Crain's Chicago Business

FORUM I THE STATE OF ESG

RED, BLUE AND ESG

Policymakers and investors are forced to grapple with the political divide over the investing framework intended to manage risk and solve problems

PAGE 15

Merger means big squeeze for food companies

A Kroger-Albertsons combo would have the heft to demand price cuts from packaged-food suppliers like Kraft Heinz, Conagra and Mondelez

BY ALLY MAROTTI

Chicago’s packaged-food giants are in for painful pricing pressure if the Kroger-Albertsons merger goes through and the megagrocer exes newfound buying muscle.

Mariano’s parent Kroger agreed last fall to acquire JewelOsco parent Albertsons in a $24.6 billion deal that would create a giant chain with 5,000 stores and 85 million households within its reach. e chain’s 17% grocery market share would be second only to Walmart’s 22.4%.

Executives have signaled that they’ll use the combined companies’ scale to squeeze suppliers for price cuts as they work to

At 66,

deliver the cost synergies Wall Street expects from the merger. at’s bad news for Chicagobased food manufacturers such as Kraft Heinz, Mondelez and Conagra, which can’t a ord to lose a customer so large. If they resist cutting prices, a combined Kroger-Albertsons can buy more from their competitors or give more shelf space to private-label products.

Price-cutting demands would come at a time when in ation has increased costs for food manufacturers. So far, they’ve o set the resulting margin pressure by raising prices, without hurting sales volumes much. But

the Rev. James Meeks launches a second career

The recently retired pastor and onetime mayoral candidate looks to ll vacant lots in Chicago’s Roseland neighborhood with a ordable new houses

BY DENNIS RODKIN

When he announced his retirement from the pulpit of his 10,000seat church on 114th Street in January, the Rev. James Meeks told the congregation how he plans to spend his retirement years: building homes in the neighborhood.

A few weeks later, as Meeks stood on the corner of 118th Street and Indiana Avenue in Chicago’s Roseland neighborhood,

where he expects to break ground on the rst 20 homes this spring, he said it’s not so much a retirement project as an extension of the work he’s been doing for four decades.

“I’ve always thought that a church that didn’t come outside its four walls to build its community isn’t worth its salt,” said Meeks, the 66-year-old pastor emeritus of Salem Baptist Church and a former Illinois state senator.

In a long-disinvested neighborhood, revitalization is an uphill battle, fraught with obstacles like nancing, high crime, the stability of homeowners who convert from renting and, according to Meeks, “skepticism.” Looking around the blocks on his project map, many of them gap-toothed with vacant lots, it’s di cult to picture the change he foresees.

GREG HINZ: Factors to consider in voting for mayor . PAGE 2 REAL

HEALTH CARE

See MEEKS on Page 14

The Rev. James Meeks

DAVID PLUNKERT

See GROCERY PRICES on Page 8

Factors to weigh as the mayoral deadline looms

By the time you read this, I expect to have taken myself to the polls and voted for someone for mayor. It’s a harder task than I would prefer, because none of these candidates come from central casting.

I never disclose my vote or endorse anyone. Make up your own mind. But I can and do write about things I consider important to keep in mind. So here are some thoughts about each of the front-runners, the folks that the polls say have a reasonable chance to move on to the April runo : Mayor Lori Lightfoot, U.S. Rep. Jesus “Chuy” Garcia, County Commissioner Brandon Johnson and former schools chief Paul Vallas.

For Lightfoot, the core question is simple: Does she have the ability to step it up, to be a better mayor than she’s been?

Let’s acknowledge that COVID really, really threw her a curve. Let’s also acknowledge that Lightfoot’s sharp tongue has gotten her into

more trouble than predecessors Rahm Emanuel and Richard M. Daley did with equally sharp comments. Media and public treatment of women is not always the same as it is with men.

at having been said, the defection of key members of Lightfoot’s City Council leadership team, not only minority women such as Pat Dowell, 3rd, and Susan Sadlowski Garza, 10th, but also gay leader Tom Tunney, 44th, ought to tell you something about this mayor’s ability to lead and not just re o orders. Ditto her disturbing failure to acknowledge the reality that crime is much worse than when she took o ce, that the Chicago Transit Authority is a mess and approaching a scal cli , and that the metropolitan area’s economic heart, downtown Chicago, is barely out of the OR. Can Lightfoot do better?

If Lightfoot comes across as too strong, Garcia comes across as too meek. In my interactions with him,

the Southwest Side congressman always has been unfailingly open and kind. at goes a long, long way. But running a tough city — rather than being run by it — takes a really strong hand. So does having laid out a clear platform that involves more than saying you’ll be a fair mayor for all of Chicago who will present an equitable budget dependent on more money from Spring eld.  Service in Congress, on the county board and in the Illinois Senate, while worthy, is di erent from managing a $40 billion municipal corporation. Endorsements from past political stars who are meaningless names to many Chicagoans don’t move the needle much. Congressman, what are your core plans and how will you implement them?

Johnson, meanwhile, is pretty clear about what he wants, even if he lately has seemed to downplay without totally renouncing his earlier call to “defund” police. He wants money, lots of money — money for social

GREG HINZ ON POLITICS

needs, be it a ordable housing, violence prevention programs, “health care for all,” “fully funded schools,” or more.

Everyone wants those things. e question is how to pay for them without irreparably damaging a city in which people and businesses are leaving, often for cheaper locales. Johnson has endorsed items such as imposing a nancial penalty on a business that has the gall to create a new job here, and levying a surcharge on the sale of residential property over $1 million, even though in an increasing number of neighborhoods, that’s the going rate. You really for those, commissioner? Or are you just parroting the line of your biggest funder and employer,

the Chicago Teachers Union? at leaves Vallas. Will the real Paul Vallas please step forward? Is the real Vallas the disciplined, pragmatic Vallas we’ve seen this campaign, someone who will put his ego out of the way and enlist the top talent he’ll need to run the city, someone smart enough to nally realize that hanging around with MAGA types is a non-starter in this city? Or is it the Vallas who can be the unlistening smartest guy in the room, the not-so-closeted conservative who sought and got the endorsement of the Fraternal Order of Police despite its provocative leader? Ponder all of those points, folks. As my precinct captain would say, vote early and often. (Just kidding.)

is simple electoral reform is long overdue

Open-minded lawmakers and necessity, created by the pandemic, hastened the use of permanent vote-by-mail lists. More and more of us seem to appreciate the bene t of being able to do our voting research, with our ballots right by our side, from home. Early indications in Chicago, for instance, show vote by mail and early voting more than doubling that method of casting ballots from four years ago.

at’s terri c, and with more local elections coming in April statewide, as well as the likelihood of several runo s in Chicago, there is even more we can do to help candidates, make information accessible to voters, and bring greater equity to our ballots and our elections.

One simple idea long overdue is this: Let’s require those seeking o ce to submit an email address or phone number where they can be reached when they le their paperwork to run for o ce. Chicago elections board o cials encouraged candidates to submit this information several years ago and most candidates did so this cycle, making it far, far easier for media, community groups, and others to contact candidates and nd out what they aim to do if elected.

It’s not a requirement, however, at the state level. So, when literally thousands of Illinois candidates led to run for school board and park district board and municipal o ce and re protection districts at hundreds of local government o ces recently, none of them had to leave information about where they could be reached.

at oversight makes it an unnecessary, herculean task for local reporters, members of League of Women Voters chapters and others to try to hunt down candidates to provide voters information about them with nothing more than a physical address.

House Bill 3221, the Ballot Access for All Act, would require an email

address and phone number on statements of candidacy.

e legislation also would boost ballot access in Chicago and Cook County by bringing some uniformity to the numbers of voters’ signatures candidates must collect. It’s simply not logical or fair that those who want to run for Chicago mayor must collect 12,500 voter signatures, but those who want to run for governor of the entire state need only collect a minimum of 5,000 signatures. For Cook countywide o ce, the numbers of signatures needed also can jump too high: 5% of the registered voters within the candidate’s party. In 2018, this meant people wanting to run countywide had to collect a whopping 20,000 signatures. ese disparities were created years ago to control who could run and it’s time they ended.

Veteran politicians will tell you candidates are required to get some signatures to show they have support and the wherewithal to get organized and run. at might make some sense to an extent, but why should candidates for mayor or Cook countywide o ce have to collect more than double the number a governor candidate does?

e Ballot Access for All Act also would end the limiting requirement that voters can only sign one candidate’s petitions for a particular o ce. Voters ought be allowed to help multiple candidates for any o ce get on the ballot and run. Signing a petition for candidacy isn’t, and shouldn’t be, treated the same as casting a ballot.

It’s also time we took advantage of the technology we have and make collecting valid signatures easier. How about we test letting signature collectors use the internet in real time to verify that someone is actually registered to vote at the address they provide before they sign a petition. Checking someone’s registration using an electronic tablet or phone before they sign a petition

has been allowed for years in Colorado and it’s dramatically lowered the number of invalid signatures.

In California, challenges to candidates’ petitions also are rare. In Illinois, would-be candidates frequently spend weeks and resources hiring lawyers and ghting to try to access the ballot. Not only does it discourage people from trying to run for o ce, the petition battles can play havoc with ballot creation and early voting. It also disrupts a candidate’s ability to campaign and tell voters about their views.

Just ask Shawn Walker about that. Nine days before the end of voting, an appellate court ruled Walker, an

aldermanic candidate in Chicago’s 28th Ward, should be put back on the ballot. Early voting had to be stopped so ballots could be reprinted. Walker is trying to run against incumbent Jason Ervin.

“I’m not going to lie and say it’s going to be easy to win,” Walker told the Chicago Tribune. “It’s going to be an uphill battle. But we’re going

to ght and give people a choice.” More information, access, convenience and choices. Isn’t that what we should be striving for with our elections?

Madeleine Doubek is executive director of Change Illinois, a nonpartisan nonpro t that advocates for ethical and e cient government.

JOHN R. BOEHM

JOE CAHILL ON BUSINESS

Chicago makes space for biotech

Chicago’s push to become a biotechnology hub picked up steam this week with news that construction will go forward on a laboratory building in Hyde Park.

As my colleague John Pletz reported, developers Trammell Crow and Beacon Capital Partners are breaking ground on the $225 million facility adjacent to the University of Chicago, a hotbed of biotech research. e 14-story, 300,000-plus-square-foot building will add to the growing amount of lab space around Chicago. Notable recent additions include a pair of buildings dubbed “Fulton Labs” on the Near West Side and another lab at Lincoln Yards on the North Side.

Oak Street deal boosts CVS in race with Walgreens

The buyout closes a primary care gap as both chains push deeper into health care services I

BY KATHERINE DAVIS

CVS HEALTH’S $10.6 BILLION DEAL for Chicago-based Oak Street Health plugs a gap in its growing portfolio of health care services, erasing an advantage for archrival Walgreens Boots Alliance as the drugstore chains race to become vertically integrated health care companies. Now Woonsocket, R.I.-based CVS can o er physician’s services alongside home health care, health insurance and pharmacy bene t management services. Walgreens, which o ers primary care through VillageMD and Summit Health-CityMD, also provides home care and specialty pharmacy services. But Deer eld-based

See CVS on Page 26

“THERE’S NATURAL SYNERGIES THAT CVS WOULD HAVE BECAUSE IT OWNS THE INSURANCE OPERATION.”

Julie Utterback, a senior equity analyst at Morningstar

Wells Fargo looks poised for major Chicago retail push

The scandal-tarred banking giant — a bit player in the Chicago market on a retail basis — has led to open two new branches

BY STEVE DANIELS

Wells Fargo appears to be in the beginning stages of a major retail push in the Chicago market.

e San Francisco-based giant, the fourth-largest U.S. bank, has led to open two new branches, one in Chicago and the other in north suburban Glencoe. at brings to four the number of locations Wells Fargo is set to open in the market this year and next.

ese will be the rst new branches Wells Fargo has opened in Chicago since its modest retail

entry into the market in 2010 via the Great Recession-era acquisition of Charlotte, N.C.-based Wachovia. at deal included seven full-service suburban branches.

e latest locations slated for Wells Fargo banks are 400 W. Division St. in Chicago’s Old Town neighborhood and 682 Vernon Ave. in Glencoe, according to lings with the U.S. O ce of the Comptroller of the Currency.

e Old Town branch will open next year, spokeswoman Tymika Morrison says in an

email. Wells Fargo will open two other Chicago branches later this year, one in the red-hot Fulton Market neighborhood and the other in River North. She declines to comment on the Glencoe location. She also doesn’t address the scale the bank seeks to achieve in Chicago once this expansion is complete.

Asked to describe Wells Fargo’s plans for Chicago, she is vague. “We continue to regularly review new branch location

See WELLS FARGO on Page 26

ese projects address a major obstacle to Chicago’s aspirations in a fast-growing industry that’s attracting billions of investment dollars and creating well-paid jobs at a rapid clip. Our area has plenty of biotech expertise at big companies like AbbVie and Abbott Laboratories, cutting-edge research at national laboratories Argonne and Fermilab, thrumming idea factories at universities like U of C and Northwestern, and worldclass medical talent at research hospitals like Rush and Northwestern Memorial.

All of that should add up to a leading position in biotech. But Chicago lags far behind leaders in this burgeoning new eld. Cities like Boston, San Diego, San Francisco, and Raleigh-Durham in North Carolina outpace us by substantial margins in life sciences companies and talent. Major companies in the industry — including some headquartered in Chicago — feel they need a presence in one or more of those cities.

Chicago isn’t there — at least not yet. A big reason we haven’t kept pace is a shortage of physical space to accommodate new companies spawned by our biotech discoveries and entrepreneurial drive. Unlike startups in sectors like information technology, edgling life sciences companies can’t operate o their employees’ laptops. ey need laboratories to conduct experiments on new drugs and test new medical devices.

