Crain's Chicago Business

PRIVATE EQUITY: Harrison Street enters hot single-family home rental market. PAGE 3

REAL ESTATE: Luxury housing boom carries into 2022. PAGE 4

CHICAGOBUSINESS.COM | JANUARY 31, 2022 | $3.50

Ken Griffin goes on a political spending tour The hedge fund multibillionaire is showering cash on conservative candidates from coast to coast

RETOOLING FORUM

CAPITALISM In pushing to reduce carbon emissions and boost diversity and inclusion, can ESG investors compel corporations to be more socially conscious—and still profitable? PAGE 13 FIND THE COMPLETE SERIES ONLINE

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Ken Griffin quarter of a billion dollars. Nearly all of Griffin’s recent donations went to Republican candidates and causes.

With a net worth estimated at $27.6 billion, Griffin has begun See GRIFFIN on Page 23

ComEd’s new boss starts with a big ask Gil Quiniones needs approval for huge spending that would allow the scandal-tarred utility to raise rates

BY STEVE DANIELS The job: Repair Commonwealth Edison’s tattered reputation while convincing newly re-empowered state regulators to bless a capital spending plan that would shatter previous records and trigger big electricity rate hikes in northern Illinois.

That’s what Gil Quiniones signed up for when he became the first outsider to run the Chicago utility in 25 years.

If he fails, ComEd parent company Exelon will find it next to

JOHN R. BOEHM

DAVID PLUNKERT

As Ken Griffin prepares to underwrite an all-out effort to unseat Illinois governor and fellow billionaire J.B. Pritzker this year, he’s finding time—and money— to extend his influence far beyond his home state.

A review of the hedge fund mogul’s campaign donations shows he’s emerged as a go-to money man for Republican candidates across the country. Griffin has ramped up his political spending sharply in recent years, doling out $170 million in federal, state and local races since 2018, and bringing his total since 2000 to a

BLOOMBERG

BY A.D. QUIG

Gil Quiniones impossible to deliver the steady earnings growth it just promised investors as it prepares next See COMED on Page 20

NEWSPAPER l VOL. 45, NO. 5 l COPYRIGHT 2022 CRAIN COMMUNICATIONS INC. l ALL RIGHTS RESERVED

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JOE CAHILL

YOUR VIEW

Prepare for sticker shock on electric bills in Illinois. PAGE 3

Beware of a poor casino deal at McCormick Place. PAGE 10

1/28/22 3:33 PM

2 JANUARY 31, 2022 • CRAIN’S CHICAGO BUSINESS

GREG HINZ ON POLITICS

Can anyone deliver real solutions on crime?

A

the Floyd protests were different from today’s street crime.

But when he lends his name to such red meat tripe, others of us will ask what Irvin really believes.

Then there’s Judge Evans.

In a presentation at the Union League Club, he seemed to recognize the political revolt in the making. Extra judges have been assigned to criminal court, the number of alleged murderers released on electronic monitors since October has been reduced to zero, Harvard University has been asked to review his standards for releasing people on noncash bail, and, he argued, his hard-working judges last year convicted of murder or other significant crimes 86.7% of those who went to trial on homicide charges. Eighty-sixpoint-seven percent! Lock ‘em up!

But under questioning, Evans said many factors could explain why there have been no alleged murderers released to walk the streets the last few months. He talked eloquently about giving young people second and third chances to get their lives together.

Like the 16-year-old alleged killer of a young child in Little Village. He earlier had been released on electronic monitors three times after being arrested for aggravated Three times.

THERE IS NO ONE SOLUTION TO carjacking.

How much of a price must innocent people TODAY’S MADNESS. pay for those second and third and fourth chances? seemed to recognize that Or why, according to Cook mere chest-beating vows to County Sheriff Tom Dart, are get tough won’t abolish crime more than 600 people now any more than Class X or free on electronic monitors three-times-and-you’re-out after being charged with being laws. “So in one hand, I’m a felon in possession of a gun like, this can’t happen to my or being an armed habitual city,” he said at a Roosevelt criminal? Convicted felons.

University forum last year, reArrested with a gun. Walking ferring to the riots that broke free awaiting trial. out after the killing of George I did hear some common Floyd. “On the other hand, sense from likely mayoral I’m like, I recognize the dishopeful Arne Duncan. ruption that needs to happen In a separate event, he for real change to occur . . . seemed to recognize there (to) calm people’s anger and is no one solution to today’s frustration about the lack of madness, that it will take both progress that we have made, smarter use of police as well as you know, over so many dea strong focus on social equity cades since the ‘60s.” and violence prevention. But That was then. Fast-forward even Duncan seemed to blow to Irvin’s new, $1 million off the impact of weak gun statewide TV ad—the one laws, even though New York that brags about how he shut and Los Angeles, which he down demonstrations in his talked about, have fewer guns town and now wants to move and less violence. to “take back our state.” I Sigh. As Evans put it, what’s guess the Trump conservahappening on the hard streets tives who tend to dominate “is real. People are afraid.” the GOP primary don’t want Yes, they are. Is anyone to hear about how racial ineqlistening? uity sparks protests. And how fter an amazingly long slumber, the local political establishment abruptly has woken up to the fact that Illinois and, in particular, Chicago are being devastated by a wave of violent crime that shows no real sign of cresting yet.

Mayor Lori Lightfoot has had several press events, and both Cook County State’s Attorney Kim Foxx and Cook County Board President Toni Preckwinkle are answering detailed questions. Chief Cook County Judge Tim Evans launched an unusual media tour, and Democratic legislative leaders are promising tweaks in the law. And all this is happening as self-satisfied Republicans, who were first to the issue, try to milk law and order for everything it’s worth.

All that is good. As they say in rehab, acknowledging that you have a problem is the first step to controlling it. But, sadly, it’s only the first step in healing an ailment that requires subtlety, nuance, resolve and cooperation, not posturing.

Take, for instance, GOP gubernatorial hopeful Richard Irvin, the mayor of Aurora and presumed leader of the statewide ticket that is expected to get hedge fund mogul Ken Griffin’s blessing—and green.

In an earlier life, Irvin had

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Why the owner of Stan’s Donuts is excited about grocery stores The Chicago doughnut mainstay opened a location inside a Lakeview Mariano’s

BY ALLY MAROTTI Stan’s Donuts & Coffee owner Rich Labriola sees a lot of potential in grocery stores.

It’s been about a year since the eight-year-old Chicago company started selling packs of its doughnuts at Mariano’s. Stan’s signature pink boxes are now on grocery store shelves throughout the Chicago area, with sales comprising almost 20% of the company’s revenue. Labriola said he sees that share growing significantly.

“I believe it has the potential to overtake our retail stores,” he said. “We’re excited about grocery stores and exposing the rest of the country to Stan’s. It’s a little different way to do it than opening up 1,000 stores.”

Stan’s is taking its grocery store foray a step further. Recently, it opened a full-service location inside a Mariano’s in the Lakeview neighborhood. Labriola said he plans to work with Mariano’s to open five to 10 more locations in the coming years.

Grocery stores have been tried and true customer magnets for the past two years, as most other forms of retailers and dining establishments watched business slow with each COVID wave. Like other restaurants, Stan’s launched a slew of new revenue streams to compensate. The boxed doughnuts were one method. Stan’s also started serving breakfast sandwiches, bought another food truck and is planning some lunch offerings.

The licensed stores, like the one inside Mariano’s, is Stan’s newest

profit stream. In those cases, Stan’s makes money off the licensing fee, and distributes the doughnuts and sandwiches through its baking commissary.

“We’ve been wanting to do something like that for years,” Labriola said. “Once (Mariano’s) really saw the success of the doughnuts . . . it was a no-brainer.”

EXPANSION

Mariano’s often features local products on its shelves and works with local vendors, said Amanda Puck, director of strategic brand development for the grocery store chain. Stan’s was a good fit because it offers something Mariano’s doesn’t have, and customers are excited about it.

“We do offer baked items and we do have doughnuts, but these doughnuts are a whole separate experience,” Puck said. “It makes it easier for our customers to access.”

The location opened in December and hosted a grand opening over the weekend.

Besides the Mariano’s locations on the horizon, Labriola said he’s working with “a major Chicago attraction” to open another licensed store this spring. He declined to give details.

An expansion into retail could be “a major sales driver” for Stan’s, particularly in Mariano’s and other high-end, Chicago-area retailers where it has brand recognition, said Kevin Schimpf, director of industry research and insights at market research firm Technomic.

“Expanding outside of the Chicagoland area will likely be a

challenge though, given the lower levels of brand recognition and higher competition from national names like Krispy Kreme,” he said.

Stan’s traces its roots back to Los Angeles, where a man named Stan Berman ran a doughnut shop with the same name. That shop operated out of a small storefront and was famous not just for the doughnuts, but for Berman himself, whose presence and personality helped draw in the customers, Labriola said.

