated over $1 billion of credits in over 400 projects/investments. MPC invests in a variety of tax credit generating projects, including historic rehabilitation, affordable housing and renewable energy throughout the United States.  MPC currently has a portfolio of over $425 million of tax credits and has created and operated more than 100 funds.

Known for its grounded history in tax credit innovation, ownership and financing, MPC works closely with government agencies to develop new customized tax credit strategies that align with the current and future financial objectives of clients.

The Company has over 100 employees and is headquartered in Atlanta with satellite offices in Charlotte, St. Louis, Springfield, MO and Sarasota and tax credit specialists in Los Angeles, Chicago, Nashville, Austin, Birmingham and Chapel Hill.

Monarch Private Capital (MPC) a national leader in the development, financing, and asset management of a diverse portfolio of projects that generate federal and state tax credits, is pleased to announce that Chuck Kaiser has joined the company as Managing Director of Financial Investments. In this new role, Kaiser will develop and maintain relationships with institutional investors who can benefit from tax equity programs that positively impact communities.

Kaiser has an extensive background in creating innovative fixed income securities for institutional investors placing more than $10 billion over his career. He began his career in institutional fixed income sales at Goldman Sachs & Company in New York, Dallas, and San Francisco. He has covered every type of institutional investor nationally for all fixed income products.

“Chuck has tremendous experience in establishing investment strategies for institutional investors,” said George Strobel, MPC’s co-CEO and Managing Director of Tax Credit Investments. “His knowledge reinforces our expertise and enables us to continue to offer the very best tax equity initiatives for our investors.”

Prior to MPC, Kaiser was a managing director at Rockwood Group, where he placed both state and federal tax credits in excess of $100 million with insurance company investors. Previously, Kaiser worked at Stifel Nicolaus as well as A.G. Edwards & Sons serving in numerous capacities including creating and placing custom structured products and selling and trading fixed income and equity securities.

“I’m excited to join a company that is a leader in tax equity investing, “said Kaiser. “Not only does Monarch Private Capital give me the opportunity to focus on my strengths, but the breadth of the business model is attractive and allows me to better serve the needs of our investors.”

Kaiser earned a B.A. from Vanderbilt University in economics and business administration, a JD from the Northwestern University School of Law and an MBA from J.L. Kellogg School of Management. He is a licensed attorney and an active member of the Missouri Bar Association.

For more information on MPC’s programs and services, please contact George Strobel at 404-596-8032 or gstrobel@monarchprivate.com

About Monarch Private Capital

Monarch Private Capital positively impacts communities by investing in tax credit supported industries. The company is a nationally recognized tax equity investor providing innovative capital solutions for affordable housing, historic rehabilitations, renewable energy, film and other qualified projects.  Monarch has long term relationships with institutional and individual investors, developers, and lenders that participate in these types of federal and state programs.  Headquartered in Atlanta, Monarch has offices and tax credit professionals located throughout the U.S.

Contact us for more information about ESG Investing, state and federal tax credits.