THE HUNT FOR SPACE

When local bioscience companies are ready to grow, they often have to look elsewhere for space. Over the years, Chicago has lost a series of promising startups to cities with more lab space available. So those cities reap the jobs and other economic bene ts of technologies developed here.

at’s starting to change as more lab space comes on line in

Chicago. Companies are ocking to the Fulton Labs building at 1375 W. Fulton St., which is now 74% leased. In a sign that local lab space keeps local innovations from leaving town, that building recently landed Dimension Inx, a maker of 3D-printed implants that grew out of research at Northwestern University. Additional lab space is starting to help Chicago compete with other cities for biotech investment. Xeris Biopharma Holdings moved its research group from San Diego to Chicago, where it’s consolidating hundreds of workers at Fulton Labs.

STRONG DEMAND

Demand for local lab space shows no sign of abating. e University of Chicago already has signed up for space at the Hyde Park lab building, as the university ramps up e orts to commercialize life sciences research.

More tenants will likely follow in short order. Venture-capital rms are showering cash on life sciences startups, to the tune of $20.8 billion in the rst half of 2022 alone, according to real estate rm Newmark. ose startups need lab space and, thanks to venture funding, they have the cash to pay for it.

Real estate developers know the ood of capital into biotech spells opportunity. Locally, Trammell Crow and Sterling Bay have added hundreds of thousands of square feet of lab space to the market. Mark Goodman, another prominent Chicago developer, plans an enormous, 19-story building with 500,000 square feet of lab space in Fulton Market.

Lab space provides not only room for bioscience startups to work, but also an ecosystem where they can ourish. Opportunities multiply when companies and workers congregate in buildings designed for their industry.

True, there’s been concern about the scattered nature of Chicago’s biotech lab space, which sprawls across sites from the northern suburbs to the city’s South Side. Chicago lacks a clear biotech hub, like Boston’s Kendall Square or the Research Triangle in North Carolina.

I doubt the lack of a single focal point will snu the synergies Chicago needs to reach its full potential in life sciences. Distances between biotech nodes aren’t vast, and companies often collaborate across the region. Far more important than clustering is adding the lab space to keep homegrown ideas at home. And it appears we’re nally starting to close the lab gap.

Number of Allstate agents at lowest level in memory

Even the current number understates the reduction in the once-ubiquitous storefronts with the familiar blue signage across the country

BY STEVE DANIELS

There are fewer Allstate agents in the U.S. than at any time at least in the past two decades.

Just 8,400 agents now are contracted exclusively to sell Allstate auto and home insurance, the company disclosed Feb. 16 in a Securities & Exchange Commission filing. That’s down from 9,300 a year ago and 10,400 two years ago, according to filings. The figure topped 12,000 in recent years before beginning its decline.

Even that current number understates the reduction in the once-ubiquitous storefronts with the familiar blue signage across the country. Hundreds of those 8,400 agents work out of

agents. Allstate CEO Tom Wilson has made no secret about his desire to sell insurance and other products through an array of channels.

In 2022, Allstate agents accounted for 38% of new auto policies compared with 71% in 2020, according to the filing. Sales directly to consumers over the internet or phone made up 35% last year versus 24% in 2020. Independent agents accounted for the remainder.

CHANGES

Consumers buying auto policies without going through an agent pay 7% less than they would using an intermediary, a discount that began in 2020.

The association representing Allstate agents foresees the number continuing to drop.

IN 2022, ALLSTATE AGENTS ACCOUNTED FOR 38% OF NEW AUTO POLICIES COMPARED WITH 71% IN 2020, ACCORDING TO AN SEC FILING.

their homes as Allstate has encouraged sales reps to use centralized call centers to provide service to their customers.

The 19% drop over the past two years raises questions about the future for Allstate

“We see trends going toward fewer and fewer agents on Main Street U.S.A.,” says Ted Paris, executive director of the National Association of Professional Allstate Agents, or NAPAA.

In addition, Allstate has changed its agent compensation in recent years to reduce what it pays when agents’ customers renew their policies and increase

what it pays for new business. at’s pressured some agents out of the business.

RESPONSE

Still, many agents have responded, writing new auto policies even as Allstate has dramatically hiked rates in the face of intense inflationary pressure. Allstate agents collectively were responsible for 2.40 million new auto policies last year, up slightly from 2.39 million the year before, according to the filing.

Sales over the internet or phone increased more, though — up 24% to 2.20 million from 1.78 million in 2021.

Allstate’s primary rival, at least in the agent-sold part of the business, isn’t following suit. Bloomington-based State Farm has more than 19,400 agents throughout the U.S., a spokeswoman says, the same figure as last year.

An Allstate spokesman didn’t respond to a request for comment.

Winter home sales cycle is slower than usual

Home sales in January were not only well below the boom times. They were far below that same month in normal years, according to a new report.

BY DENNIS RODKIN

Home sales in January were not only well below the boom times. ey were far below that same month in normal years, according to a new report.

But even as sales tumbled, prices held steady—except in the city.

In Chicago, 1,076 homes sold last month, down 41.2% from January 2022, according to data released Feb. 21 by the Illinois Association of Realtors. In the nine-county metropolitan area, 4,420 homes sold, a drop of 38.8%.

City and metro sales last month were quite weak compared to January sales in the ve years prior to the explosive housing boom ignited in 2020 by COVID and fueled for another two years by low interest rates.

Compared to average January gures in 2016 through 2020, last month’s city sales were down 26%. e metro-area drop was 25%.

City and metro-area January sales were the lowest since 2011,

a year when the housing market was starting to climb out of the mid-2000s crash.

All this means that not only is the old familiar winter cycle of lower sales back, but it’s back with a vengeance after an unprecedented boom eventually depleted sellers’ inventory and buyers’ taste for a move.

Nationwide, home sales in January were down about 37% from the year earlier, according to a separate report out Feb. 21 from the National Association of Realtors. NAR does not provide enough data to make a comparison to pre-boom January sales.

EROSION

e median price of homes sold in the Chicago metro area in January was $287,000, up only 0.7% from a year earlier. January was the second month when prices were at, but it’s important to note that the gure comes on top of 5.6% price growth in January 2022 and 16.3% gains the January before that.

Prices staying steady after all that growth is a sign of resilience. Nationwide, the median price of homes sold in January was up 1.3% from a year earlier.

In the city, the median price of homes sold in January was $297,500, down 4% from the same time a year ago. It’s the third consecutive month of price declines. In January 2022, prices were at from the year before, but in January 2021 they were up 15.9%, the city’s biggest monthly increase during the housing boom.

City prices have been eroding since the boom ended. Crain’s

reported this month that the drop is most pronounced with singlefamily homes, whose median price dropped 10% in January from a year earlier.

e drop in city house prices doesn’t drag down the overall gures because houses make up only 43% of all residential sales in the city. It’s an even smaller piece of metro area sales: just 10%.

e Illinois Realtors data uses the U.S. Census Bureau de nition of the Chicago metro area, which comprises Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will counties.

Many Allstate agents haven’t been pleased with the changes. NAPAA in 2021 sued the company in Cook County Circuit Court, alleging breach of contract over unpopular steps like forcing agents to use a centralized phone system provided by the company. Agents technically are independent contractors, responsible for health care costs, rent and other typical business expenses.

That suit, which Allstate is fighting, is in discovery.

Examining our city’s government

“One City, 50 Wards: Does the City at Works Actually Work?” is an ongoing joint series from Crain’s Chicago Business and the University of Chicago Center for E ective Government that explores the connections between how Chicago’s city government is designed, how it functions and how it performs.

Check in at ChicagoBusiness.com/ OneCity50Wards over the coming weeks to see the full project, including in-depth reporting, Q&As with experts and related opinion pieces.

You’ll also nd podcasts, the rst of which features Crain’s contributor Steve Hendershot discussing the series with Crain’s Daily Gist host Amy Guth.

MIKE MOZART/FLICKR

HATHAWAY HOMESERVICES CHICAGO

This house on Harrison Avenue in Brook eld sold for $730,000 in January.

Our dedicated employees volunteer their time

We’re committed to helping people in Chicago improve their lives through financial education. In the past 10 years, we’ve donated millions in national and local grants to help people learn the ins and outs of budgeting, saving and reducing debt.

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Quick sale a good sign for ‘buy the block’ developers

The 11-building project in West Woodlawn rides on the traditional concept of an owner defraying the cost of the loan on a three- at by renting out two of the units

BY DENNIS RODKIN

The first three-flat in a Black developers group’s effort to rebuild a stretch of West Woodlawn sold quickly and for more than the asking price, a good sign that the group’s effort may accomplish its mission.

The recently completed three-flat in the 6400 block of South Evans Avenue came on the market Feb. 7 with an asking price of $755,000.

“We had four offers in the

more than the asking price.

Built by DNA Construction, the three-flat is the first of 11 that the developers plan on two blocks of Evans and a block of Langley Avenue.

‘A BIGGER EFFECT’

DNA’s principal, Dajuan Robinson, told Crain’s in May when the project started that, “as an individual developer, I can build one house on a block where there are seven empty lots. But building in these neighborhoods, we need to have a bigger effect.”

e quick sale of DNA’s rst threeat “is an awesome sign” for the rest of the project, Payne said.

first five days,” said listing agent Candice Payne of 5th Group Realty. She marked the listing contingent on Feb. 17. The sale has not closed yet, but Payne confirmed that it will close for

Some of the losing bidders may look at the other properties in the group e ort known as Woodlawn Point. “ e beauty of this is that we can drive tra c to each other,” Payne said.

Also completed and on the

market now are a trio of threeflats on the 6300 block of Evans. Two, each priced at $830,000, are the work of developer Bonita Harrison and are represented by Kenya Hunter of KMB Realty. The third is by Sean Jones. Priced at $845,000, it’s represented by Jones, who’s an ExpRealty agent.

Harrison said several of the other buildings are “80% complete or 90% complete” and will go on the market in the next several months.

The three-flat offerings ride on the traditional concept of an owner defraying the cost of the

mortgage by renting out two of the units, at the same time providing new, high-quality rental units.

Woodlawn Point is a block west of the 63rd and Cottage Grove intersection where the firms DL3 Realty and Preservation of Affordable Housing have done extensive revitalization work around a CTA Green Line station. This month, city officials approved a $5 million grant for a DL3 Realty affiliated venture’s plan to build Class A office space behind the historical facade of the Washington Park National Bank

building, Block Club Chicago

reported.

About six blocks away in Woodlawn are the Presidential Square townhouses with prices ranging from $659,000 to $729,000, according to Midwest Real Estate Data.

“Everybody’s looking to the future,” Payne said, with the Obama Presidential Center in the works and the groundbreaking earlier this month of a planned $100 million movie production facility in South Shore. The Regal Mile Studios site is a little more than 2 miles southeast of Woodlawn Point.

Officials eye Akorn for laying off 400 amid bankruptcy

Akorn Pharmaceuticals, a Gurnee-based maker of generic drugs, is under investigation by the Illinois Department of Labor after the company filed for Chapter 7 bankruptcy last week and abruptly notified about 400 workers that they’re out of a job.

According to a state WARN report, 400 workers will lose their jobs as part of Akorn’s bankruptcy and the shutdown of its Decatur manufacturing site. But Akorn failed to notify the state ahead of the planned layo s, and it gave employees only 24 hours’ notice of the job cuts, “which is inconsistent with industry best-practices and lacks basic consideration for their employees,” the Labor Department said in a statement to Crain’s.

portunity is deploying rapid-response resources to support affected workers, according to the Labor Department statement.

NO SEVERANCE

Akorn CEO Doug Boothe noti ed employees of the bankruptcy and company closure in a video call Feb. 22, the Decaturbased Herald & Review reports.

“Effective immediately, we are shifting from operating a business to preparing for the wind-down of it to pass over to a trustee,” Boothe said.

e department said it is initiating an investigation immediately and, if violations are found, the agency will assess civil penalties against Akorn. Illinois WARN rules apply to employers with 75 or more full-time employees and require them to provide 60 days’ advance notice of pending plant closures or mass layo s.

The Illinois Department of Commerce & Economic Op -

Boothe told employees on the video call they would be paid through Feb. 23 and receive pay for any accrued and unused vacation time. Employees will also receive health benefits through the end of the month — this Tuesday. However, employees will not receive any severance or COBRA coverage that would allow workers to extend health care benefits, Boothe said.

This isn’t the first time Akorn has filed for bankruptcy. In May 2020, the company filed for Chapter 11 — allowing a firm to reorganize, unlike Chapter 7, which governs the process of liquidation — following quality-control concerns that resulted in a failed takeover of the business. In 2018, Fresenius pulled a $4.3 billion offer for the company after it discovered is-

sues with Akorn’s pharmaceutical production and drug testing.

Soon after, Akorn received warning letters from the U.S. Food & Drug Administration about manufacturing violations at two of its plants — one in Somerset, N.J., and the other in Decatur. Akorn had notified the FDA earlier last week that it would be closing, Boothe said.

Akorn has also been accused of submitting false claims to Medicare Part D for three generic drugs that were no longer eligible for Medicare coverage. In September 2022, Akorn agreed to pay nearly $8 million to resolve the allegations. Akorn did not immediately respond to Crain’s request for comment.

The Illinois Department of Labor is investigating the Gurnee-based drugmaker after it abruptly told workers they’re out of work and led for Chapter 7 liquidation

BY KATHERINE DAVIS

Previously, Akorn had led for Chapter 11 reorganization in May 2020.

This recently completed three- at on South Evans Avenue came on the market Feb. 7 with an asking price of $755,000.

WITH 11 PROPERTIES IN THE GROUP EFFORT KNOWN AS WOODLAWN POINT, “THE BEAUTY OF THIS IS THAT WE CAN DRIVE TRAFFIC TO EACH OTHER.”