Labriola worked with Berman, using his recipes as a base for the Chicago Stan’s Donuts.

The 55-year-old California shop closed permanently during the pandemic in 2020, and Berman retired.

The pandemic has caused challenges for Stan’s in Chicago, too, but not as dire. The company closed five of its stores for 60 days when COVID struck, Labriola said.

He declined to give specific numbers but said revenue was down 20% in 2020 compared with 2019.

Though last year was better, with revenue almost hitting 2019 numbers again, some stores have yet to fully recover. The Wicker Park location still misses the morning commuters heading to the nearby Blue Line CTA stop, for example. The best-performing stores of 2021 were those in Orland Park and Oakbrook Terrace, with drivethrus.

Inflation has also caused snags.

Labriola said he has raised prices 5% to 7%, but that doesn’t cover all the rising costs.

“Some of our chocolate went up 30%,” he said.

97% OF OUR CURRENT C U STO M E R S R A N K T H E I R S AT I S FAC T I O N W I T H U S A S “ E XC E L L E N T ” O R “A B O V E AV E R AG E .”

B E Y O U R B A N K E R ’ S T O P P R I O R I T Y. W I N T R U ST.CO M / P R I O R I T Y

Banking products provided by Wintrust Financial Corp. banks. Source: 2021 Coalition Greenwich Market Tracking Program

1/28/22 3:14 PM

CRAIN’S CHICAGO BUSINESS • JANUARY 31, 2022 3

JOE CAHILL

Christopher Merrill is CEO of Harrison Street Real Estate Capital.

ON BUSINESS

JOHN R. BOEHM

A

Harrison Street bets on a rental housing boom Real estate private-equity firm is ready to compete with big homebuilders in the single-family market BY ALBY GALLUN CHRISTOPHER MERRILL started his own real estate firm by going off the beaten path. Nearly 17 years and $55 billion later, he’s joining a herd of investors stampeding into a hot new market: single-family homes built specifically for renters.

A $1.5 billion joint venture backed by Merrill’s firm, Chicago-based Harrison Street Real Estate Capital, has plans for subdivisions with hundreds of rental homes in 10 metropolitan areas, including Denver, Dallas, Nashville, Tenn., and Chicago. As millennial families grow and need more space, Harrison Street is wagering that many will rent rather than buy—some because it’s more affordable and others out of choice.

“There’s just a tremendous amount of pent-up demand for

“AS APARTMENT RENTERS AGE, THERE’S GOING TO BE PLENTY OF DEMAND COMING THROUGH THE PIPELINE FOR THIS KIND OF PROPERTY.”

See HARRISON on Page 21

John Pawlowski, senior analyst, Green Street

The key to working from anywhere? Some office time.

Chicago tech firm Cameo runs a return-to-the-office experiment, discovers a big productivity boost and rethinks its remote-only stand Steven Galanis, the poster boy for working from anywhere but an office, was sitting in a glasswalled cube—and loving it.

He was in an office, surrounded by about 100 salespeople working their phones, trying to sign up talent to join Cameo, the Chicago-born app that allows users to order up custom video shout-outs from athletes and celebrities for prices ranging from $15 to several hundred dollars.

What got him into a cubicle?

An impromptu experiment into the merits of being in an office.

In early November, after Cam-

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JOHN R. BOEHM

BY JOHN PLETZ

Steven Galanis eo suffered a drop in productivity among its sales team, Galanis—who had declared Cameo wouldn’t need permanent offices after COVID lockdowns sent everyone home—rented space at 1871, the tech incubator in the

Merchandise Mart where Cameo got its start.

By the end of the first day, the 70-person sales team had made more than 3,000 outbound contacts with prospects, roughly four times what it had been doing weekly.

“I couldn’t believe it,” says the 34-year-old CEO. “We were doing a month of work in a day.

That’s the number I can’t stop thinking about.”

His conclusion: “An office is part of ‘work from anywhere.’ ” Cameo is confronting challenges facing every company as See CAMEO on Page 22

Prepare for electric shock, Illinois

dd higher electricity rates to the list of worries for Illinois residents and businesses.

Electric bills are headed up as market conditions that have kept them from causing much heartburn begin to break down.

For years, customers of Chicago utility Commonwealth Edison saw relatively little change in their overall electricity costs, even as the company raised its charges for delivering power by 35% since 2011. That’s because the wholesale price of the electricity itself— which ComEd purchases from power plants and passes along to customers at cost—declined by more than 40% between 2015 and 2020, according to the U.S. Energy Information Administration.

Lower power costs blunted the impact of ComEd’s rising delivery rates on customers’ total bills.

That’s about to change.

Wholesale power prices started rising sharply in the second half of 2021, following a surge in the cost of natural gas, the fuel for many power plants. The EIA reports that prices in the wholesale markets, where utilities like ComEd buy power, soared 97% last October.

Those higher charges are starting to show up in ComEd bills. According to the Citizens Utility Board, a local watchdog group, customers paid 10% more for electricity in October. The EIA predicts retail electricity prices across the U.S. will rise another 4% this year.

What hasn’t changed is ComEd’s appetite for higher delivery rates. As my colleague Steve Daniels reports, the utility is asking state regulators to approve a record capital-spending plan, which would drive rates even higher.

A one-two punch of higher electricity costs is the last thing Illinois consumers and business owners need now. With overall inflation at a 40-year high, they’re paying more for everything from hamburger meat to computer chips.

A company spokesman doesn’t deny ComEd’s proposed capital spending would spark additional rate hikes. He says it’s necessary “to strengthen our grid so it’s ready for more intense and frequent severe weather events, to protect customers’ health and safety and address the climate crisis, help customers meet their sustainability goals, create local clean energy jobs and attract local investment, and make sure that historically disadvantaged communities benefit from our investments.”

The spending won’t jeopardize “our region’s unique com-

petitive advantage of affordable service, clean electricity supply and world class reliability,” the spokesman says, adding that ComEd’s “average residential rates are 17% lower than the 10 top U.S. metro areas, and our average commercial rates are 18% lower than the top 20 U.S. metro areas.”

But rising rates already are eroding one of Illinois’ key economic advantages over neighboring states. As recently as 2019, electricity rates for industrial users in Illinois were lower than rates in Indiana and Wisconsin by double-digit percentages.

Now Illinois rates are on par with Indiana’s, and only 7% less than Wisconsin’s.

In another blow to business, commercial customers will bear 70% of $100 million in ComEd rate hikes that take effect this year. Usually, increases are split more evenly between residential and business customers. ComEd says commercial customers are paying a bigger share this time because the latest hikes are tied to energy-efficiency initiatives that largely benefit businesses.

That’s little comfort to businesses battling cost pressures in many areas. Electricity is a major expense for companies, especially manufacturers and other energy-intensive businesses.

Swelling electric bills will give them one more reason to consider leaving a state with relatively high taxes and labor costs.

Longer-term efforts to curb global warming are likely to push electricity costs even higher. Electricity will command a larger share of household and corporate budgets as electric vehicles supplant gasoline-powered cars, and other fossil fuel-burning machines shift to electric power. Imagine how much voltage car owners will consume recharging their autos every night, and how much companies will need to juice up fleets of service vehicles.

The International Energy Agency predicts electricity demand will double in three decades as the world works to eliminate carbon emissions by 2050. Rising demand tends to drive up prices.

As electricity rates become an economic lodestar like gasoline prices are today, local variations in the price of a kilowatt will take on more importance. States where electricity costs less will have an edge over those where watts are pricier.

As Illinois drifts toward the latter category, there’s one more reason to ask the question so many in our state ponder during these frigid winter days: Why are we here?

1/28/22 3:48 PM

4 JANUARY 31, 2022 • CRAIN’S CHICAGO BUSINESS

How did housing do last year in your area?

Here’s our exclusive look at 2021 home prices in Chicago and the suburbs

See the data online

BY DENNIS RODKIN

BIG GAINS

If 2005 feels like a very long time ago, consider this: The sales tally for 2021 was nearly 24% above the average annual total for the years 2015 through 2019, the last full year before the pandemic began to affect everything.

The median price of a home sold in the Chicago metro area last year was $299,000, up almost 12% from 2020, according to Illinois Realtors’ mid-January report. In the city, the

DENNIS RODKIN

Two years after COVID-19 first arrived in the Chicago area, the housing surge sparked by the pandemic—as well as low interest rates—has been like a furnace keeping our once-chilly real estate market hot all over.

In the nine-county metro area tracked by Illinois Realtors, 137,898 homes were sold last year.

That’s the most since 2000—as far back as the professional group’s records go—and surpasses the old record of 133,313 set during another housing boom, in 2005.

The boom is everywhere, not just in some neighborhoods or towns. median was $335,000, up 6%.

The median price is the midpoint of all homes sold during the year. The change in the median may be distorted by heavier buying at one end of the price ladder, but it provides a general measurement for comparing locations.

The boom is everywhere, not just in some neighborhoods or towns, as the online charts in Crain’s an-

The Chicago Association of Realtors, Midwest Real Estate Data and Minnesota-based real estate data management firm ShowingTime provide data on the city and Cook, DuPage, Lake and Will counties only. The city data is compiled for the 77 officially designated community areas, which don’t always conform to common neighborhood names. The West Loop, for example, shows up in data for the Near West Side, and Pilsen in the Lower West Side. The nine-county metrowide data comes from Illinois Realtors.

For the city, the sources break out data separately for detached homes (or houses) and attached homes (condominiums and townhouses). Each type of housing gets its own online chart. For suburbs, there is only one chart.

Crain’s analyzes only those locations where at least 25 homes sold in 2020 and 2021, because smaller numbers would distort the percentages too much to be useful measures. Thus, not all 77 neighborhoods appear in the lists online, and many suburbs are missing. Some Will County towns do not appear simply because they are beyond what Crain’s deems the outer edge of the suburbs.

Go to ChicagoBusiness.com/HomeSales2021 to search the interactive charts for your neighborhood or town.

nual compilation of year-end data show.

Crain’s found that in 61% of the locations we analyzed, home prices were up 10% or more at yearend, and in 60% of locations, the number of homes sold was up at least 10%. One item that’s not tabulated in our charts but speaks to the robust market: In 67 suburbs and neighborhoods, sellers on

average got 100% or more of their original asking price.

Riding along with the explosive increase in home sales is spending on everything related to changing addresses, from moving vans

to interior decorating to toilet seats, making the housing boom a considerable factor in the ongoing health of the economy while restaurants, travel and other economic sectors have suffered.

and their names do not yet appear in public records.

The 11,000-square-foot house has eight bathrooms, three laundry rooms and garage space for seven cars. It has a brick Victorian-inspired facade that reflects

the neighborhood’s historical housing. Inside are, among other things, a family room with glass walls on two sides looking into the yard, a temperature-controlled wine room and a long topfloor space, staged as an office in

the listing, with large skylights overhead and a balcony overlooking the side yard.

Behind the house is a very unusual feature: an enclosed ramp to basement-level parking, with a grass-covered slope on top.

Luxury home boom carries into 2022

BY DENNIS RODKIN A mansion with a giant yard in Graceland West is the latest big-dollar seller in a booming upper-end housing market.

The seven-bedroom house, on Greenview Avenue in the neighborhood whose name comes from being across Clark Street from the famous cemetery, sold on Jan. 21 for $6.5 million. Set on the equivalent of five city lots, the house went on the market in February 2021 priced at nearly $8 million. The sellers, Daniel and Katherine Adamany, dropped the price by $1 million in July, and the home went under contract to buyers in September.

It was the second Chicago mansion to sell for $6.5 million in 2022. The first was a historical home on Astor Street. Add three upper-end condo sales—in the West Loop at $5.6 million, the Palmolive Building at $4.9 million and a Lincoln Park condo at a little more than $4.4 million—and it’s been a hot January in the city.

There had been no suburban sales at this level, but the year is young. In 2021, 101 Chicago-area homes sold at $4 million or more, compared with an average of 51 in the previous six years. Crain’s

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will have a full list of the 50 highest-priced sales later this month.

The Adamanys, the sellers on Greenview, could not be reached for comment. Lake County and Illinois public records show that just before putting the Graceland West home on the market, they bought a 24,000-square-foot unfinished mansion on over 4 acres in Lake Forest for $3.125 million.

Crain’s could not determine what they paid to finish it or if that project is now complete.

Daniel Adamany is the founder and CEO of Chicago-based IT firm Ahead.

Both the Adamanys’ agent and the buyers’ agent said the mansion’s primary appeal was its vast outdoor space. The lot is about one-third of an acre, and the side yard alone is bigger than two standard, 25-by-125-foot city lots.

“The huge private yard was a major draw to every buyer who toured,” said Tim Salm, the Jameson Sotheby’s International Realty agent who represented the property.

The buyers “are in love with the yard,” said Marlene Granacki, the Re/Max 10 Lincoln Park agent who represented them. Granacki declined to identify the buyers,

JAMESON SOTHEBY’S INTERNATIONAL REALTY PHOTOS

A house in Graceland West that sold for $6.5 million was the fifth upper-end sale in Chicago in January

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6 JANUARY 31, 2022 • CRAIN’S CHICAGO BUSINESS

Five Below to open State Street store

Discount chain Five Below is opening a big store on State Street in the Loop, good news for a floundering retail strip that could use some.

Five Below has signed a lease for a 14,300-square-foot space at 36 S. State St. currently occupied by Blick Art Materials, which is moving to another location nearby, confirmed Joseph Dushey, vice president at New York-based Jenel Real Estate, which owns the property.

Following recent leases at the Block 37 shopping mall and a big one just up the block with British footwear retailer JD Sports, the Five Below deal offers more hope to State Street landlords crushed by the coronavirus pandemic. The

retail vacancy rate for the central Loop, which includes State Street, jumped to 26.1% in 2021, up from 14.7% in 2019, according to Stone Real Estate, a Chicago retail brokerage.

Many Loop stores and restaurants closed—some for good—as shoppers, tourists and office workers stayed home, with few new retailers or dining concepts expanding to take their place. But discounters like Five Below—named so because most of its products sell for less than $5—have thrived throughout the pandemic, adding stores as other retailers shrink.

Five Below opened 171 stores in 2021 and aims to reach 2,500 stores over time, up from nearly 1,173 at the end of third-quarter 2021. The Philadelphia-based company runs

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Five Below’s lease at 36 S. State begins in August, according to a Bloomberg report on the property’s loan.

54 stores in Illinois, including six in Chicago, but none downtown, according to its website.

Five Below’s lease at 36 S. State begins in August, according to a Bloomberg report on the property’s loan. The retailer will occupy the bulk of the 18,800 square feet of retail space owned by Jenel at the base of a residential building, joining two neighbors, Verizon and T-Mobile.

“I think their product mix and everything is great for State Street,” Dushey said. “They’re investing a lot of money in the buildout. It’s going to be a flagship for them.”

With Five Below moving in, the

property will remain fully occupied, averting a potential loan problem for Jenel, which paid $26 million in 2018 for the two-story space. Jenel is carrying a $16.8 million mortgage on the property, according to public records.

Dushey declined to discuss specific terms of the Five Below lease, or disclose whether the retailer is paying less in rent than Blick did.

But he said he’s happy with the deal.

“If you calculate all the terms, it’s slightly better than what I had,” he said.

A Five Below representative was not immediately available for comment.

While it’s too early to say whether State Street is turning around, leasing activity there over the past couple months is a positive sign for the Loop retail market. JD Sports, which acquired the Finish Line brand in 2018, recently signed a lease for a two-story space at 10 S. State St. formerly occupied by Forever 21. Three retailers, including Danish menswear brand Lindbergh, also signed leases for about 13,000 square feet at Block 37, at the corner of State and Randolph streets.

There’s “a lot of good action for the street,” Dushey said. “There are a lot of good things happening.”

Dresden nuclear plant now could run 30 more years Exelon confirms that it will file for a 20-year license extension for the site

BY STEVE DANIELS The Dresden power plant in Grundy County is the oldest nuclear station still operating in Illinois.

The licenses for Dresden’s two nukes will expire in 2029 and 2031, respectively, which would mean 60 years of service. Now Exelon plans to file for a license renewal that would add 20 years to Dresden’s life.

The change in plans comes after enactment last year of the Climate & Equitable Jobs Act, which provides ratepayer-funded subsidies for Dresden and two other nukes.

It also coincides with the imminent spinoff of Exelon’s powergeneration unit into a company to be called Constellation.

Constellation CEO Joe Dominguez unveiled the soon-to-be standalone company’s plans, including the license extension filing for Dresden and other nukes, at a Jan. 11 investor presentation.

The company says the license filing doesn’t guarantee Dresden will continue to help keep lights on in the Chicago area for the next three decades.

“We believe all of our carbon-free assets will be needed for years to come, and that includes Dresden,”

The Dresden plant spokesman Paul Adams said in an email. “Based on that expectation, we have laid out plans to seek license renewals for Dresden and other plants in our fleet, but initiating a license application should not be confused with a commitment to operate. As we have said previously, the continued operation of any of our nuclear plants depends on whether it remains economically viable to do so under existing market and policy conditions.”

Translation: Dresden will keep operating only if wholesale power prices are high enough to make it economic or if state or federal governments continue to subsidize it.

But the prospect of another three decades of operation is good news for the local economy in Grundy County, about 60 miles southwest of Chicago. Dresden employs nearly 800, most of them unionized, and generates nearly $25 million annually in state and local taxes.