Candice Payne of 5th Group Realty

“WE ARE SHIFTING FROM OPERATING A BUSINESS TO PREPARING FOR THE WIND-DOWN OF IT.”

Akorn CEO Doug Boothe, in a video call to the

company’s employees

Lawmakers taking another run at graduated tax

How is this new graduated income tax proposal di erent from the one Pritzker oated — and voters defeated — a few years ago? And what are its chances this time?

BY GREG HINZ

As promised, a new proposal for an Illinois graduated income tax has been introduced in Springeld, and though its prognosis is i y at best, it is has some signicant di erences from the “fair tax” plan by Gov. J.B. Pritzker that voters rejected in a 2020 referendum.

Under legislation led by state Sen. Rob Martwick, a Northwest Side Democrat, tax rates on low-income single lers would be cut to as low as 4%, well under the state’s current 4.95% at rate and the 4.75% rate the governor proposed. e tax rate wouldn’t even hit the 4.75% mark until a person’s annual income tops $100,000.

At the opposite end, rates would max out at 6.95% on annual income above $500,000 for individuals and $1 million for couples who le jointly. at’s lower than the maximum 7.95% rate in Pritzker’s plan.

e changes would mean that, while the plan would help middle-class and working families while hitting the wealthy, overall it would be revenue neutral. Unlike

the defeated “fair tax,” this revised plan would raise only as much money for the state treasury as the current at tax does, not more.

Even if approved by legislators, the changes could not be enacted unless voters separately approve a constitutional amendment dropping the current ban on a graduated tax. Martwick is working on a separate enabling measure that would put the matter back in front of voters.

CONVERSATION STARTER

As he did in previewing his legislation several weeks ago, Martwick in a phone interview said he’s hoping spark a conversation about proper state tax policy.

So far, Martwick’s new bill is stuck in the Senate Committee on Assignments, and it’s not clear whether Senate President Don Harmon, D-Oak Park, will allow the measure to be referred to another committee in which it could receive a hearing. Nor is there any sign Pritzker is willing to expend more political capital on the issue.

But Martwick said the situation in Spring eld is uid. He speci -

cally pointed to a separate proposal from the Civic Committee of the Commercial Club to impose a 0.5% surcharge on the individual income tax rate for the next 10 years to pay o Illinois pension debt, something

$225 million U of C lab project getting underway in Hyde Park

The building is breaking ground after several years of growth in life sciences

BY JOHN PLETZ

Construction is set to begin on a long-sought lab for life sciences in Hyde Park.

Hyde Park Labs, a 14-story facility with nine oors of lab space near 52nd Street and Harper Avenue, will be anchored by the University of Chicago. e $225 million project is a joint venture of developers Trammell Crow and Beacon Capital Partners.

e 302,388-square-foot building is breaking ground after several years of strong growth that made biotech and life sciences one of the strongest sectors in commercial real estate. Unlike technology or other types of o ce work, life sciences research doesn’t lend itself to remote work.

ere are a half-dozen lab projects planned in Chicago, from Bronzeville to Evanston. Dallas-based Trammell Crow has built two lab facilities in Fulton Market in the past three years and has another in the works in Evanston. “We’ve always thought there’s just been a lack of supply in Chicago,” says John Carlson, a principal at Trammell Crow.

Its partner in the Hyde Park Labs project, Beacon Capital Partners, based in Boston, has lab projects underway in its hometown as well as in New York,

Houston and San Francisco.

“Chicago continues to be a Top 10 life-science cluster in the U.S.,” said Dan Lyne, a senior vice president at CBRE who is marketing and leasing Hyde Park Labs.

e idea of building lab space in Hyde Park was rst conceived several years ago by U of C, but the plan languished and the university sought new proposals.

e University of Chicago has pre-leased 55,000 square feet, or 1 1/2 oors, of the Hyde Park Labs building. Researchers from the Pritzker School of Molecular Engineering will occupy some of the

space, while additional square footage will be used for an incubator for life sciences startups. e university has ramped up e orts in recent years to create more startups from research on campus.

“We have a historic opportunity to strengthen Chicago’s innovation capacity,” Juan de Pablo, U of C’s executive vice president for science, innovation, national laboratories and global initiatives, said in a statement. e building, which is scheduled to open in late 2024, will have 40,000 square feet of tenant amenities, including a fth- oor terrace.

the committee says would save $40 billion in the long run and nally stabilize state nances.

Perhaps the two plans could somehow be merged in a compromise plan, Martwick suggested.

Civic Committee President Derek Douglas, who was not immediately available for comment, has been meeting with key lawmakers in Spring eld in an e ort to sell his plan.

Together,

Even if approved by legislators, the changes could not be enacted unless voters separately approve a constitutional amendment dropping the current ban on a graduated tax.

JOHN R. BOEHM

Hyde Park Labs will be a 300,000-square-foot life sciences facility.

TRAMMELL CROW

New York real estate firm lining up Fulton Market deal

Thor Equities would take control of what may be the most valuable development parcel available in the trendy corridor

BY DANNY ECKER

One of the most active investors in the Fulton Market District is in talks to buy the largest remaining development site in the trendy neighborhood, lining up what could be its next big bet there.

New York-based or Equities is under contract to buy the vacant 2.7-acre site along the west side of Peoria Street at the Metra tracks from meat wholesaler Nealey Foods, according to sources familiar with the negotiation. e purchase price is unclear, and one source said it may be several months before any deal would be nalized, but the property is expected to trade for more than $100 million.

or is said to be further along in its negotiation than Chicago developer Sterling Bay was when it was nearing a deal to purchase the site more than a year ago. ose talks ultimately fell apart. If or completes its purchase, it would take control of what may be the most valuable development parcel available in a loca-

tion that has gained global attention from commercial real estate investors. With steady demand for o ce space from big corporations, a slew of planned residential projects and a growing mix of upscale restaurants and hotels, Fulton Market has largely de ed the pain the COVID-19 pandemic has created for most of downtown.

NEIGHBORHOOD DENSITY

e Nealey site is surrounded by redevelopment projects, including o ce buildings along its the western border, another proposed o ce development to the east, the Time Out Chicago food hall to the south and a Guinness brewery to the north. By purchasing the property, or would be in position to develop as much as 1.3 million square feet in the middle of that with o ces, apartments and other potential uses.

But the rapidly growing scale and density of developments in Fulton Market are also raising questions about whether the corridor’s infrastructure — which was designed for meatpacking

pushcarts rather than Loop-like commercial buildings — will be able to support the neighborhood’s continued growth. Developers in the last few months alone have formally proposed buildings that would include thousands of apartment units and nearly 1.4 million square feet of o ces. On another large development site on the 1200 west block of Fulton Street, developer Fulton Street Cos. is planning a 1.5 millionsquare-foot mixed-use project. or itself has contributed the new density in the neighborhood, developing a 450,000-square-foot o ce building at 800 W. Fulton St. that includes o ces for Aspen Dental and Deere, among other tenants. or also developed a new headquarters for snack maker Mondelez International at 905 W. Fulton St. that the real estate company sold in 2020 to a German investor for a record high price per square foot for a Chicago o ce building.

A spokeswoman for or did not respond to a request for comment, and spokesmen for Nealey Foods and Sterling Bay

declined to comment.

BIG PAYDAY or’s purchase would complete a big payday for the family that owns Nealey, which moved the company’s operations from Fulton Market to a new location in South Lawndale in 2017. Nealey already cashed out on some of its Fulton Market property, selling its longtime home on the 900

block of Fulton Street and a property across the street for more than $32 million combined in separate deals in 2019, according to Cook County property records. CoStar News rst reported that or was under contract to purchase the Nealey Foods site. Vern Schultz and Mike Senner at real estate services rm Colliers are marketing the Nealey land for sale.

Kroger-Albertsons megamerger could force price cuts on food manufacturers

GROCERY PRICES from Page 1

margins could shrink if a huge, combined grocery chain forces them to start cutting prices instead.

Kroger and Albertsons “are going to start squeezing on the margins,” says Je Pehler, director of West Monroe’s consumer and industrial products practices. “ ey’re basically going to say, ‘Hey, we want a better price. Now we are bigger, we can guarantee larger volumes.’ ”

Pehler predicts packagedfood makers could see gross pro t margins on sales to Kroger and Albertsons shrink by 1 to 2 percentage points, a big deal for the companies, which already make small margins on grocery products.

Every percentage point of gross margins is precious to grocery suppliers. For example, at Kraft Heinz, which relies heavily on sales to grocery chains, gross profit would have been $521 million lower last year if the 30.7% gross margin it reported for 2022 had been 2 percentage points lower. The ripple effect of that $521 million decline would have reduced Kraft Heinz’ pretax income by 17.6% to $2.4 billion. A decline in margins on Kroger and Albertsons sales alone — which Kraft Heinz doesn’t publicly disclose — would have a lesser, but likely still significant, impact on overall profits.

e merging grocers will also likely demand special package sizes, rst dibs on popular items, delivery assurances and more. Such demands would add more

costs for food manufacturers, particularly if they must alter production lines or switch up distribution methods, experts say.

“ e supply chain (team) is going to have a whirlwind on their hands once this transaction goes through,” Pehler says.

Still, food manufacturers are likely to do what’s necessary to keep their shelf space in stores, particularly as private-label products gain favor with consumers.

Private-label sales accounted for 17.9% of packaged-goods spending in the U.S. last year, up from 17.7% in 2021, data from consumer insights company Numerator shows. At Kroger, private-label sales rose 10.2% year over year in the quarter that ended last August, as the company rolled out almost 150 new private-label products. Recession fears among consumers are expected to keep private-label sales accelerating throughout 2023.

Retailers make bigger profits on private-label products, so they’ll likely continue to push them, says Russ Redman, executive editor of industry trade publication Winsight Grocery Business. ey also create more brand a nity for the retailer and give them more control of the supply chain.

Packaged food giants also know that once a consumer tries a private-label product, it’s hard to get them to switch back to a more expensive brand name, especially during in ationary times.

Retailers have shown a willingness to lose access to brand-

BATTLE OF THE BASKETS

A proposed merger between Kroger and Albertsons would create a combined company with 17% of the grocery market — and a lot more pricing leverage with suppliers.

name products when they don’t get the prices they want. Canadian grocery chain Loblaw didn’t have Doritos, Tostitos or Lay’s chips for two months while it worked out a pricing dispute with PepsiCo’s Frito-Lay Canada. e products were replaced with private-label options during that time.

POWER SHIFT

In the past, the food company might have held the reins in such a situation. e retailer would want to avoid disappointing consumers looking for brandname products. But the threat of recession, along with changes to the grocery landscape, are rewriting that narrative. Walmart, the dominant grocery retailer, recently warned suppliers against further price hikes.

“We’ve seen this shift over the last 10 years, where the power

had always been with the branded company,” says Dave Donnan, president of investment and consulting company Silvertip Management. “Now we’re seeing that shift toward more power in the retail.”

Representatives from Conagra, Kraft Heinz and Mondelez declined to comment. An Albertsons representative referred questions to Kroger. In an emailed statement, Kroger said, “With an expanded network, we believe the merger will bene t our suppliers as it will allow for a more e cient distribution chain and provide opportunities to help grow our suppliers’ businesses.”

Big food makers like Kraft Heinz, Mondelez and Conagra have enough padding in their budgets to weather some changes, experts say. eir most wellknown brands, such as Oreos or

Heinz Tomato Ketchup, likely still carry enough weight with consumers to retain most of their shelf space. But lesser-loved brands from the big companies, and products from smaller manufacturers with shallower pockets, could ultimately vanish from grocery shelves.

Kroger and Albertsons are working to persuade federal antitrust regulators that the merger wouldn’t lead to higher grocery prices for consumers. Among the promises they’ve made is $500 million in price cuts. ose cuts would potentially come at the expense of packaged-food suppliers.

e pressure food manufacturers are likely to face if the merger is allowed to proceed isn’t new. “ ey’ve seen this show before,” Donnan says. “Walmart has been doing this to them for the last 15 years.”

The vacant Nealey Foods site is adjacent to several new Fulton Market developments.

DANNY ECKER

Tech rm helps Chicago businesses create new markets

records to track various touchpoints during surgery. Hospital leadership receives advanced analytics on operating room performance to transform data into targeted actionable insights.

Dialexa also helped Surgical Directions to set up regular internal meetings and processes to scale the solution as needed. In fact, Merlin 2.0 was launched late last year.

e results? Surgical Directions is currently migrating 20 health systems to the Merlin 2.0 platform this year. “We are trying to keep up with demand,” Besedick said.

SEEKING CHICAGO TECH TALENT

e company’s comprehensive approach is a big part of what attracted the interest of IBM. Dialexa’s product engineering expertise complements IBM’s hybrid cloud and business transformation consulting o erings to help clients turn concepts into real products to accelerate growth. e acquisition by IBM will also allow Dialexa to scale up more quickly. “IBM is a trusted and reliable brand,” Williams said.

BY CRAIN’S CONTENT STUDIO

Aer years of explosive growth, big global tech companies are downsizing. But digital product engineering rm Dialexa, an IBM Company, is on a trajectory for growth and expanding its footprint in Chicago.

Dialexa was launched 13 years ago in Dallas by two former product engineering executives. It opened a Chicago o ce last year. Today, Dialexa has a highly skilled team of 320 product managers, strategists, designers, engineers, and data scientists. In the midst of its rapid expansion, Dialexa was acquired last September by IBM to scale their digital product engineering services for IBM Consulting clients, a market expected to reach $700 billion by 2026.

What explains Dialexa’s success? e product mindset and approach.

“We want every organization to be a great tech organization,” said Jonathan Williams, partner and Chicago market lead at Dialexa. All industries leverage technology to become more e cient and pro table, he explained. “We work with our clients to ll in the gaps to get them to that place.”