EXELON

BY ALBY GALLUN

JENEL REAL ESTATE

Combined with recent leases in the Loop shopping corridor, the discounter’s deal offers hope to other landlords on the retail strip crushed by the pandemic

Exelon threatened to shut down the two reactors last fall unless the state moved to prop them up financially. The company argued that early closure of nuclear plants, which generate electricity without emitting carbon into the atmosphere, would make it impossible to meet Gov. J.B. Pritzker’s goals to remove fossil fuels from the state’s power generation mix.

Included in the sweeping energy law that ensued was $700 million in subsidies over five years for Exelon’s Dresden, Byron and Braidwood nuclear stations. Commonwealth Edison ratepayers will pay extra in their electric bills over that time to finance the bailout.

A more generous federal production tax credit for nuclear power across the country was included in President Joe Biden’s “Build Back Better” tax bill, but that measure is sidelined by disagreements among Democrats on other issues.

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CRAIN’S CHICAGO BUSINESS • JANUARY 31, 2022 7

Northern Trust exits the pro golf sponsorship biz The 2021 tournament in New York was the Chicagobased bank’s last after 14 years sponsoring PGA events, including a memorably tumultuous one Northern Trust is out of the professional golf sponsorship business.

The Chicago-based bank catering to wealthy families and institutional investors has sponsored Professional Golfers’ Association tournaments for 14 years, but the 2021 Northern Trust tourney in New York was the company’s last.

CEO Michael O’Grady told investors this month that the PGA sponsorships accomplished what the bank set out to do, which was to raise its profile and boost its brand identity.

Now the bank will bank some of the savings while redeploying some of that money into unspecified other branding initiatives.

For Northern, the decision, which O’Grady first disclosed during the August event in New York, ends an era that saw its profile at times raised in ways it didn’t foresee. The Northern Trust Open, then in Los Angeles, became a political lightning

rod during the public backlash against bank bailouts during the Great Recession, when the bank wined and dined clients in the months after it participated in the Troubled Asset Relief Program, along with virtually all banks its size.

Then-CEO Rick Waddell protested that the bank didn’t want or need the bailout funds but was effectively compelled to participate by federal regulators, who didn’t want banks to be differentiated based on whether they “needed” the cash.

‘BRAND BUILDING’

The controversy didn’t deter Northern from continuing to sponsor the Northern Trust Open in L.A. and later to sponsor one of the playoff tourneys at the end of the PGA season in New York for five years.

“We have been delighted with ‘The Northern Trust’—as well as our previous nine-year title sponsorship of the Los Angeles-based Northern Trust Open tournament—and with our partnership with the PGA Tour,”

PGA TOUR

BY STEVE DANIELS

The Northern Trust PGA golf tournament in New York. spokesman Doug Holt said in an email. “We know from viewership and brand data that the tournaments raised Northern Trust brand awareness significantly globally.”

O’Grady on Jan. 20 told analysts, “We still need to continue

to invest in the brand. So some of the … funds that are deployed for that brand building through the golf tournament are being deployed in other (marketing) areas. At this point, it’s not going to be at the same levels as what we were spending on the

golf tournament.”

Northern Trust doesn’t disclose what it spent on the golf sponsorship and associated events. But the expense line in which those costs are included increased by $9 million in the third quarter.

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8 JANUARY 31, 2022 • CRAIN’S CHICAGO BUSINESS

Fulton Market project to feature 40-story tower proposed for its site in 2016 and won city approval for in 2017.

A pair of Chicago developers The company at the time was have filed plans for a big project preparing to leave the neighborin the Fulton Market District that hood and cash out as investors would include apartments, of- snapped up development sites in fice space, a hotel and a 40-story the gritty-turned-trendy corridor. tower—among the tallest in the Bridgford never moved forward with the project, but found a buyneighborhood.

In one of the most ambitious er for its property in 2020 when it development proposals to date in reached an agreement with CRG the former meatpacking neigh- to sell the site along Lake Street beborhood, a venture of Clayco di- tween Green and Peoria streets for vision CRG and Shapack Partners around $60 million, according to aims to transform the nearly 1½- sources familiar with the deal.

Now CRG has laid out a new acre site at 170 N. Green St. with a tower including 275 apartments redevelopment vision after teamas well as office space, a hotel and ing up last year with Shapack, other commercial uses, according the developer known for helping to a zoning application that was jump-start Fulton Market’s transto be submitted to the City Coun- formation into the city’s hottest cil last week. The project would corporate destination. Among othreplace the 156,000-square-foot er major projects in the neighborBridgford Foods processing plant hood, Shapack co-developed the 750,000-square-foot building across THE PLAN IS A BIG CHANGE FROM THE office the street from the Bridgford site at 167 N. 17-STORY, 314-UNIT PROJECT THAT Green St. BRIDGFORD PROPOSED IN 2016.

CRG and Shapack have been promoting on the site today, which Bridgford the Bridgford Foods redevelopran from 1975 until the Anaheim, ment in recent weeks to local comCalif.-based company relocated its mercial real estate brokers, showChicago facility to a new building casing plans that include 150 hotel in the Back of the Yards neighbor- rooms and around 350,000 square feet of office space in addition to hood in 2020.

The plan is a significant change the residential units. It’s unclear from the 17-story, 314-unit apart- whether the scope of those figures ment project that Bridgford itself has changed, and spokesmen for

BY DANNY ECKER

CRG and Shapack couldn’t be reached.

Renderings of the proposed building show the tower rising at the corner of Lake and Peoria streets, while the rest of the building would be approximately 14 stories tall at the highest point. The design includes an open-air courtyard in the center of the property as well as an outdoor thoroughfare running east-west through the ground floor, similar to “The Mews” that Shapack developed at 167 N. Green St. The proposal includes 235 accessory parking spaces and 97 bicycle parking spaces, according to the zoning application.

ZONING REQUEST

The developers need the City Council to sign off on a zoning change to allow the project. At least 14 of the apartments in the building would be affordable to comply with the city’s affordable housing requirement ordinance, while the rest of the developers’ obligation would be met with off-site affordable housing units or paying a fee in lieu of more units, according to the zoning application.

The site is surrounded by new development, including Shapack’s Green Street office building to the east. The 182-room Hoxton Hotel—which Shapack also developed—debuted in 2019 across the street from the Bridgford property

LAMAR JOHNSON COLLABORATIVE

The plan to redevelop the longtime Bridgford Foods processing plant is one of the most ambitious and tallest proposals for the trendy former meatpacking district

A rendering of the proposed development at 170 N. Green St. to the north, while the 115-room Nobu Hotel opened immediately south of the plant in 2020. On the block west of Bridgford, developer Related Midwest broke ground in November on a 43-story apartment building, which is slated to be the tallest building in Fulton Market when it is completed.

Developers have aggressively proposed taller buildings in Fulton Market over the past couple years, especially for residential properties. Further west in the trendy corridor, developer Fulton Street Cos. is planning to break ground this year on a 34-story apartment building at 1201 W. Fulton St. and earlier this month revealed plans for a mixed-use project on the 1200 block of Fulton Street with a tower rising as high as 50 stories.

CRG has hired a number of prominent local real estate veterans in Chicago in recent years, including former Chicago planning chief David Reifman as its vice president for strategic development initiatives. Reifman was the planning commissioner who signed off on the latest amendment to Bridgford’s planned development in February 2018, according to public records.

Clayco has also stepped up its development work in recent years with apartment buildings in Bucktown and Uptown and the Zurich North America headquarters in Schaumburg. The company was also named to the team of firms building a new $8.5 billion international terminal at O’Hare International Airport.

For one retail landlord, Amazon is a boon, not a bane The owner of a Schaumburg shopping center sold the property for a gain less than a year after an Amazon Fresh grocery store moved in

BY ALBY GALLUN Shopping centers can still be a winning investment, especially if you can score a lease with the newest supermarket chain in town: Amazon Fresh.

A local developer has cashed out of a Schaumburg shopping center for a gain less than a year after an Amazon Fresh opened there, capping a successful turnaround of the property in less than two years.

A venture led by Oak Brookbased Kensington Development Partners sold Schaumburg Corners, a 160,300-square-foot property at 16 E. Golf Road, for $33 million in December, up from the $26.3 million it paid for the shopping center in February 2020, according to Cook County property records.

After losing its biggest tenant, Babies R Us, the property offered an opportunity to Kensington and its British partner, IM Properties. If they could find a new retailer to take over the empty 44,200-square-foot store, they

P008_CCB_20220131.indd 8

The Amazon Fresh in Schaumburg could increase the shopping center’s income and sell it for a profit. The venture quickly signed a lease with Amazon Fresh and put Schaumburg Corners up for sale in early 2021.

A venture led by New Yorkbased KPR Centers acquired the shopping center from the Kensington entity, property records show. It’s the first acquisition in the Midwest for KPR, which mostly owns properties on the East Coast.

Executives at KPR and Kensington did not return phone calls.

Amazon Fresh, a new chain launched by the e-commerce giant, has been expanding rapidly in the Chicago area. It currently operates six stores here, in Westmont, Naperville, Oak Lawn, Schaumburg, Bloomingdale and in a shopping center in Morton Grove owned by Kensington and IM. More stores are coming to the former Purple Hotel site in Lincolnwood and to the Portage

Park and Lakeview neighborhoods in Chicago.

The coronavirus pandemic crushed shopping center landlords in its early days, as stores closed, many tenants stopped paying rent and more consumers shopped online. Though e-commerce remains a major threat to brick-and-mortar retailing, shopping centers with grocery stores, other necessity-based re-

tailers and restaurants—places many consumers still visit in person—have held up so far.

Schaumburg Corners is 99% leased, according to real estate information provider CoStar Group. Other tenants include Bob’s Discount Furniture, an H Mart grocery store, Office Depot, Petco and O’Reilly Auto Parts.

CBRE brokered the Schaumburg Corners sale.

1/28/22 3:09 PM

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10 JANUARY 31, 2022 • CRAIN’S CHICAGO BUSINESS

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EDITORIAL

t’s not every day Crain’s has an opportunity to report some positive news about public employee pensions in Illinois, but that occasion has popped up a couple of times recently, and it’s worth stepping back and appreciating it while we can.

The good news comes in the form of two recent reports by Crain’s political columnist Greg Hinz. In December, he took note of a new report from the Illinois Commission on Government Forecasting & Accountability, which serves as the Illinois General Assembly’s fiscal research arm. COGFA, as that agency is known around the Statehouse, said unfunded liability in the five major state-pension systems shrank by a hefty $14.2 billion in the fiscal year ended June 30, dropping from $144.2 billion in the previous year to $130 billion as of December. As Hinz pointed out in the Dec. 9 edition of Juice, Crain’s daily newsletter on power and politics, the improved figures were enough to boost the state’s funded ratio of pension assets to liabilities to 46.5%. That’s still dreadfully short of the 90% goal, but it’s also the highest level we’ve seen since 2008.

The other recent bit of positive pension news from Hinz’s desk came out in the Jan. 27 edition of Juice: Lawmakers appear poised to renew one of the few initiatives that have taken a decent bite out of that unfunded liability.

The measure under consideration is a pilot program in which state retirees can cash out early, taking a lump sum up front in lieu of either their entire pension or, more typically, annual guaranteed compounded cost-of-

WWW.ILLINOISSENATEDEMOCRATS.COM

I

On pensions, it’s 2 steps forward, 1 step back

Sen. Rob Martwick

living increases of 3%. The early payout option has proved popular since the pilot was launched in 2019: Some retirees are happy to get their money early, either to invest on their own or use for other purposes. But it also saves the state money since participants receive only a fraction of what they’d get if they waited, generally 70 cents on the dollar.

The current program is funded by a $1 billion state bond issue; the renewal, if passed, would extend it by two years and authorize another $1 billion in bond funding.

Meanwhile, it’s estimated that the program has reduced unfunded liability by around $800 million.

Of course, covering the pension situation in Illinois is a bit like climbing a sand dune: For every two steps you take up the slope, you fall back one. Sure enough, even as Hinz was reporting on the glimmers of progress in that state pilot program, his colleague A.D. Quig was reporting on the fiscal effects of a Chicago firefighters pension bump that Gov. J.B. Pritzker signed last year over Mayor Lori Lightfoot’s objections.

That law doubled cost-of-living adjustments for roughly 2,200 retired firefighters and eliminated a 30% cap on cumulative COLA adjustments. At the time the bill passed, the fiscal watchdog Civic Federation

warned it would cost taxpayers more than $850 million over 35 years. Now we have a full tally of the price. It’s a bit lower than the most dire estimates, but it’s also not small.

According to an actuary for the firefighters fund, the city will have to chip in an additional $702 million through 2055 under the new law. That works out to be an average of $20 million a year. Sure, that’s a small fraction of the city’s overall budget, but it’s still money Lightfoot and her successors will have to scare up no matter the fiscal conditions. The bill also boosts the overall unfunded liability for 2022 by $215 million. That will bring the overall liability just above $7 billion.

“What did city residents get out of this? A gift outside of collective bargaining . . . that the Legislature decided to grant for firefighters because they could,” Civic Federation President Laurence Msall said in an interview with Crain’s. “This validates people who said it was a huge mistake. There’s no savings, no answer where we’re going to come up with $700 million.”

And now, state Sen. Rob Martwick, who sponsored the original legislation, says he’s going to do the same thing for Chicago police, arguing that it’s long been city practice to pay this sweetened benefit to retirees while keeping the cost off the books. Better to have the cost accounted for, he says. Perhaps. Or perhaps this is a benefit that should, as Msall suggests, be negotiated at the bargaining table by the taxpayers’ representatives.

So there you have it: Some pension progress in a state that’s not accustomed to such things, and a pension setback in a city that perpetually finds new ways to trip itself up.

YOUR VIEW

O

Ed Bachrach, left, and Austin Berg are co-authors of “The New Chicago Way: Lessons From Other Big Cities” (Southern Illinois University Press, 2019). the entity taxes dining, hotels, taxis, rental cars and ride-shares to the tune of about $150 million a year. But then comes debt service of more than $250 million, so overall it runs about $200 million short every year. In a world of Zoom and social distancing, the level of convention activity is likely permanently impaired, and utilization will take a sharp step down. All this results in debt that the special taxes can’t repay. Five years ago, the authority owed $4 billion in long-term debt.

Five years later, it has risen to $4.8 billion.

The casino opportunity comes in the wake

of these poor choices. Those choices are made by a joint venture between the city and state, as the mayor and the governor appoint an equal number of MPEA board members.

And in the eyes of the ratings agencies, the authority’s debt is ultimately a state liability.

Here are the four things responsible leaders owe the people of Illinois and Chicago before any deal advances.

First, the MPEA board needs to charge a casino market rent and use the proceeds to pay down debt. To quote a famous Chicagoan, the property is golden. What enterprise wouldn’t want to use such a setting, with all the parking and access? It is irreplicable. So let’s charge for it.

Second, the state of Illinois should commission an independent study of the future of the convention center and its realistic future prospects. It should appoint an independent ad hoc board and not leave it up to the authority to trot out another self-serving economic study. The independent commission should hire independent consultants to do a realistic economic assessment, including other potential uses of the tax revenue currently directed to the convention center.

This study group should also opine on the fate of the authority and its strategic di-

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Chicago Business, 150 N. Michigan Ave., Chicago, IL 60601, or email us at letters@chicagobusiness.com. Please include your full name, the city from which you’re writing and a phone number for fact-checking purposes.

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Questions to ask about a McCormick Place casino

f the five proposals for a Chicago casino, the one that takes over the Lakeside Pavilion of McCormick Place looks promising. At first blush, this site looks like a win-win. It is a beautiful setting. And the building sits empty, crying out for repurposing.

But the city’s history of bad deals and the terrible financial management of the Metropolitan Pier & Exposition Authority should give taxpayers heartburn. There are four specific measures Chicagoans deserve to ensure they aren’t hoodwinked by another poor deal.

But first, a quick refresher on the history of this beleaguered agency.

The MPEA has a habit of making bad bets.

Years ago it spent $43 million to build the “Mayor’s Road” to take conventioneers from the hotels in Illinois Center to McCormick Place. Then it spent hundreds of millions building two hotels and the Wintrust Arena next to McCormick Place, making the road obsolete. When the convention center shut down during the pandemic, the 2,000 rooms in the hotels sat empty, too.

Before the pandemic, the MPEA consistently ran operating deficits of around $100 million each year. To make up the difference,

can eve On wh nal ing rep (wh the to ma hea jou

rection. The MPEA board has proven for decades that they intend to expand regardless of the economics. Who will rein them in?

And finally, the governor must take the lead in deciding the center’s fate. Any mayor would love to give the property away and then skim off revenue and taxes to fill a budget hole. We’ve seen this before. This is a state problem—indeed, ratings agencies believe the state is ultimately on the hook for MPEA’s liabilities—and it should be dealt with independently by the General Assembly and the governor.

Absent these four imperatives, taxpayers should fear the deal that will be cooked up.

The worst deal would be for the MPEA to build out a casino and hotel, pile on more debt, and then sign a sweetheart lease. The second-worst deal would be for the developer to pay for the casino and hotel, and for the MPEA to lease the building for $1 like the Park District did for the Obama Center and tried to do for the Lucas Museum.

While the public views the gleaming renderings of a beautiful casino complex, there might be some ugly dealings in a back room somewhere.

If history teaches us anything, it is to beware.

Sound off: Send a column for the Opinion page to editor@ chicagobusiness.com. Please include a phone number for verification purposes, and limit submissions to 425 words or fewer.

1/28/22 3:07 PM

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CRAIN’S CHICAGO BUSINESS • JANUARY 31, 2022 11

LETTERS TO THE EDITOR

Any wonder voter turnout is so low?