While companies recognize the importance of technology, the right digital solution can be a real di erentiator in a competitive business environment. A customized digital product can open new markets, attract more customers and add value to existing operations.

At Dialexa, the development process starts where it should—with a product mindset. “ at’s our big di erentiator,” Williams said. “We work with our customers to understand their market opportunity.”

e process is key. Dialexa helps its customers build a digital product with the business outcomes in mind, beginning with the strategy that informs product development and performance. “All the work is tied back to the outcomes the customer is trying to create,” Williams said.

CASE STUDY: SURGICAL DIRECTIONS

Chicago-based Surgical Directions assists hospitals to ne-tune the performance of operating rooms, which account for upwards of 60% of hospital revenue.

Surgical Directions had 25 years of experience consulting with hospitals. As the healthcare industry started to adopt more technology, Surgical Directions recognized an opportunity to o er its clients a solution to better track operating room performance. e challenge was how to transform Surgical Directions from a professional services rm to a tech-enabled services rm. “ at’s where Dialexa came in,” said Michael Besedick, director of analytics at Surgical Directions. “Dialexa bridged that gap for us.”

As a consulting rm, Surgical Directions faced a so ware development learning curve. e Dialexa team worked closely with

Surgical Directions to understand the market need and build a so ware product. e development process took about ve months. “Dialexa had the product development skills that we did not,” Besedick

Results are a big part of the process. “Launch day is ‘Day Zero,’” Williams said of Dialexa’s strategy. Dialexa continues to monitor performance a er product launch, asking if the market is receiving the product the way it was intended and how assumptions should be adjusted if they turn out to be incorrect.

“We recognize the journey is not linear,” Williams said. “Strategy, product development and performance

Dialexa has access to IBM’s studio space in Chicago. It’s a creative space where customers can work alongside digital product engineers to cra custom solutions.

Over the last year, Dialexa has joined the greater Chicago community. As part of its bigger mission, the company has formed a liations with City Colleges of Chicago and hosted talks about increasing diversity in the eld of technology. Dialexa also supports i.c.stars, a local group focused on nding nontraditional tech talent and training them for a tech career.

As Dialexa continues to grow, Williams said he expects to hire tech talent from many industries, both in Chicago and across the country. “Dialexa has a phenomenal growth trajectory,” he said.

said. “ ey helped us through the design and development process, which accelerated our go-tomarket  timeline.”

e nal product was named Merlin; it uses data from electronic health

happen simultaneously. We have the ability to read those inputs and allow them to inform each other.”

Bottom line: Dialexa was able to help create a platform to actually expand a market for Surgical Directions.

Dialexa, a growing digital product engineering company acquired by IBM, creates custom solutions that help companies transform in their markets.

“We work with our customers to understand their market opportunity.”

– Jonathan Williams, Partner and Chicago Market Lead, Dialexa

Table stakes in the EV game just got higher

It’s been said before — including on this page — that Gov. J.B. Pritzker can’t a ord to let Illinois’ EV future slip through his ngers.

De ning what “can’t a ord” means, however, just got a little bit harder.

According to a Feb. 22 report by Crain’s Detroit Business, Michigan economic development o cials are asking lawmakers there to allocate $750 million to buy land, upgrade infrastructure and do other con-

INCENTIVES

struction work in support of Ford’s plan to build a $2.5 billion, 2,500-job electricvehicle battery factory in Marshall, a little town about 10 miles east of Battle Creek.

at $750 million number came more or less out of the blue — and, if approved, would bring the total state incentives for the Marshall project to nearly $1.8 billion. Michigan’s economic development chief, Quentin Messer Jr., told lawmakers the new slug of potential spending “allows us to accelerate what we would have had to have done to secure any project for this site.” He also pledged that “not a dime of that will go to Ford.”

e proposed site-readiness spending

for the coveted Marshall project, Crain’s David Eggert notes, requires legislative approval. If it passes, it would come on top of a $1 billion incentive package the Michigan Strategic Fund Board authorized earlier this month, including a $210 million grant — which also requires Lansing’s OK — and a tax break worth $772 million over 15 years.

Ford’s commitment to build its nextgeneration EV battery plant in Marshall

was a major win for Michigan, which, like Illinois, has watched more than one multibillion-dollar electric vehicle and battery development opportunity pass it by in favor of nearby rivals such as Indiana, Ohio, Kentucky, Tennessee and even Georgia. Michigan lawmakers may ultimately decide the extra spending is worth it if it means bringing good-paying, middle-class jobs to a region of the state in dire need of that sort

of investment. And Pritzker may be forced to make similar calculations if and when the speculation swirling around the future of the shuttered Stellantis plant at Belvidere ever solidi es into an actual negotiation.

Incentives are worth it if they build a base of decent jobs and renewed vitality to struggling communities — as opposed to, say, helping a professional football team build a new suburban playground — but the cost-bene t analysis is always the tough part. And any incentives deal must also hold the recipient responsible to meet the economic goals of the project and allow for transparency and accountability. But one thing is certain: In the state-bystate EV development poker game, the table stakes are getting higher.

Here in Illinois, Pritzker just recently asked for and won a $400 million “closing fund” to help him sweeten deals like, potentially, the long-rumored conversion of the Belvidere plant to EV production. at’s on top of previously approved payroll-tax breaks and other incentives that could bring the total close to $1 billion. With lingering concerns about the future of Ford’s gigantic Torrence Avenue internal-combustion manufacturing facility in an increasingly electri ed sector, and with Illinois’ own Rivian having just opted to build a second plant in Georgia instead of here at home, the question becomes: Is $1 billion going to be enough to keep Illinois in the game? And, if not, how much is too much?

Let’s lead the way in supporting a startup visa

Some things are universally true. What goes up must come down. Ketchup does not belong on a hot dog (although that may be Chicago-speci c). And immigrant startup founders are key drivers of economic success.

ough they account for approximately 17% of the workforce, immigrants have started 55% of America’s unicorns, privately held companies valued at $1 billion or more. Given this, you would think our immigration system would fully embrace the immigrant founder, but alas, this is not the case. U.S. immigration laws do not have a speci c “startup visa.”

Congress is tasked with creating new laws, and 1990 was the last time it truly revised our entire immigration system, making the immigration laws we have today over 30 years old. Knowing the need, many attempts have been made to create a startup visa. Despite consistent bipartisan understanding, Congress has still not managed to pass any new laws that would allow us to attract, or retain, these brilliant immigrant entrepreneurs.

While the Biden administration did reintroduce an option — the International Entrepreneur Parole program — for startup

founders, this is at best a stopgap executive action that could be undone by subsequent administrations, as seen when the Trump administration shelved the program.

To remain competitive on a global scale, the U.S. needs to get with the program. e city of Chicago and the state of Illinois could step up and lead the way in advocating for a startup visa. As a city and state, we have everything to gain from its introduction.

Illinois has the fth-largest population of international students in the country. Additionally, a recent report by the Illinois Science & Technology Coalition shows that these international students are very entrepreneurial — the percentage of university-supported startups in Illinois founded by at least one immigrant entrepreneur is around 42%.

is is the highest percentage of immigrant entrepreneurial activity that ISTC has recorded over the past decade of collecting this data. As a city and state, we need to do everything we can to ensure these innovative immigrant entrepreneurs can remain here and work on their startups, and a startup visa would be the ideal solution.

In contrast to our outdated system, many

of our international peers have created robust immigration options for startups. America’s approach stands in stark contrast to our friends across the pond, for instance. In the past few years, the U.K. government has introduced a raft of new immigration routes, with a laser focus on attracting the best global talent in the eld of innovation and entrepreneurship.

e new U.K. immigration options include a startup visa and an innovator visa for founders with an innovative and viable new business idea that has been assessed and endorsed by a speci c credible body including organizations with a history of supporting U.K. entrepreneurs. e startup visa is open to those with high-potential ideas who are establishing a business in the U.K. for the rst time. e innovator visa is aimed at experienced entrepreneurs who have available funds to invest in their business idea, although the investment requirement can be waived if certain conditions are met.

In August 2022, the scale-up visa was introduced, further highlighting the U.K. government’s support for high-growth

businesses (“scaleups”). is visa allows the 33,445 designated scaleups in the U.K. more exibility to attract the best global talent by giving them access to a speci c, modern immigration option.

Like the U.K., Canada has also modernized its immigration system. Our neighbors to the north have adopted a wide range of

immigration programs speci cally aimed at attracting top international talent. Canada has established itself as a hub for startups as immigrant founders ock there to take a chance on their Canadian dream.

e most popular of the programs — and one with a direct path to permanent residency — is the federal startup visa program. Introduced in 2013, this program targets innovative entrepreneurs who can build businesses that create Canadian jobs

ALAMY

Pritzker just recently asked for and won a $400 million “closing fund” to help him sweeten deals like, potentially, the long-rumored conversion of the shuttered Belvidere plant to EV production.

ARE WORTH IT IF THEY BUILD A BASE OF DECENT JOBS AND RENEWED VITALITY TO STRUGGLING COMMUNITIES.

IN CONTRAST TO OUR OUTDATED SYSTEM, MANY OF OUR INTERNATIONAL PEERS HAVE CREATED ROBUST IMMIGRATION OPTIONS FOR STARTUPS.

and keep Canada globally competitive. e startup visa is proving very successful, especially in recent times. Last year immigrant entrepreneurs set up businesses in Canada through this program at almost three times the rate they did the previous year.

Immigrant entrepreneurs in Canada can also avail themselves of the C11 LMIA Exemption under the International Mobility Program. is allows business owners to secure temporary status in Canada if they can demonstrate that their business will bring signi cant bene t to Canada. Additionally, innovative Canadian businesses can access the immensely successful Global Talent Stream of the Temporary Foreign Worker Program, which issues fast-tracked work permits to highly specialized and skilled foreign talent when Canadians or permanent

CRAIN’S

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residents are not available.

With the U.K. and Canada both o ering modern immigration options designed to attract top international talent, we are losing this race. It is long past time to introduce a U.S. startup visa so we can remain competitive in these global sweepstakes.

Chicago and Illinois have long been key destinations for immigrant entrepreneurs and international students despite the outdated U.S. immigration system, but this may not be the case for much longer. Our city and state have regularly taken leading stances in welcoming immigrants, and advocating for a startup visa at the federal level would be a much-needed and extremely bene cial endeavor. Let’s do everything we can to ensure these American dreams can grow right here in our city and state.

Fiona McEntee is managing immigration attorney at McEntee Law Group, a former international student from Ireland and a naturalized U.S. citizen.

Julio Mena is a Canadian corporate immigration attorney and founder of LEGEM law rm. He is also vice president of the Immigration Chapter of the Canadian Bar Association (Quebec Branch).

Patrick Dunbar-Lavoie is a Canadian corporate immigration attorney and member of the LEGEM team.

Chetal Patel is a head of immigration and a partner in Bates Wells and is based in London.

LARGEST EMPLOYERS CRAIN'S LIST

Ranked by full-time local employment as of 12/31/2022. e = Crain's estimate (in gray).

W. Randolph St., Chicago60606; ATT.com

AT&T Illinois and AT&T Great Lakes

ResearchbySophieRodgers(sophie.rodgers@crain.com). |Localemployment guresincludefull-timeemployeesinCook,DuPage,Kane,Lake(Ill.),Lake(Ind.),McHenryandWillcountiesunlessotherwisenoted.Crain’sestimatesare showningray.NOTES: e. Crain'sestimate. 1. CityofChicagoestimate.

2. Includesestimateddistributioncenteremployment guresfromMWPVLInternational.IncludesWholeFoodsemployees.

3. Includespart-timeemployees.IncludesWholeFoods employees. 4. FormerlyAdvocateAuroraHealth. 5. AsofDecember2022,AdvocateAuroraHealthandAtriumHealthmergedtobecomeAdvocateHealth. 6. Includespart-timeemployees.

7. FormerlyNorthShoreUniversityHealthSystem. 8. Asof January 2022, Edward-Elmhurst Health became part of NorthShore. 9. State of Illinois estimate. 10. Formerly AMITA Health. Get 62 employers and hundreds of executives in Excel format. Become a Data Member: ChicagoBusiness.com/data-lists

Retired pastor plans to fill vacant lots in Roseland with new affordable houses

If Meeks can ll dozens of long-vacant lots with new houses and homeowners, “that will have a substantial, positive impact on the area,” said Erik Doersching, CEO of Tracy Cross & Associates, a Schaumburg-based consultancy to the homebuilding business.

Roseland could begin to revitalize with clusters of new homes attracting people who “will speak up about crime (and) won’t put up with it,” says Vernon Lilly, who’s been selling real estate in the area for four decades. “If they’re living in clusters of new homes, they’re going to say they want police protection, they want the neighborhood going their way.”

Meeks’ primary adviser in the project, David Doig, president of Chicago Neighborhood Initiatives, sees the proposed new homes as coming at the right time, ahead of the Chicago Transit Authority’s planned Red Line extension to 130th Street. One proposed stop is at 115th Street and Michigan Avenue, a few blocks from the rst round of new homes. A direct transit line to neighborhoods north of Roseland and to the Loop could enhance the neighborhood’s appeal to homebuyers.

“One of the big demand drivers here is going to be the new Red Line,” Doig said.

Best known for its multipronged, $350 million Pullman revitalization e ort, CNI is partnering with Meeks’ three-year-old Hope Center Foundation. Doig said construction costs for the Meeks initiative will be covered through a revolving fund Doig’s group has raised with contributions from BMO Harris, Chase Bank and others.

“We’re trying to build the fund

to $25 million,” Doig says, “but right now, we have $12 million.” e fund is for both the Meeks program on the South Side and a similar homebuilding e ort by Lawndale Christian Development Corporation and United Power for Action & Justice on the West Side.