I

can commiserate that a lack of public access by candidates is not a positive trend in our government elections (“Holding candidates accountable is tougher than ever in the digital age,” Madeleine Doubek On Government, Jan. 21). At the same time, what passes these days for “real, live journalists” appears to the layman to be nothing more than preening, self-absorbed reporters who come to a press conference (when they can find one) with an agenda of their own and looking for the opportunity to launch that “gotcha” question that will make the interviewee look like a deer in the headlights. Then the social media side of journalism takes over.

Is it any wonder voting turnout is so low when we have to endure months of this showboating, to the point that no candidate is untouched by the mudslinging? I’m sure this has gone on for centuries as elections used whatever format was at their disposal to paint the other guy as vermin. But with literally thousands of outlets for this stuff today, the common man is driven to distraction by all the noise in the system.

JOHN F. PHELAN Winnetka

Duncan has the right idea on crime My thoughts after reading Arne Duncan’s

ideas on how to solve Chicago’s epidemic of violence: What a breath of fresh air (“Duncan rips Lightfoot on crime,” Greg Hinz On Politics, Jan. 26). He has correctly stated that we already have had more shootings in January 2022 than we had in a horrendous January 2021. The fact that he mentions the shootings instead of the killings shows an insight into just how dangerous a city Chicago has become.

Duncan also uses the words “demoralized” and “overworked” to describe Chicago’s cops. There is a reason why so many are jumping the department by the hundreds, either to retirement or other departments.

He states that Chicago’s cops are not being

used properly. When that occurs, leadership is called into question. When a mayor and the rank-and-file cops, including Fraternal Order of Police leadership, are in conflict, only bad things can happen to a city that desperately needs to have leadership work together.

Chicago cops need all the help and support they can muster, and it must come from leadership understanding that when a department has lost confidence in their leaders, a change is desperately warranted.

BOB ANGONE Retired Chicago Police lieutenant Austin, Texas

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12 JANUARY 31, 2022 • CRAIN’S CHICAGO BUSINESS

PEOPLE ON THE MOVE

Advertising Section To place your listing, visit www.chicagobusiness.com/peoplemoves or, for more information, contact Debora Stein at 917.226.5470 / dstein@crain.com

ACCOUNTING

FINANCIAL SERVICES

LAW

LAW

REAL ESTATE

MGO, Chicago

LGIM America, Chicago

Adelman & Gettleman, Ltd., Chicago

Nixon Peabody LLP, Chicago

CRG, Chicago

MGO is pleased to announce that Barbara Webb has been admitted as a partner. She is the cofounder of the MGO-Chicago office and continues to lead the firm’s Midwest expansion. She brings more than 13 years of experience to clients in a variety of industries, including health technology, life sciences, medical manufacturing, private equity, cannabis, SaaS, and construction. Barbara specializes in tax planning, services, and advisory for organizations in the cannabis industry.

LGIM America (LGIMA) is pleased to announce that Philip Kim, CFA, has joined the firm as the Head of US Product. In this role, he is responsible for defining the product strategy of LGIM America and designing and launching innovative, competitively differentiated products to the firm’s client base. He also ensures the firm’s new and existing range of product strategies continue to meet the needs of its clients and prospects and LGIMA’s commercial goals on an ongoing basis.

Adelman & Gettleman, Ltd. is pleased to announce the elevation of Alex Brougham to partner.

He joined the firm as an associate in 2012 and practices on both the litigation and transactional sides of business bankruptcy and reorganization. Prior to joining the firm, Alex served as a law clerk to bankruptcy judges in Massachusetts and Illinois. A&G is among the oldest boutique commercial insolvency firms in Chicago, handling all aspects of debtor-creditor relations for almost 40 years.

Nixon Peabody LLP is pleased to announce that Conrad Adkins has joined the firm as counsel in our Corporate practice.

Conrad comes to the firm from a multi-national building products manufacturer where he served as in-house counsel for the past 7 years. He has in-depth experience advising on US, Australian, and Irish corporate and securities laws matters; all aspects of the M&A deal cycle; domestic and cross-border commercial agreements; and complex restructurings.

CRG is pleased to welcome Tim O’Connell as vice president of marketing. With 15 years of commercial real estate experience, Tim will oversee the management of CRG’s corporate communications, branding, public relations and digital marketing initiatives as the firm comes off a record year in commercial development. Prior to joining CRG, Tim served as the vice president of corporate communications and sustainability for RPAI, a publicly traded open-air shopping REIT.

REAL ESTATE

CONSULTING WTW, Chicago Ingrid Woolfolk has joined WTW also known as Willis Towers Watson; as the Senior Director, Employee Experience North America. Ingrid has spent 20+ years in executive level finance and strategic advisory roles specifically in customer experience, profit & loss management, and talent development. As an EX Leader, she will be responsible for designing solutions across the employee lifecycle with an emphasis in Org Transformation, DE&I, and ESG with linkage to business imperatives.

DESIGN / BUILD

MANAGEMENT CONSULTING HEALTH CARE

LAW

Help at Home, Chicago

Benesch Law, Chicago

Darren Lehrich joins Help at Home as the company’s senior vice president of investor relations and finance.

Since 2015, he has served in corporate leadership roles including investor relations, finance and strategy in publicly traded and private equity-backed health care service companies, including Magellan Health and American Renal Associates. Prior to Lehrich’s corporate experience, he spent more than 15 years on Wall Street as an equity research analyst covering the health care sector.

Lianne Foley has joined Benesch as an associate in the firm’s Benesch Healthcare+ Practice Group. Lianne assists hospitals, physician groups, and other health care organizations and professionals in a variety of health care compliance, regulatory, and transactional matters.

Her experience includes advising clients of various specialties with licensure and compliance issues, state corporate practice of medicine doctrines, and working with ambulatory surgery centers.

Dan Dooley, principal/ CEO of middle-market consulting and turnaround firm MorrisAnderson, was honored by the Turnaround Management Association’s Chicago chapter with the Turnaround Legend award for “doing what turnaround legends do best - helping business owners and lenders successfully work through seriously distressed situations.” Dan and the MA team of Brian Schroeder and Luke Stephenson also received the Small Business Turnaround of the Year award for work with the Hobie Cat Company.

LAW

PHILANTHROPY

Goldberg Kohn Ltd., Chicago

Jewish National Fund-USA, Chicago

Goldberg Kohn Ltd. is pleased to announce that it has named David Chizewer as chair of its litigation practice group. A veteran litigator, Chizewer has served as lead trial counsel in some of the country’s most significant cases. He takes the helm of one of the nation’s most impactful litigation practices, which regularly advises and defends Fortune 100 corporations, midmarket companies, public entities and closely held businesses across a wide range of issues and industries.

Jewish National FundUSA, the premier philanthropic organization for Israel, welcomes Robyn Schneider as its new Major Gifts Director in Illinois. A lifelong Zionist with almost two decades of development experience, Robyn looks forward to deepening Illinois’ philanthropic support for the land and people of Israel. Robyn holds a BA from Brandeis University, a Master’s degree from Hebrew Union College, and an MBA from USC. Robyn can be contacted at rschneider@jnf.org.

DESIGN / CONSTRUCTION PREMIER Design + Build Group, Itasca PREMIER Design + Build Group is pleased to announce the promotion of Joseph Ahrens to the role of Senior Vice President, Market Leader.

In his new role, Ahrens will oversee all aspects of the firm’s Midwest Division. Most recently, he served as Vice President of Midwest Operations. Ahrens joined PREMIER’s team in 2008 as Project Manager.

He has been a key contributor to the firm’s growth. PREMIER is now a national firm with regional offices in Illinois, California, and New Jersey.

P012_CCB_20220131_v1.indd 1

Stotan Industrial, Chicago Chicago real estate veteran Dan Fogarty has joined Stotan Industrial as Managing Partner.

Mr. Fogarty will oversee business development and operations for the private investment firm that specializes in the acquisition and development of industrial assets in high growth markets critical to e-commerce distribution and the U.S. supply chain.

TECH / TELECOM UScellular, Chicago

Clayco, Chicago Clayco welcomes Maureen Ramirez as Senior Project Manager. With over 15 years of construction management experience, Maureen’s portfolio includes high-profile commercial and multifamily high-rises, as well as large-scale projects for Northwestern University including the Ryan Fieldhouse. Maureen holds an M.Arch and M.S. in civil engineering from the University of Illinois at UrbanaChampaign and B.A. in interior design from Michigan State University.

MorrisAnderson, Chicago

HEALTH CARE Help at Home, Chicago Rich Tinsley joins Help at Home as the company’s new chief development officer.

Tinsley brings more than twenty years of professional experience from diverse industries such as health care, law and finance. Previously, Tinsley served as president and CEO for Stoneridge Partners, a nationwide leading health care M&A advisory firm specializing in the brokerage of home care, hospice and behavioral health agencies. His track record includes developing and integrating new businesses.

INFORMATION / DATA TECHNOLOGY Entara, Chicago Entara is pleased to announce the promotion of President, Pamela Diaz, to CEO and President. Diaz is an accomplished leader with over 25 years of experience connecting organizations with the solutions and assets they need to thrive in the financial and tech industries. She is on the Board of Directors and Chair of the Governance Committee for Bounce Children’s Foundation and is on the Events Committee of the Female Integrator Mastermind, for which she presents on equality and female empowerment.

Eric Jagher has been named senior vice president and chief marketing officer for UScellular. In this newly created role, he is responsible for executing customer acquisition, retention and lifecycle programs that deliver customer and revenue growth and build brand loyalty. Jagher has extensive telecommunications and marketing experience and a vast background in consulting. He joined UScellular in 2006, and he most recently served as senior vice president of consumer sales and operations.

PROFESSIONAL SERVICES

WEALTH MANAGEMENT

LAW

Cotter Consulting, Inc., Chicago

Strategic Wealth Partners, Deerfield

Levenfeld Pearlstein, LLC, Chicago

Cotter Consulting announces the promotion of Patrick Cotter to Chief Operating Officer. A Project Management and Planning & Scheduling Professional, Pat has led the growth of Cotter’s Energy group and Project Controls practice since 2015. In his COO role, Pat will be responsible for shaping and implementing Cotter’s business strategy and project delivery. Founded in 1990, Cotter Consulting is a Chicago-based, woman-owned project and construction management firm.

Strategic Wealth Partners (SWP), an independent wealth management firm based in both the Chicago and Milwaukee areas, is pleased to announce that Jessica Pickens, Chief Operating Officer, has been promoted to Principal.

SWP has been partnering with clients since 2008. The firm consists of a team of professionals that provide personalized financial planning and investment advisory services. SWP is proud to manage complexity and deliver simplicity for clients.

LP is proud to announce that Steven L. Kriz has been promoted to partner. Steve, a member of the firm’s Trusts & Estates Group, counsels high-net-worth individuals and families on structuring and implementing their unique estate planning goals. He concentrates on estate and gift taxation, wealth preservation, succession for closely held businesses, and charitable foundations. He has also played a key role in the firm’s DEI initiatives.

1/25/22 9:00 AM

CRAIN’S CHICAGO BUSINESS • JANUARY 31, 2022 13

ORIGINS OF ESG: The movement got its start during the Vietnam War era. PAGE 15 POWER OF THE PURSE: Chicago investors seek a positive impact beyond boosting personal wealth. PAGE 17

ESG INVESTING

STEWARDING CAPITAL: A philanthropist-investor says shareholders can be drivers of change. PAGE 18

RETOOLING CAPITALISM

In pushing to reduce carbon emissions and boost diversity and inclusion, can ESG investors compel corporations to be more socially conscious—and still profitable?

BY JUDITH CROWN

L

DAVID PLUNKERT

FIND THE COMPLETE SERIES ONLINE

ChicagoBusiness.com/CrainsForum

oyola University Chicago in fall 2021 joined a growing cadre of investors kicking oil and gas companies out of their investment portfolios.

Trustees of the Jesuit university announced in October that its $929 million endowment would favor funds or companies working to reduce carbon emissions and address climate change. It’s a move spurred by student advocacy as well as a consideration of Jesuit principles, says Chief Investment Officer Katharine Wyatt: “Sustainability is a reflection of our mission and identity.”

Loyola is among universities, foundations, asset owners and managers more fully embracing environmental, social and governance principles in their investing. The approach isn’t new, but it’s picked up steam in the past 18 months with the heightened focus on climate change underscored by the November United Nations climate summit in Glasgow, Scotland, and the push for diversity and inclusion following George Floyd’s murder in mid-2020.

Capital flows into funds that integrate ESG factors in the investment process more than doubled to $51.2 billion in 2020 and continued to rise last year, according to Morningstar. The Labor Department in October issued a proposed rule—relaxing Trump-era restrictive guidelines—that will makes it easier for corporate retirement plans to offer ESG options.

In September, the MacArthur Foundation, the area’s largest, announced plans to divest fossil fuel stocks and diversify its asset managers. The $8.8 billion endowment already has restructured its U.S. oil and gas investments and is in the process of shedding international fossil fuel holdings, says President John Palfrey. The foundation also set a goal of having 20% of assets with U.S.-based managers invested with firms led by managers of color and/or women by 2024. “This is a journey that will take time,” Palfrey says.

Northern Trust, an early adopter, has seen assets tied to sustainability double in the past four years to about 13% of its $1.2 trillion assets under management. ESG-managed See CAPITALISM on Page 14

SPONSORS

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14 JANUARY 31, 2022 • CRAIN’S CHICAGO BUSINESS

CAPITALISM

Continued from Page 14

launch of the United Nations’ Principles for Responsible Investment, in which signatories commit to responsible investment.

Because the definition of responsible investing is so broad, critics say some money managers can bask in the glow of being a signatory without changing their practices very much. Nevertheless, more than 2,900 asset managers and institutional investors have signed on. Many of the founding signatories were faith-based investors, including Wespath Investment Management in Glenview, which manages money for the United Methodist Church.

Wespath shuns companies that generate more than half their revenue from thermal coal, says Jake Barnett, director of sustainable investment stewardship. But it can be difficult to shed oil and gas holdings that are embedded in index funds. Rather than exclude these emitters, Wespath participates in Climate Action 100+, a coalition of more than 600 institutional investors that press the largest contributors of greenhouse gases to move to net-zero emissions by 2050 or sooner.

“You can’t reduce supply without a simultaneous cut in demand and avoid disruptive impact to the economy,” Barnett says. A rapid market shift away from fossil fuels would leave traditional energy companies with “stranded” or useless assets. He and other activist investors aim to prod these companies to transition more quickly to a clean energy business plan. Through Climate Action 100+, Barnett is engaging with Chevron, Occidental, Cummins and Peoples Gas parent WEC Energy Group.

Investors have leverage in their proxy vote. Notably, the small activist investor group Engine No. 1 last year succeeded in voting three PRODDING THE BAD ACTORS ESG dates to the Vietnam War directors to the board of Exxon era, when it was called “socially Mobil, which has been under fire responsible investing.” Share- for not moving fast enough to reholders voted against the pro- duce its carbon footprint. “Engine No. 1 was supported by institutional invesFUNDS AREN’T “CLAIMING THEY ARE tors who had talked to GOING TO SAVE THE WORLD. THEY ARE, Exxon but were unsuccessful in getting them to move,” Barnett says.

AFTER ALL, INVESTMENTS.” “Those investors gave Jon Hale, Morningstar credibility to Engine No. 1.”

Northern Trust Asset Manageduction of napalm and Agent Orange and went on to advocate ment, also a member of Climate for divestment from South Africa Action 100+, similarly engages because of its apartheid system of with climate-challenged companies that are represented in its racial segregation.

The devastating 1989 Exxon index funds. Outside of these efValdez oil spill in Alaska led to the forts it classifies as “stewardship,” founding of the Coalition of En- money managers work with ESGvironmentally Responsible Econ- focused clients to tailor portfolios omies, which includes investors, to their priorities. “Some look for business leaders and public-in- a fossil fuel-free strategy,” Hawterest groups advocating for sus- kins says. “Others tilt their porttainable practices and the transi- folios toward companies that we tion to a low-carbon economy. In expect will benefit from the green the 1990s, a greater understand- transition.”

These days, potential ining of climate change led to early stitutional clients send deinitiatives by the United Nations.

A key development was the tailed questionnaires probing assets are growing at a 30% annual rate, says Sheri Hawkins, executive vice president and global head of product management at Northern Trust Asset Management. “It is front and center in the minds of our investors,” Hawkins says.

ESG investing often is misunderstood because it’s so broadly defined. The approach can involve screening out oil and gas companies and other greenhouse gas emitters and embracing clean energy alternatives. Many asset owners invest in designated ESG funds, but those, too, have a wide berth to maneuver. Some ESG investors keep fossil fuel holdings— largely through index funds—and engage with management to press them to reduce their carbon footprint.

One worry is “greenwashing,” the concern that fund managers make misleading or unsubstantiated claims about the sustainability characteristics and benefits of their investment products. Investors could be disappointed to find that the funds they selected don’t deliver the characteristics or benefits they expected.

And critics argue that privatesector efforts will never be enough to stem climate change and that investing in ESG funds only makes investors complacent.

It’s “like selling wheatgrass to a cancer patient,” Tariq Fancy, the former head of sustainable investing at BlackRock, wrote in a series of recent essays.

Funds need to be clear on the kinds of outcomes they are seeking for investors, Jon Hale, global head of sustainable research at Morningstar, wrote in a recent essay. “None are claiming they are going to save the world. They are, after all, investments.”