COMMUNITY BUILDING

‘ e funding is more than sufcient to build the rst 20 homes, Doig said, and when they’re sold, the money replenishes for additional construction. Shenita Muse, executive director of the Hope Center Foundation, said she has buyers lined up for at least four homes, and expects to

COMPANIES ON THE MOVE

have more as the foundation’s homeownership training classes progress.

e three-bedroom, twobath houses will be priced from $200,000 to $210,000, Muse says, but buyers will pay about $30,000 less because of down payment incentives and other grants the foundation has lined up from housing agencies and donors. Buyers will be primarily former renters who’ve been through the foundation’s classes and learned how to maintain and pay for a house. Training and nancial guidance continue after the family moves in, and some nancial incentives only kick in when the buyers have been in the home for

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ve years.

“ is whole thing would be a failure if people are rotating in and out of these houses,” Meeks says.

Housing has long been part of Meeks’ community-building agenda. A dozen years ago, when running for mayor, he pushed for programs that would convert foreclosed buildings into low-income housing. It’s only now in retirement, he said, that “I have time to take this on” at the scale he’s got in mind.

In his retirement address from the pulpit in early January, Meeks said his goal was to build 1,000 homes. In a later interview, he suggested that’s more of an ideal, a shiny target to aim for.

Ald. Anthony Beale, whose 9th Ward encompasses the Meeks project area, said the stated goal of “1,000 houses is extremely aggressive and ambitious, but we denitely have enough vacant lots to do it.”

On a map of about 12 square blocks between 116th and 119th streets, between Michigan and Prairie avenues, the project map shows dozens of targeted lots.

ey’re in various hands now, owned by Salem Baptist, the city, the Cook County Land Bank Authority or private owners. On the block where the spring groundbreaking will be held, 10 of 22 lots are targets for new houses.

Doersching’s rm, Tracy Cross, is not connected to Meeks’ project.

But when evaluating a comparable neighborhood in another Midwestern city, which he declined to name, for a client looking to build low-cost homes, Doersching says, “we found there was signi cant demand for homes (built by) a local organization that has been there in the neighborhood.”

FIGHTING CRIME

Building houses in clusters is fundamental, Doig says. “Filling up those vacant lots with families who take ownership of the block is the best crime- ghting strategy,” he says, citing a signi cant drop in crime around a previous project of dozens of homes built near St. Bernard Hospital in Englewood.

Meeks grew up in Englewood, the fourth child of parents who came up from Mississippi in the Great Migration. After a few years in Bronzeville, his parents bought a two- at at 64th and Lain streets.

At age 24, Meeks became pastor of Beth Eden Baptist Church in Morgan Park, and at 29, he founded Salem Baptist. With his wife, Jamell Meeks, he raised four children. e couple live in Roseland.

Building homes is not Meeks’ only retirement plan. He says he also wants to golf and mentor younger pastors, but that the housing program is “my focus, the best thing to get up for every morning.”

If Meeks can ll dozens of long-vacant lots with new houses and homeowners, “that will have a substantial, positive impact on the area,” said Erik Doersching, CEO of Tracy Cross & Associates, a Schaumburg-based consultancy to the homebuilding business.

Former Salem Baptist Church Red properties are owned by Salem Baptist Church

JOHN R. BOEHM

THE STATE OF ESG

GETTING SPECIFIC: SEC set to spell out guidelines to aid investors. PAGE 20

WHAT’S YOUR ESG IQ? This quiz will show you what you know. PAGE 21

STRATEGIC IMPACTS: Quantifying ESG lays out a road map for sustainability. PAGE 23

RED, BLUE AND ESG

Policymakers and investors are forced to grapple with the political divide over the investing framework intended to manage risk and solve problems

The red state-blue state divide is roiling the staid world of investing.

e practice of considering environmental, social and governance risk has gained mainstream traction over the past two decades — in some quarters, it’s almost routine. Is it wise to invest in an oil and gas producer if the market is shifting away from fossil fuels, or in a company that has a record of sexual harassment complaints?

Some Republican o cials have decided, however, that they’ve had it with what they call “woke” investing. A dozen states have enacted bills or issued advisories restricting ESG investing for public pension funds and other public money. Other states are considering similar measures.

Florida’s hard-line conservative Gov. Ron DeSantis led a resolution to bar state pension funds from considering ESG factors, and the state pulled about $2 billion in assets managed by investment giant BlackRock, an advocate of

socially conscious investing. Texas blacklisted BlackRock and other nancial rms it determined divested stocks of fossil fuel companies.

e backlash worries asset owners and managers in Illinois and other blue states. Why would anyone limit the considerations that go into selecting a sound investment strategy, they ask. at could potentially depress the returns of the pension funds or deprive the fund of a superior return because it’s unwilling to consider factors that impact long-term viability.

“It’s a dangerous path to go down,” says Angela Miller-May, chief investment o cer of the Illinois Municipal Retirement Fund, or IMRF, in Oak Brook. “It doesn’t allow for investment teams to evaluate all strategies and cuts o opportunities to create value.”

See ESG on Page 16

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BY JUDITH CROWN

Angela Miller-May is chief investment o cer of the Illinois Municipal Retirement Fund in Oak Brook.

THE STATE OF ESG

Continued from Page 15

e Illinois Sustainable Investing Act, passed by the General Assembly and signed into law by Gov. J.B. Pritzker in 2019, provides that public fund investment ocers should integrate “material, relevant and useful sustainability factors into their policies, processes and decision-making.” But it leaves them latitude in how they evaluate risk. IMRF, for example, has focused on adding diversity to its managers and their suppliers.

And investment o cers in Illinois could nd money managers picking sides — either casting their lot with red or blue sides of the divide. If that happens, managers worry that it will limit choice, restrict competition and ultimately lead to higher fees.

“It’s not easy to walk the line,” says Josh Lichtenstein, a partner at Ropes & Gray in New York, who specializes in the regulations that govern retirement plans and is tracking state regulation of ESG investments. “Everything you do risks angering one group or the other.”

Meanwhile, asset managers in Illinois and other blue states stand to lose business in Republican-governed states if they’re deemed to be too pro-ESG and could be shut out of opportunities for growth. Texas and Florida pension funds have billions in assets and employ dozens of money managers.

ESG FUNDS ON RED STATE BLACKLISTS

Funds designated as ESG represent a tiny portion of open-end and exchange-traded funds in the U.S., with 1.26% of the $21.5 trillion invested as of the end of the third quarter, according to Morningstar. But the growth rate of ESG funds has far outpaced the growth of all U.S. funds over the past ve years.

ESG funds held up well in a down year for the stock market.

In ows to U.S. funds labeled as sustainable grew by an estimated 0.89% last year, while the universe of all U.S.-based funds shrank by an estimated 1.31%, according to Morningstar. Still, U.S. sustainable funds saw out ows in the second quarter of last year–the rst such quarterly out ows in more than ve years.

Sustainability is gradually being absorbed into the investing world, even for investments that aren’t explicitly tagged as ESG. “Increasingly, we’re seeing traditional funds that don’t claim an ESG mandate saying that they’re considering ESG risks when they’re material,” says Alyssa Stankiewicz, associate director of sustainability research at Morningstar.

Even as the concept of ESG has become respectable among investment professionals, some Republican politicians have seized on it as another example of elites pushing a “politically correct agenda.”

e backlash dates to 2021, when a handful of states, including Texas and West Virginia, enacted bills requiring state pension

funds to cut ties with investment rms that were shunning fossil fuel stocks. “Oil and gas is the lifeblood of the Texas economy,” one state representative said on the oor of the Texas House in 2021.

Last year, more states, including Florida, Arizona and Louisiana, expanded on the idea by adopting bills that simply ban the application of ESG in the investment of public money.

Red state o cials have targeted BlackRock, with $10 trillion under management, because CEO Larry Fink is a champion of sustainable investing.

Texas Comptroller Glenn Hegar in August published a list of 10 nancial rms and nearly 350 investment funds that he determined are boycotting the oil and gas companies that are the backbone of the energy producing states.

“ e ESG movement has produced an opaque and perverse system in which some nancial companies no longer make decisions in the best interest of their shareholders or their clients, but instead use their nancial clout to push a social and political agenda shrouded in secrecy,” Hegar said in a press release announcing the blacklist in August.

Even as the anti-woke fever spreads, some managers in red states are pushing back against the backlash. In Kentucky, the board of a $10.8 billion retirement system told the state treasurer that a law requiring them to divest from BlackRock and other money managers would violate its duciary duty to seek the highest returns for retirees. And in Indiana, state budget managers said a proposed law to limit the use of sustainable investment factors could cost $6.7 billion in investment returns over

See ESG on Page 18

NAVIGATING STATE REGULATION OF ESG INVESTMENTS

At the state level, political leaders are taking varying approaches to overseeing investment decisions made by their retirement systems and companies. The red shading denotes anti-ESG activity, while the blue shading denotes pro-ESG ac tivity.

Legislative actions promoting integration of ESG

Legislative actions promoting divestment from certain industries

No significant action

Legislative actions targeting entities with boycotting certain industries

Legislative actions restricting use of ESG fac tors

Source: Ropes & Gray (as of Feb. 8, 2023)

ESTIMATED INFLOWS FOR ESG FUNDS

From 2017 to 2022, estimated quarterly net flows into U.S. funds that are focused on ESG factors were on the rise. Only the second quarter of 2022 had a net outflow.

GROWTH OF ESG ASSETS

B etween 2017 and 2022, total net assets in U.S. funds that are focused on ESG factors peaked in fourth quarter of 2021.

Illinois Treasurer Michael Frerichs is a strong ESG advocate.

ESG

Continued from Page 16 the next decade.

Illinois has avoided this kind of drama as pension managers have focused on diversity in their asset managers and more recently are considering environmental initiatives.

In October, the board of the $11.5 billion Chicago Teachers’ Pension Fund voted to divest its fossil-fuel investments — about $350.4 million in coal-, oil- and gas-related publicly traded debt and equity investments, representing 3.3% of the fund — by December 2027.

e fund plans to engage with portfolio companies to encourage them toward a path of clean, renewable energy sources, “while working toward the longer-term goal of divesting from fossil fuel holdings and investing that portion of the portfolio into viable clean energy sources,” Fernando Vinzons, chief investment o cer of the Chicago Teachers’ Pension Fund, said in an email.

He noted that the fund is researching the possibility of joining an investor network, which would enable it to magnify its voice through a group that collaborates on engagement and proxy voting strategies. Examples of such groups are Climate Action 100+ and the Net Zero Asset Managers initiative, which in uence companies to reduce their greenhouse gas emissions.

One development that surprised blue state managers was the withdrawal of investment giant Vanguard from the Net Zero Asset Managers initiative following pressure from Texas lawmakers. e state’s win may embolden other red states to push harder, ESG experts say. On the other hand, blue states could punish Vanguard by withdrawing their assets.

“I warned Vanguard that the way to deal with bullies is not to give in to their demands,” says Illinois Treasurer Michael Frerichs, a strong ESG advocate. “ e demands will just keep coming. I think (Vanguard is) trying to keep both sides happy by withdrawing from the climate change coalition to make red states happy and then telling us it’s not going to change their approach.”

If the polarization continues, asset managers could be tested on their allegiances. “We like working with money managers who analyze for risk,” Frerichs says. “If managers are unable to look at risk factors, or decide they don’t want to look at certain risk factors, we would have to reconsider our involvement with them.”

For Illinois public pension funds, a primary focus has been diversity. Even before the adoption of the Illinois Sustainable Investing Act, the state’s pension code set an “aspirational” goal that 20% of investment fund advisers be minorities, women or people with disabilities.

Miller-May of IMRF says the fund has 25% of its $48 billion in assets managed by diverse rms. For majority-owned companies,

THE STATE OF ESG

“We like to see that there are diverse professionals in decisionmaking roles,” she says.

IMRF pushes majority-owned rms to steer business to minority and female brokers, lawyers and other suppliers. It looks for managers of large-cap funds to pay 30% of account commissions to minority or female broker-dealers.

“In Illinois, we’ve focused on diversity and inclusion, but we’re looking to integrate more ESG factors into our investment process,” Miller-May says.

TONING DOWN THE RHETORIC

It will be a di erent challenge for companies that manage money for funds in red states. Some states are targeting entire companies like BlackRock, while others are steering clear of a fund with an ESG label.

LGIM America, the Chicagobased U.S. arm of the Londonnancial services giant, could be a target in red states where it manages public pension funds because of its strong position in favor of ESG, says John Hoeppner, head of U.S. stewardship and sustainable investments at LGIM America. LGIM is a signatory of the Net Zero Asset Managers initiative and Climate Action 100+.

“We’ve had conversations with clients, and they haven’t been concerned yet with our activities,” he says, noting that red state ofcials appear to be targeting the highest-pro le advocates, such as BlackRock.

So far, the red state pronouncements have been broad in scope, so there may be room for a more nuanced understanding.

Anthony Tursich, co-portfolio manager for sustainable equities at

MAJOR CHICAGO-AREA COMPANIES’ SUSTAINABILITY TARGETS AND PROGRESS

Achieved so far

Goal

Abbott Labs Medical devices

Throughout 2021, absolute scope 1 and 2* emissions production increased by 3.3% compared to 2020. When adjusted for sales, scope 1 and 2 emissions decreased 17% over this same time period. In 2021, as their products — including COVID-19 testing and diagnostics — became increasingly important for patients and healthcare workers globally, the company expanded production, which has come with a rise in emissions.

Reduce absolute scope 1 and 2* carbon emissions by 30% from 2018 baseline by the end of 2030

AbbVie

B iotech

26% reduction of absolute carbon dioxide emissions (scope 1 and 2*) from 2015 to 2021, surpassing 2025 target of 25%

Allstate Insurance Reduced absolute energy use 20% within owned portfolio against 2007 baseline by 2014, six years ahead of schedule

Archer Daniels Midland Food processing

6% reduction of scope 1 and 2* greenhouse gas emissions over 2019 baseline

50% reduction in absolute carbon emissions (scope 1 and 2* —market-based) by 2035 vs. 2015 baseline

Reduce owned and leased building greenhouse gas emissions 50% from a 2019 baseline by 2024

25% reduction in scope 3* greenhouse gas emissions over 2019 baseline by 2035

Deere Manufacturing Reduced scope 1 & 2* greenhouse gas emissions by 20% since 2017Validated science-based targets to reduce scope 1 and 2* greenhouse gas emissions by an additional 50% by 2030, with fiscal year 2021 serving as the baseline

Discover

Credit cards

Exelon Nuclear electric power generation

JLL Real estate

McDonald’s Fast food

In 2021: 40,753 metric tons in scope 1 and 2* emissions. In 2020: 40,167 metric tons in scope 1 and 2* emissions. N/A

In 2021: 5.7 million metric tons in scope 1 and 2 emissions. In 2020: 5.4 million metric tons in scope 1 and 2* emissions.

By the end of 2021 reduced scope 1 and 2* emissions by 17% against a 2018 baseline

As of the end of 2021, a 2.9% reduction in restaurants’ and offices’ absolute emissions from the 2015 baseline

United Airlines Airline In 2021: 21.4 million metric tons in scope 1* emissions; 160,794 metric tons in scope 2* emissions. In 2020: 15.5 million metric tons in scope 1 emissions; 175,087 metric tons in scope 2 emissions

Reduce scope 1 and 2* emissions by 50% from a 2015 baseline by 2030

Reduce absolute scope 1, 2 and 3* emissions by 51% by 2030, and 95% by 2040, from a 2018 base year.

By the end of 2030, partner with franchisees to reduce greenhouse gas emissions related to McDonald’s restaurants and offices by 36% from a 2015 base year

By 2035, reduce carbon intensity 50% compared to 2019

US Foods Food 15% reduction in scope 1 and 2* emissions since 2015 N/A

Maureen O’Brien is a senior vice president at Segal Marco Advisors.

Here’s a look at 12 companies from different industries that have set carbon reduction and greenhouse gas emissions goals.

Naperville-based Calamos Investments, says that when he recently met with a representative of the Texas Employee Retirement System who asked if his team boycotts energy, Tursich replied that they avoid big integrated oil companies that are in long-term secular decline and invest where they see opportunities for long-term growth.

e fund manager said, according to Tursich, “I understand your strategy. If I’m going to push this up the chain, I need you to tone down the rhetoric around sustainability.”

Tursich, who joined Calamos with co-Portfolio Manager James Madden in 2021, says when he has the chance to explain his team’s approach of using ESG factors to assess risk and opportunity, many appreciate the strategy. But for some retail clients, he says, it’s “I don’t want to hear about ESG. Don’t talk to me about it.”

Criticism of ESG hasn’t been con ned to red state politicians. A common criticism is “greenwashing,” the practice of slapping a sustainability label on a fund without clear de nitions and goals. e Securities & Exchange Commission is in the process of publishing new rules to govern labeling and transparency for ESG funds.

Tariq Fancy, a former sustainable investing chief at BlackRock,

has written that the private sector can’t solve for existential threats like climate change because people, companies and governments have to cooperate. Only government, he says, can change the rules of the game and enact a tax on carbon that would level the playing eld.

Another former BlackRock executive, Terrence Keeley, writes in a new book, “Sustainable: Moving Beyond ESG to Impact Investing,” that threats of divestment are ine ective in changing corporate behavior and so-called green companies don’t systematically generate great returns. Like Fancy, he argues that business can’t solve societal problems alone but must also cooperate with regulators and other stakeholders.

It’s fair game to criticize ESG, but experts argue the red state positions aren’t well thought out or consistent. “ ey’re not getting into which factors are material and which are not,” says Maureen

O’Brien, a senior vice president at Segal Marco Advisors’ Chicago o ce who works with institutional investors on ESG. “ ey’re lumping everything together and attacking it as a social goal.”

O’Brien points out that the Southeastern U.S. sustained more than $50 billion in damage from

Hurricane Ian in September. “ e idea that a Florida pension fund would be prohibited from asking companies about how they are protected from severe weather events is willful ignorance,” she says.

Another concern for ESG advocates: Public companies, including major energy companies , have made strides in reporting their progress in reducing greenhouse gas emissions. A recent report by Nasdaq found a consistent and signi cant increase in companies disclosing short-term greenhouse gas reduction targets. Last year, 58% of S&P 500 companies set at least one speci c quantitative target.

“Research and development efforts could slow down if companies start receiving mixed messages from investors,” says Hoeppner of LGIM America. “If investors start signaling that it’s not a priority, that slows down the entire transition.”

Given the current ferocity of polarization and the combativeness of House Republicans in the U.S. Congress, it’s unlikely that states will be singing the same ESG tune anytime soon.

“A di erence of opinion is not a referendum on what’s right or wrong,” says Miller-May of IMRF. “I want to get back to where it’s the United States, and not a confrontation between red and blue.”

SIX YEARS OF PIVOTAL EVENTS FOR ESG

w President Donald Trump’s administration rolls back environmental protections

w Trump withdraws U.S. from Paris climate agreement

w Hurricane Maria devastates Puerto Rico

w Movie mogul Harvey Weinstein charged with rape, sexual assault

w Wildfires rage in California

w Democrats win back House of Representatives

w Temperatures soar in European heat wave

w Wildfires destroy large areas of Brazil’s Amazon rainforest

w Trump impeached for the first time

w Start of COVID-19

pandemic

w George Floyd murdered

w Joe Biden elected president

w Jan. 6 insurrection; Second Trump impeachment

w Inflows to U.S. ESG funds peak at $21.6 billion

w Biden re-enters U.S. in Paris climate agreement

w Texas winter storm triggers power crisis

w Texas enacts bill shunning firms that divest energy stocks

w Temperatures soar in Pacific Northwest

w Shareholder activists win vote to replace Exxon board members

w U.S. Supreme Court overturns Roe v. Wade

w Florida enacts no-ESG investment bill

w Hurricane Ian results in more than 100 dead, more than $50 billion in damage

w GOP narrowly wins U.S. House, Democrats hold Senate

Working to advance racial equity and economic mobility for the ne xt generation inthe Great Lakes region.

Source: Compiled by Judith Crown

Chicagoans admire firms with socially conscious goals

SEC preparing guidelines, specifics on ESG labeling

BY JUDITH CROWN

What exactly is ESG anyway?

e variety of approaches in environmental, social and governance investing can cause confusion and draw accusations that there’s little transparency.

For some, it means divesting fossil fuels. For others, it’s investing in energy companies and holding them to account, or buying stocks in clean and renewable fuels.

And that’s only the environmental component. It also covers investing in companies with good social policies, such as promoting diversity, as well as sound governance rules like appointing independent directors.

Better labeling and speci city are on the way. e U.S. Securities & Exchange Commission is in the process of preparing guidelines to provide consistent standards for ESG disclosures and enable investors to better compare products.

In another regulatory development, the Labor Department late last year updated its policy, explicitly permitting retirement plans to o er ESG options, reversing two Trump-era rules.

When it comes to labeling and disclosure, the U.S. is behind the European Union. e EU’s Sustainable Finance Disclosure Regulation requires asset managers, pension funds and insurers to disclose how they consider ESG risks in their investment decisions. One category of funds must show that it promotes ESG characteristics, while another set is required to

demonstrate a sustainable investment as its objective.

In rules expected to be published in coming months, the SEC identi es three types of funds: those that integrate ESG factors alongside non-ESG factors in investment decisions; focused funds for which ESG is a signi cant or main consideration; and a subset of focused funds that seek to achieve a particular impact. e funds will be required to disclose more detail on their processes. Impact funds will be required to show how they measure progress on their objectives.

Alyssa Stankiewicz, associate director of sustainability research at Morningstar, says the rules dene a continuum. On one end of the spectrum, ESG integration attempts to mitigate risk, while on the other side, funds labeled as “impact” seek tangible outcomes.

“ e lines get blurred in the middle,” she says.

Managers were already headed in the direction of adding more speci city, says Laura Kernaghan, senior director of investments at e Chicago Community Trust.

“Having that greater transparency enables everyone to be a better decision-maker,” she says.

Meanwhile, experts anticipate more public companies will incorporate ESG options in retirement plans, which have been requested by employees, especially millennial and Gen Z workers.

A 2021 Harris Poll on behalf of Nuveen found that more than twothirds of investors felt better about

contributing to their company retirement plans if they had responsible investment options. With those options, they also felt better about their employers.

During the Trump administration, the Labor Department set a high bar for retirement plans to incorporate ESG funds. ey could not be designated as a default option, called the quali ed default investment alternative.

“ at had a chilling e ect,” says Maureen O’Brien, a senior vice president at Segal Marco Advisors’ Chicago o ce who advises union and public pension funds. “ is new rule takes all of that away.” An earlier Labor Department proposal considered mandating the consideration of material risk, but that was dropped from the nal rule.

Since the change was only announced in November, it will take some time for companies to consider and formulate retirement plan changes. e ruling also paves the way for asset managers to incorporate ESG factors in target-date mutual funds, where the mix of securities changes as a retirement date draws near.

Queries to a half-dozen large Chicago-area companies about whether they expect to expand retirement plan options were unanswered. But a Walgreens’ spokesman says the governing committee responsible for the company’s main retirement plan, along with assistance from advisers, is evaluating the recently issued Labor Department guidance as well as the broader topic of ESG investments.

e country has spent the last few years mired in national debates over controversial issues such as climate change and how to achieve racial equity. Even corporations have taken sides on these topics, with many consumers prioritizing spending and investing with companies whose values mirror their own.

Chicago is no exception: 78% of city residents agree that it’s more important now than ever before for businesses to speak out on social issues, according to a new Harris Poll survey. And more, eight in 10 (80%), Chicagoans expect businesses to act in accordance with their stated social stances. And many city residents are themselves acting, with almost half saying that they consider a company’s prole on environmental, social and governance issues when deciding where to invest (46%) and where to spend money (44%).

Proponents argue that ESG funds are not just an e ective form of social activism but also smart business because companies with socially conscious goals will outperform their more traditionally motivated rivals. Unfortunately the data does not support either assertion.

e 10 largest ESG funds all had double-digit losses at the end of 2022, according to Bloomberg. While 2022 was a bad year for investing across the board, eight of these 10 funds posted larger losses than the S&P 500’s 14.8% decline. In contrast, shares of oil company Exxon Mobil ourished, with its price rising more than 80% last year, from roughly $60 to $110 per share.

Some investors are willing to accept lower nancial returns if they believe their investment bene ts society, of course. ey are willing to pay an average of 20 basis points more annually for ESG funds, according to a Harvard Business School working paper published in December.

ey are often not achieving that

Chicago asks investors to make a social impact

BY JUDITH CROWN

The city of Chicago last month issued its first “social bonds,” designed to attract environmental, social and governance investors. The more than $150 million offering is being used to fund neighborhood improvements that aim to improve quality of life, including cleaning up vacant lots, building 2,000 units of affordable housing, planting 15,000 trees and buying electric fleet vehicles. To attract retail buyers, the city

lowered the minimum purchase price to $1,000 and marketed the program locally through public service announcements and social media. The issue was oversubscribed. In a recent conversation, city Chief Financial Officer Jennie Huang Bennett discussed the strategy behind the bonds. This transcript has been edited for length and clarity.

CRAIN’S: How did the idea for social bonds come about?

BENNETT: We’ve started to see a number of municipalities sell social bonds. New York City recently sold its inaugural social bond, as did Atlanta. It’s driven by ESG investors who are interested in purchasing bonds that allow them to tell their bondholders about the social impacts created by their investments.

How do we differentiate this issue from everyday general obligation bonds?

These are not traditional street

repaving projects, traffic signals or bridge repairs. They are super-progressive, which gives us the ability to sell the projects to investors looking to make a social impact.

How much was the participation from the public?

It exceeded my expectation. We received more orders from retail than we had bonds.

About 24% of those retail orders were from Illinois investors and 8% from Chicago investors.

good either, however: U.S. companies in ESG funds are not always as socially conscious as investors expect, according to the Harvard Business Review. In fact, these enterprises sometimes have worse labor- and environmental-compliance records than non-ESG companies.

So if ESG funds are neither performing nancially nor socially, where can socially minded Chicagoans turn? e old activist admonition about thinking globally and focusing locally may hold an answer.

More than eight in 10 Chicago residents (83%) agree that the city’s business leaders should embody their company’s stated values (e.g., mission statement, stance on social issues), while a majority (52%) think Chicago-area businesses make a positive impact on local social issues (e.g., environmental health, human rights). What precisely can we expect from our titans of local industry? eir most important contribution may simply be drawing attention to issues: ree-quarters of city residents (76%) agree businesses are better at raising awareness of social issues than they are at xing them. e ability to highlight problems can be potent, paving the way for other city leaders to correct them. After all, the rst step toward solving a problem is acknowledging it. By raising awareness of local issues, business leaders may inspire the local government or Chicago residents to work toward the change they want to see.

Importantly, the city’s historical bond nancings have had either

Will Johnson is CEO of e Harris Poll, a global public opinion polling, market research and strategy rm.

Jennie Huang Bennett

Quiz: Test your ESG investing knowledge

1.What does ESG stand for?

A. Environmental, social and government

B. Environmental, social and governance

C. Environmental, sustainability and governance

2. Robinhood Markets’ CEO topped the AFL-CIO’s list of highest-paid executives, with $796 million for 2021.

True or false: This an ESG issue.

3. ESG issues are separate from pecuniary factors.

True or false

4. State laws limiting ESG investments for retirement plans apply to all plans in the state, including public pensions and private company-sponsored 401(k) plans.

True or false

5. Which asset manager is bearing the brunt of the backlash against ESG by red states?

A. PIMCO

B. Fidelity

C. BlackRock

D. Morgan Stanley

6.In 2021 activist investor Engine No. 1 mounted a proxy challenge to Exxon, saying it wasn’t moving fast enough to address climate change. As a result, the company:

A. Replaced three of 12 board directors.

B. Committed to investing $15 billion over the next six years to advance lowcarbon solutions.

C. Announced that it had achieved 2025 scope 1 and 2 greenhouse gas emissionsreduction targets nearly four years early.

Answer: B

Sustainability is used as a synonym of ESG; both terms consider longer-term impacts on investment. Governance refers to the corporate board structure and shareholder rights, not to wider government issues.

Answer: True

If shareholders believe that CEO pay is excessive, they can vote against the pay package at proxy time. It’s only an advisory vote, but when shareholders vote against CEO pay, the company usually restructures the compensation plan.

Answer: False Fiduciaries are traditionally required to prioritize financial returns above all else. Academic and industry research shows ESG issues can have a material impact on returns. For example, diverse leadership groups often outperform. So while diversity can be viewed as a social good, it also can have a beneficial impact on returns.

Answer: False

Private retirement and benefit plans are governed exclusively by the Employee Retirement Income Security Act, a federal statute. The new state restrictions apply primarily to state-managed public pension funds.

Answer: C Elected officials in red states have targeted BlackRock and CEO Laurence Fink for what they call woke attempts at social engineering.

Answer: D

Asset managers BlackRock, Vanguard and State Street supported the activist investor’s nominees.

D. All of the above.

7. The Labor Department’s new ESG rule requires companies to offer ESG funds to 401(k) participants.

True or false

8. Investors in U.S. companies are required to hold how much stock to be eligible to file a shareholder proposal?

A. $2,000 of company stock for three years, $15,000 of stock for two years or $25,000 of stock for one year.

B.

C.

Answer: False

ERISA has never required that a specific type of investment be offered to plan participants. The new ESG rule permits a plan to offer any fund that plan fiduciaries determine to be appropriate based on economic considerations, which may include ESG investments. The rule does not require ESG funds to be offered as options or to invest in ESG funds.

Answer: A

Investors in U.S. companies can qualify under these three options. Answer B is the requirement to file a shareholder proposal in the U.K. Answer C is the requirement to file a proposal in Japan.

Scores: 6-8 correct: You’re an ESG aficionado. 3-5 correct: You’re relatively knowledgeable. 1-2 correct: Keep expanding your knowledge.

zero retail participation or about 1%.

How did you allocate the sales?

We ended up selling half to retail and half to ESG portfolio holders. We provided Chicago retail first priority and Illinois retail second priority. All those retail orders were filled. We made a pro rata allocation between national retail buyers and ESG investors because we wanted both to participate.

What was the level of interest from fund managers?

ere was $88 million in orders from 11 bond funds that focus on

ESG, which is one of the highest participation of ESG-speci c investors on an ESG bond issue.

As we were crafting this issue, we reached out to some of the top ESG portfolio holders and we asked them what are they looking for in a bond issue. ey said they want to know that the projects are impactful, that they’re di erent from what you see in other bond

issues. ey also told us they want reporting, so the city committed to provide impact reporting on these particular projects on an annual basis for as long as the bonds are outstanding.

How did the high demand accrue to the city’s advantage?

We saw a 3 to 5 basis point benefit in yield to the city. Tradition -

ally, most social bonds are sold without any differential, maybe 1 or a few basis points. That has to do with us engaging in this hyperlocal retail marketing. We structured the accessibility of the bonds to make it easier for mom and pop retail to be a part of the transaction. We wanted Chicagoans to participate and be able to invest in their own communities. What exactly are the bonds yielding?

The overall cost is 4.39%, which is attractive for the city, especially considering how interest rates have moved over the past

year. (The $97.7 million in taxexempt bonds range from 2.56% to 3.86%, and the $60 million in taxable bonds range from 4.41% to 5.29%.)

Why are these bonds betterrated than the city’s general obligation bonds?

The bonds are backed by sales tax revenues, which flow through the city’s Sales Tax Securitization Corporation. It’s a high-grade credit and lends itself to retail participation. It’s harder for retail investors to do the work of evaluating a credit. The higher rating helps to sell the bonds at retail.

5% of the total voting rights or representation of 100 shareholders of the company.

1% of the voting rights or 300 voting rights, held for at least six months.

Sources: Josh Lichtenstein, a partner at Ropes & Gray in New York who specializes in the regulations that govern retirement plans and is tracking state regulation of ESG investments; Maureen O’Brien, a senior vice president at Segal Marco Advisors’ Chicago office who works with institutional investors on ESG; Crain’s research.

“THE CITY COMMITTED TO PROVIDE IMPACT REPORTING ON THESE PARTICULAR PROJECTS ON AN ANNUAL BASIS FOR AS LONG AS THE BONDS ARE OUTSTANDING.”

Jennie Huang Bennett, city of Chicago chief nancial o cer

A framework t for responding to a pandemic

Reacting to a public health emergency was not part of many business continuity plans before the pandemic hit. Since then, we’ve discovered the mission-critical impact of health on our workforce, supply chains and markets. As the Chicago area enters its fourth year living with COVID-19, it’s time for organizations to take a longer view of their approach to health and wellbeing. There’s a familiar framework available for this review: the ESG practices used across industries to meet environmental, social and governance objectives.

COVID-19’s ongoing e ects have been sweeping, long-lasting and unequal. Black, Indigenous and people of color in business organizations and communities have held forth as one of our most essential yet most vulnerable populations. ey continue to bear a disproportionate risk of developing not only COVID complications but also diabetes, heart disease, mental health and other common conditions that became more critical in the pandemic. Deloitte Consulting estimates the cost of health disparities in the U.S. — in medical claims, productivity losses and other expenses associated with preventable illness and premature death — at $320 billion a year and rising.

Responding to the pandemic, I joined with other Black board members across

PURPOSEFUL

the health ecosystem to focus our organizations on responding to these disparities. Organizing formally as the Black Directors Health Equity Agenda, we worked with Deloitte to develop governance strategies that aligned wellness with business objectives.

When we viewed health equity within an ESG framework, the potential for producing sustainable change was undeniable: Environmental issues are a force multiplier of health disparities. Pollution in Black communities exacerbates cardiovascular problems and exposes residents to greater risk in conditions disparate as asthma, stroke and breast cancer.

Social needs have knock-on community health e ects. Economic, housing and food insecurity contribute to widespread chronic physical and mental health conditions.

Governance systems make organizations accountable for the drivers of health that a ect business objectives. By tracking wellness outcomes, companies can measure the impact of their health initiatives.

For good reason, market leaders, investors, regulators and rating agencies are comfortable with the ESG framework. It gives them ways to assess risks to an organization’s workforce, community and ecosystem. is knowledge can help directors

ask the right questions about their impact and respond in material ways that strengthen their brands, recruit and retain talent, and improve nancial performance.

Not all Chicago companies view their social responsibilities through an ESG lens. Still, health resilience has taken a more signi cant role in their actions toward their employees and the community. Here are a few examples:

 $10 million in AbbVie seed money supported community health centers through the charity Direct Relief.

 Allstate addressed one of the social determinants of health: stable housing. e insurer raised its investment in low-income housing tax credits, lowering its tax liability while promoting healthy households.

 State Farm enhanced employee health bene ts, o ering crisis leave, online physical therapy and an LGBTQ+ care concierge.

 United Airlines extended a telehealth bene t to reach employees with access, education, income or language barriers.

 Walgreens pharmacists consulted with patients and parents at South and West Side locations to help customers manage diabetes and pediatric asthma.

Bringing such e orts into the ESG conversation helps board members prioritize these initiatives. As our COVID-19 response winds down, we must push ahead with ambitions to make our institutions more resilient. Long COVID appears to exploit inequities in how we care for chronic illness in populations with the least access to quality care. A sustainable long-term approach to population health will force businesses to rethink their objectives in fostering employee wellness and community prosperity.

We must intentionally demand transformation that embraces health equity to achieve our nancial, operational and strategic goals. Actions to advance health equity are ways to address ESG concerns directly impacting our workplaces and communities.

Take a step back and consider the larger picture

As the popularity of environmental, social and governance investing rises, the debate around its merits also gets louder. For those looking to align their investing with personal beliefs, impact investing can be part of a well-rounded portfolio.

Environmental, social and governancefocused strategies are available across most — if not all — asset classes. is allows investors to build a well-diversi ed portfolio designed to simultaneously capitalize on upside growth and mitigate downside risk — consistent with other asset classes – all while using their investing dollars to champion their communities and causes.

In fact, a recent study found that ESG-heavy portfolios have outperformed their benchmarks over a threeyear time horizon. e study also revealed that ESG funds can o er a lower downside risk than their traditional counterparts. How?

ESG management includes a whole suite of non nancial factors; when these factors are controlled, companies tend to perform better overall.

But impact investing does involve unique challenges. Speci cally, critics point out that an ESG approach lacks transparency and consistency in reporting. Without comprehensive information, investors understand-

ably struggle to quantify the ESG impacts that companies have. With few guidelines or standard ESG measures, investors who do wish to adopt ESG investing may wonder where to begin. What types of ESG investments should be included in a portfolio?

As in traditional investing, we recommend seeking out speci c industries or companies whose products meet a challenge or need, both in the medium and long term. Take, for example, electric vehicles. We believe consumer awareness of the bene ts of EVs provides much potential and upside growth for this nascent industry, both for EV producers as well as manufacturers of the underlying technologies. While individual investments should always be evaluated on their own merits, we recommend investors look for tailwinds and room for growth before making portfolio selections.

While the “environmental” part of ESG investing often gets the most attention, in-

vestors who are most interested in social issues can also pursue targeted opportunities. One way to do this is through community-focused or thematic impact funds. ese investments can realize competitive returns while e ecting philanthropy-like outcomes, such as education or a ordable housing.

Whether or not you actively seek ESG investments for your portfolio, we believe the priority for all investors is the same: Invest in a way that works for you, whether that includes ESG considerations or not. If we take a step back and look at the bigger picture, investing in an array of industries, companies and initiatives (either directly or indirectly) makes an impact through the creation of jobs, economic growth and the development of new technologies to further our communities. When viewed that way, all of us are making a di erence in the world around us—one investment at a time.

Deborah Phillips is executive director and a founding member of Black Directors Health Equity Agenda, a Chicago-based group of board directors and senior leaders working to eradicate the health disparities that threaten the prosperity of Black families.

PLANNING

Emily Kaiser and Edward Apsey are coheads of ESG Engagement and Stewardship at CIBC Private Wealth. CIBC is a sponsor of Crain’s Forum.

ALIGNING FOR IMPACT

Find the true value by identifying areas that matter the most

Despite being one of the “love it” or “loathe it” topics of the day, environmental, social and governance factors are at an alltime high.

Regardless of where you stand, the investment market has made one thing clear: ESG is here to stay. According to a recent PricewaterhouseCoopers report, “Asset managers globally are expected to increase their ESG-related assets under management to $33.9 trillion by 2026, from $18.4 trillion in 2021.”

e Global Impact Investing Network estimates that $1.1 trillion globally is currently allocated to impact investments — those that seek to intentionally generate positive social and environmental impact alongside nancial return.

Kelly McCarthy is head of impact at Vistria PRG, where she leads the rm’s impact management practice. Based in Washington, D.C., she previously served as chief impact ofcer at the Global Investing Network. Vistria is a sponsor of Crain’s Forum.

What is “ESG” and what’s driving investor interest?

In one word: value.

ESG is a framework for managing risks and opportunities around sustainability issues. ese are issues that have material e ects on the core business, its nancial value and how its operations a ect society. Layered on top of ESG management are strategies that aim to generate positive outcomes for society as a value proposition — commonly referred to as impact strategies.

Taken together, sound ESG management with an authentic impact strategy has the potential to increase valuations when compared to businesses in similar sectors without these practices. Over a decade’s worth of research and thousands of studies into ESG value creation from organizations like McKinsey & Co. to United Nations Principles for Responsible Investment present a compelling case about the potential for higher returns, risk reduction and access to new market segments. Additionally, many of the largest investors have their own ESG commitments to ful ll and are looking for the best-placed managers to help them meet those promises. Increasingly, investors worldwide now consider ESG management to be part of duciary duty.

It’s no longer a question about why to manage ESG but rather how to manage it well.

Here are some key considerations: ESG management is table stakes. Start with the most widely used industry-speci c ESG standards to get a sense of which issues are most material for the sectors in which you operate or invest.

Go beyond compliance and set realistic ESG goals. Every industry has a different set of ESG risks and opportunities. Classify your goals and expectations accordingly and use a datadriven approach to manage performance against these expectations.

Include core value drivers and core risks. ere are several universal drivers of value that apply to every sector. One example is diversity, equity and inclusion.

A 2022 Boston Consulting Group study found that companies with above-average diversity had both 19% higher innovation revenues and 9% higher earnings before interest and taxes margins, and a more engaged workforce. Climate risk mitigation is another example. Climate risks a ect supply chains and materials costs, insurance premiums and basic operating costs.

Partner with stakeholders, understand the issues, get speci c. Investors and management teams should determine together which ESG levers and impact strategies create value. is could be a workforce development plan or opening a new segment for the underserved. e point is that ESG, beyond compliance, is where value creation starts.

Incentivize good performance. If solid ESG management can drive business value, strong incentives for good performance can optimize that value. Find which driver(s) matters most to your key issues, stakeholders, management teams and communities. Identify KPIs. Set targets. Put core drivers such as DEI goals in your management incentive plans. Reward the winners.

KEY QUESTIONS

ewhat and the why of sustainable actions

Across the business landscape, more companies today are touting their environmental, social, and governance efforts to appeal to investors, consumers and others. Take Domino’s, which has rolled out a fleet of electric vehicles for pizza delivery with a tagline about it being “better for the planet.” More impactfully, tech giants Amazon, Meta (the parent company of Facebook) and Google (owned by Alphabet) reportedly are the biggest corporate buyers of wind and solar energy—but keep in mind that data centers are among the most energy intensive of any commercial property per square foot.

Such e orts do contribute, at least marginally, to ESG objectives, particularly the “E” that gains the most attention. But are such e orts to promote sustainability really sustainable? is is the key question going forward.

Companies have a mandate to produce a return for shareholders, as argued famously by Milton Friedman, who stated that increasing pro ts was the social responsibility of companies. More recently, the Business Roundtable has emphasized bene ting all stakeholders — from employees and suppliers to the environment. e fact remains, however, that companies cannot spend resources without considering the impact on shareholder value.

al long-term risks they face from ESG-related issues.”

For example, the “Net Zero” target for carbon emissions calls for consumption of energy from cleaner, renewable sources instead of fossil fuels. Recent research links reduced emissions to improvements in health, decreases in premature deaths, and reductions in both crop losses and lost workdays. Capturing those bene ts, however, takes time, which equates to spending money without an immediate return. More importantly, it is unclear whether capturing such bene ts is the role of a rm. is is not an argument against sustainability; rather, it is a call to understand the investment involved and the projected return on that investment. e fact is companies are evaluated on generating shareholder return. Executive pay and bonuses are tied to these metrics, typically re ected in share price gains. If ESG turns out to be a drag on pro tability, corporate sustainability will not be sustainable.

Consider what happened with BP, which, after reaping higher pro ts on fossil fuels, has decided to slow the pace of its shift to alternative energy. “Look at what governments around the world are saying: We want more investments to get supply today,” BP CEO Bernard Looney told the Wall Street Journal.

At the Vistria Group, we consider each factor — the E, S and the G — as ways to enhance the quality, outcomes and performance of the companies in which we invest. And, as an impact-aligned rm, we look for companies whose products and services contribute to broader societal impact alongside strong nancial performance. oughtfully designing an ESG management plan around the behaviors, drivers and issue areas that matter most helps move ESG beyond a signaling exercise — and the risks associated with that approach — to authentic strategic alignment. And that’s when you’ll get the true V out of ESG.

is duciary consideration makes for an even thornier issue at a time when ESG has become politicized, with upcoming congressional hearings that many see as anti-woke backlash. But it doesn’t have to be this way, in amed by headlines, both pro and con. To be sustainable for the long term, ESG should be subject to reasonable and rational discussions among corporate leaders and policymakers.

SHOW THE PROOF: THE WHAT AND THE WHY  Discussions need to focus on two key areas: what ESG-related actions make the most sense and why these actions are being undertaken. Actions need to be evidence-based, backed by science, to demonstrate what will ameliorate risks and why reducing those risks are important.

As a new Harvard Business Review article states: “ e key will be returning ESG to its original and narrow intention — as a means for helping companies identify and communicate to investors the  materi-

is raises key questions: Should companies be pressured to engage in ESG, without thinking about their bottom line? What is the in ection point of improvement — and is the bene t marginal or more signicant? In other words, what is a realistic ESG and sustainability strategy and what is not?

In addition, incentives are needed for companies to make good on their ESG promises. For example, government incentives and policies that encourage ESG actions in ways that are e cient, e ective and measurable. Measuring the impact of ESG is also good for investors who want to ensure their investments are making a difference to the planet — as well as generating a competitive return.

As more companies take on ESG, what’s needed is a way to quantify the impact of those actions, for both the environment and shareholders. Otherwise, ESG promises will only be lip service. Quantifying ESG as a return on investment o ers a road map of improvement that can make sustainability more sustainable for the long term.

Aaron Yoon is an assistant professor at Northwestern University’s Kellogg School of Management.

A COMPELLING CASE FOR HIGHER RETURNS, RISK REDUCTION AND ACCESS TO NEW MARKET SEGMENTS.

312 Chicago, a haunt for City Hall pols, to reopen after 3 years

The Italian restaurant at Randolph and LaSalle will be back for the rst time since the COVID pandemic struck — a rarity in the downtown dining world

BY ALLY MAROTTI

312 Chicago, the Italian restaurant at the corner of Randolph and LaSalle streets in the Loop, is opening for the first time since the COVID-19 pandemic struck.

In the three years since COVID closures shuttered restaurants across the city, 312 Chicago did some light renovating and brought in a new chef who redid the menu. Iris Junge, general manager of 312 Chicago and the connecting Allegro Royal Sonesta Hotel, said it was important not to rush the reopening.

“We really wanted to make sure that we did it right,” she said.

Reopenings of restaurants that existed pre-pandemic have become rare, as the third anniversary of the initial COVID shutdowns nears. Most establishments have either reopened, permanently closed or converted to a new concept. Restaurants in the Loop have faced their own challenges, as lunch business has not recovered and office occupancies remain at about half of where they were pre-pandemic. Operators of fast-casual to sit-down establishments are still weighing whether they should even stay open for lunch.

312 Chicago is banking on guests from the connecting Allegro hotel and hoping to draw in pre-show crowds from the

nearby Cadillac Theater. Junge said she expects the politicians from nearby City Hall to return to their old lunch haunt as well.

Leaning on those other crutches could help 312 Chicago weather some of the challenges other downtown lunch joints face. Pedestrian activity in the Loop reached 85% of pre-pandemic levels in the fourth quarter of 2022, as did hotel occupancy, according to the Chicago Loop Alliance.

“It is a bit unusual for a restaurant to be closed for so long and then reopen under the same brand name. However, we also have been living in an unusual time where the pandemic has hit, and downtown restaurant traffic has been very slow to come back,” Joe Pawlak, managing principal at market research firm Technomic, said in an email. “Their risk is mitigated because they do have the hotel business to help support its restaurant business.”

312 Chicago plans to reopen in late March, starting first with breakfast and lunch, then reintroducing dinner service in April. Brunch will come eventually, Junge said. The restaurant also plans to reopen its sidewalk cafe.

The new chef is Marcello Florio, who was trained in Italy. The restaurant’s renovations included new furniture, lighting, carpets and making the space “brighter,” Junge said.

312 CHICAGO

BREAKOUT SESSION: Affordable

BREAKOUT SESSION: Future

CVS closes a gap in its race with WalgreensWells Fargo poised to bulk up

Walgreens lacks a health insurer or a pharmacy bene t manager.

“Walgreens is further down the path of adding care-giving services to its mix of businesses,” says Julie Utterback, a senior equity analyst at Morningstar.

“However, CVS is much further along from diversifying away from the retail pharmacy store operations in general.”

at diversi cation could help CVS, especially if it helps the company lower health care costs for patients and employers.

Speci cally, Utterback says CVS owning an insurance plan could be an advantage over Walgreens.

“ ere’s natural synergies that CVS would have because it owns the insurance operation,” Utterback says. “ at’s the ability to manage risk in medical services.”

But Walgreens has no interest in acquiring an insurer, says John Driscoll, the newly appointed executive vice president and president of Walgreens’ health care segment. Instead, he says Walgreens has inked partnerships with a range of health plans and will seek more.

“ e Walgreens perspective today is (that) the best way to be the independent partner of choice is to work with as many health

plans as possible,” he says.

Walgreens has a similar approach to pharmacy bene t managers, or PBMs, which negotiate with drugmakers and pharmacies for lower drug prices on behalf of health insurers and other payers.

“We’re not really biased towards working with any PBM and I think it’s unlikely that we’re going to invest in one,” Driscoll says.

Meanwhile, CVS owns Caremark, the market’s largest PBM. CVS declined to comment for this story.

TARGET MARKET

e companies are targeting the same market: seniors on Medicare or Medicare Advantage insurance plans, a large and growing segment. Oak Street, which serves just 160,000 patients in 169 medical centers across 21 states, caters exclusively to that group. VillageMD and Summit Health serve “millions” of patients at 680 locations in 26 markets, take insurance from patients across the age and payor spectrum, but Walgreens’ growth plans are focused on areas with growing Medicare populations.

Experts say it’s still too soon to tell which strategy and array of assets will prove more successful in the long term. But so far, investors seem more enthusiastic

about CVS’ strategy.

CVS’ stock is up 28% over the last ve years. Revenues grew 10% to $322 billion last year, and about $91 billion, or 28%, was just from CVS’ health care benets business, which encompasses its health insurance plans, according to its annual ling.

Meanwhile, Walgreens’ stock is down 48% over the same time period, and the company’s revenue grew less than 1% to $132 billion in 2022, with about 1% coming from Walgreens’ U.S. health care segment, according to its annual ling.

e two will compete not only with each other, but also with other health care newcomers, like Amazon and Walmart, as well as traditional players, like regional health systems and independent physician groups. A challenge for CVS and Walgreens will be attracting physicians and patients to their subsidiaries, who may already be accustomed to giving and receiving care in status quo health care settings.

Despite the headwinds, Utterback says recent moves by CVS and Walgreens signal that they aren’t done making health care deals.

“ e door is de nitely open for more primary care deals by the likes of CVS and Walgreens,” she says.

opportunities as part of our ongoing process to better serve our customers,” she says.

Wells Fargo remains tarnished in the public eye by widespread opening of ctitious customer deposit accounts that came to light beginning in 2016. It remains subject to a 2018 Federal Reserve enforcement order that capped growth at the bank. e company has paid billions in nes and penalties.

Ordinarily, a bank the size of Wells Fargo seeking to bulk up substantially in a market like Chicago would search for a local buyout target. But the regulatory cloud takes deal-making o the table for now.

at leaves the option of battling for consumers one by one. Typically, banks looking to make a retail splash will o er enticing rates on deposit products and/or hundreds in cash awards to those who move their accounts. at can start pricing wars forcing incumbent banks to pay up to keep their customers.

In Glencoe, for example, there are just three banks — a surprisingly low number given the a uence of that suburb. ey are JPMorgan Chase, BMO Harris and Wintrust Financial, the rst-, second- and fourth-largest area banks by deposits. All had roughly a third of the $537 million Glencoe deposit mar-

ket as of June 30, 2022, the most recent data available from the Federal Deposit Insurance Corp.

DEPOSITS

Wells Fargo is the six-county area’s 12th-largest bank by deposits. But that’s misleading because most of that cash comes from commercial customers and is stashed in its main operation downtown. Its seven suburban branches held $1.8 billion as of June 30, 2022. To put that in perspective, Chase had $83 billion in deposits, excluding the $52 billion in its main branch downtown.

Wells Fargo CEO Charlie Scharf is familiar with Chicago’s retail banking scene. He served as Bank One’s retail chief under Jamie Dimon before Dimon sold Bank One to Chase in 2004 and became CEO of what is now the nation’s largest bank. e last time a major U.S. bank attempted to elbow its way into Chicago’s top banking ranks via a branch-opening strategy was a failure. Washington Mutual, based in Seattle, opened dozens of new branches in the market in the early 2000s.

Chase and other incumbents successfully fought o WaMu before the housing bust capsized the mortgage-dependent bank.

Chase acquired WaMu in 2008 and its Chicago footprint and closed many of the branches WaMu had opened just a few years earlier.

WELLS FARGO from Page 3

Explore this expansive Spanish-style villa in Grayslake that is coming on the market

Built in the mid-1920s on a vast piece of property, the house of stucco, tile and columns was a reminder of one family’s Mediterranean vacations. It will be for sale for the rst time since 1996. I

Apicturesque 1920s Spanish villa in Grayslake, complete with a courtyard and fountain, tile oors and twisted columns, will soon be for sale for the rst time since 1996.

“It’s like being on a Mediterranean vacation every day,” said Christine Costabile, who with her husband, George Dell, has owned the vebedroom house on a little less than 8 acres for almost 27 years. e property, which includes a swimming pool and a pond, will go on the market March 1, priced at $875,000 and represented by Lake Reid of Red n.

Originally the main house of a country estate with over 180 acres, the rambling, tile-roofed house — located 47 miles northwest of downtown — was designed for its original owners, Frederick and Mary Dobe, almost a century ago “to remind them of the Mediterranean vacations their families took,” Costabile said. She got this explanation from Dobe family members who lived in the Dobes’ native Germany.

For Costabile’s family of four, the villa design of big arched doors opening to the surroundings, an outdoor staircase (as well as one indoors) and the breeziness inside when doors and windows are open “made us feel like we were somewhere else, not in Grayslake,” she said.

Costabile and Dell updated the kitchen and baths and put an addition on the back of the house, but kept an eye on authenticity for any work on the historical section. “Why would you buy an old house and not keep it the way it is?” Costabile said.

e European tone of the house, she said, suited “the Renaissance man who built it.” Frederick Dobe was an entrepreneur with several businesses who, according to one 1930s biographical article, came over from Germany as a teenager to work on the buildings of the World’s Columbian Exposition of 1893. He and his wife, Mary, and their daughter, Johanna, moved to their newly built villa in the mid-1920s.

Chicago architect Norman Cook designed the house with a two-story living room, outdoor stairs to one of the bedroom suites, a couple of towers and a walled courtyard leading to a front door framed with carved stone.

Costabile said her research indicates Dobe may also have run a sports bookie operation on the property. at would help explain why the house had 50 phone lines when she and Dell bought it.

e 7.9 acres that the house is on could be divided into smaller lots, Costabile and Reid both said.

For the house itself, Costabile said, “I want to nd somebody who loves it as much as I did the rst time I walked in.”

BY DENNIS RODKIN

REDFIN PHOTOS

AND HUNGER AFFECT US ALL.