INVESTMENT FLOWS INTO ESG FUNDS Investment in funds that include a focus on sustainability and social equity soared in 2020, a year of upheavals.

YEARLY ESTIMATED ESG NET FLOW $60 billion 50 40 30

$56.28 billion

20 10 0

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Note: 2021 data through Sept. 30. Includes ESG focus, impact and sustainable sector funds as defined in Sustainable Funds U.S. Landscape Report. Includes funds that have been liquidated; does not include funds of funds.

2020

2021

Source: Morningstar

ENVIRONMENTAL AND SOCIAL SHAREHOLDER RESOLUTIONS GAIN SUPPORT Average support for resolutions has gained, as has the number gaining the 50% support needed for passage.

E&S SHAREHOLDER RESOLUTION SUPPORT LEVELS Less than 25%

25% to 40%

40% to 50%

AVERAGE E&S SHAREHOLDER 60 RESOLUTION SUPPORT

More than 50%

250

35%

50

30

40

200

25

30

150

20

20 10

15

100

34%

DIVE

0 -10 35%

10 50

5 0

2015

2016

2017

2018

2019

Note: Average support calculations based on vote results as reported

2020

2021

0

30 2015

2016

2017

25 2018

2019

2020

2021

Source: Morningstar’s proxy voting database on July 30, 2021

20 15

P013-P019_CCB_20220131.indd 14

Nort able from kins for a uct,” towa appr in th Sti room incre susta prop a nu wide wild and acco dete mak ward No good ing t but i and And the o mea meth ing b pron truck

10

1/28/22 2:38 250PM

In fice Freri vesto high CalP iforn teach Freri 34% billio ers f

2021

DIVERSIFYING THE ASSET MANAGERS

In the public sector, the office of Illinois Treasurer Michael Frerichs is an active ESG investor, considered on par with high-profile public funds such as CalPERS and CalSTRS, the California public employees and teachers retirement systems.

Frerichs’ office invests about $17 billion with outside asset managers for the state’s college savings

P013-P019_CCB_20220131.indd 15

THE ORIGINS OF ESG INVESTING

See CAPITALISM on Page 16

Source: Morningstar’s “ESG Investing Comes of Age,” updated through March 2021

AP

GETTY IMAGES

GETTY IMAGES

1971: Two United Methodist ministers looking to avoid investing church dollars in companies contributing to the Vietnam War launch the first sustainable mutual fund.

1986: Congress passes the Comprehensive Anti-Apartheid Act, banning new investment in South Africa.

1989: Following the Exxon Valdez oil spill in Alaska, activists form the Coalition of Environmentally Responsible Economies to speed the adoption of sustainable business practices.

1997: The Kyoto Protocol convenes world leaders to set goals on addressing global warming.

Pictured are Chairman Raul Estrada, left, and Japanese Environmental Agency chief Hiroshi Oki shaking hands as the Kyoto Protocol is adopted.

GETTY IMAGES

Northern’s approach to sustainable investing, a dramatic shift from three or four years ago, Hawkins says. “They’re not searching for a (single) sustainability product,” she adds. “They’re moving toward considered and thoughtful approaches for incorporating ESG in their investment programs.”

Still, the broad definitions leave room for confusion. There are an increasing number of third-party sustainability rankings, but these proprietary metrics may roll up a number of variables and differ widely. An investor may be bewildered to find an old-line oil and gas company lingering in an account. But a manager may have determined that the company is making strides in diversifying toward cleaner strategies.

Nor are companies consistently good citizens. Tesla may be leading the way to a cleaner future, but it’s been slammed for a hostile and discriminatory workplace.

And fossil fuel companies are not the only bad characters. There are meat producers contributing to methane release, insurers backing builders constructing in floodprone regions and conventional trucks and cars burning gasoline.

plan and other programs. (Additional state funds have short-term horizons and are managed internally.)

“When you’re investing for kids’ college education, you’re not hopping in and out of the market,” Frerichs says. “ESG is about accounting for a wider range of risk exposures.”

The office uses outside asset managers and evaluates them on their ESG and stewardship policies, Frerichs says. “We want to ensure they’re effectively integrating sustainability factors into their engagement with portfolio companies and proxy voting policies.”

Frerichs’ team also interacts directly with companies on board diversity, climate risk and managing human capital, with “dozens of engagements every year,” he says. Through Climate Action 100+, the treasurer’s office teamed with CalSTRS for a multiyear engagement with Atlanta-based utility Southern, parent of Nicor Gas. “They face notable risks and opportunities as they transition to net-zero emissions,” Frerichs says.

For the most part, companies cooperate with investors because they don’t want poor ESG evaluations and bad publicity. “Our companies see that it matters,” says Blake Pontius, director of sustainable investing at William Blair, which engages directly with companies but not as part of investor coalitions. “We have companies reaching out to us, asking for feedback,” he says. That’s particularly true of small-cap companies and recent IPOs, whose corporate governance practices aren’t well developed.

Blair doesn’t have much exposure to large energy companies but engages on issues including diversity and governance, Pontius says. Climate change and environment account for the most majority-supported shareholder resolutions this year, according to Morningstar, but workplace diversity and pay equity also rank high.

Polk Bros. Foundation is striving to better align its public-company investments with its grant-making focus on poverty, inequality, diversity and inclusion, says CEO Gillian Darlow.

The foundation, with a $500 million endowment, had in the past invested in a fixed-income fund supporting affordable housing and small business. It works with about 50 outside asset managers.

Last year, the foundation conducted a review of its investment practices and hired Morgan Stanley to oversee public-equities investments with an ESG focus and expand participation with minority- and women-owned investment firms. “We’re looking at more than ownership,” Darlow says. “We want to understand who are the decision-makers and what are the fields in which they invest.”

In a similar way, the MacArthur

2006: The United Nations’ Principles for Responsible Investment is launched to encourage further development of sustainable investing. It has gained more than 2,900 signatories from asset managers and institutional investors.

GETTY IMAGES

GEOFFREY BLACK

Katharine Wyatt, chief investment officer at Loyola University Chicago, says, “Sustainability is a reflection of our mission and identity.”

2011: The Sustainability Accounting Standards Board forms to establish industry-specific standards for corporate reporting on ESG issues.

California, Washington and New York state governments require disclosures on climate risk by insurers operating there.

2016: CalPERS, the largest public pension fund in the U.S., adopts a five-year plan to incorporate ESG principles into its investment process.

AP

star

CRAIN’S CHICAGO BUSINESS • JANUARY 31, 2022 15

2015: The Paris Agreement is formed during the United Nations Framework Convention on Climate Change. The accord goes into force the following year, when 55 nations representing at least 55% of global emissions formally join. Nearly 200 countries have ratified the agreement.

2018: BlackRock founder and CEO Larry Fink writes that companies focused on minimizing negative environmental and social impacts and accentuating positive ones will be in a better position to navigate the transition to a low-carbon and digital economy.

2019: Flows into U.S. sustainable funds top $20 billion, more than four times their 2018 level. Nearly 500 actively managed funds in the U.S. add ESG criteria to their prospectuses.

2020: Sustainable funds in the U.S. attract a record $51.1 billion in net flows, more than twice the previous record set in 2019.

2021: BlackRock’s Fink asks companies to disclose a plan for how they will be compatible with a net-zero economy and to have this plan reviewed by their boards of directors.The U.S. Department of Labor says it won’t enforce a Trump-era rule that limits the use of ESG funds in retirement plans regulated under the Employee Retirement Income Security Act, including 401(k) plans.

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16 JANUARY 31, 2022 • CRAIN’S CHICAGO BUSINESS

A mix of divesting and diversifying assets

Illinois Treasurer Michael Frerichs evaluates outside asset managers on their ESG and stewardship policies.

MacArthur Foundation exerts influence—through its portfolio

BY JUDITH CROWN The MacArthur Foundation, the area’s largest, recently announced a new initiative in environmental, social and governance, or ESG, investing. The foundation is divesting stocks in fossil fuel companies and diversifying its asset managers. It set a goal to have 20% of assets with U.S.-based firms led by managers of color and/or women by 2024. In a recent interview, President John Palfrey and Chief Investment Officer Susan Manske discussed how investing the foundation’s $8.8 billion endowment has evolved. This transcript had been edited for length and clarity.

road through our proxy policy for a number of years. It’s too late for that. We have to do more.

CRAIN’S: How did this decision come about?

How are you pursuing the “social” in ESG?

PALFREY: The approach for big foundations, university endowments and nonprofits had been to invest for the highest riskadjusted returns. But people inside and outside the foundation were asking, how could we have our grant-making address climate change while we also were invested in fossil fuel holding companies?

PALFREY: It’s in diversifying our asset managers. It’s not just the person sitting in the CEO or CIO seat, but the portfolio managers and directors, the entire team. We started working with Lenox Park Solutions (a consultancy that specializes in demographic data in the investment industry). We teamed with the Kresge Foundation to have Lenox Park survey and assess the diversity of our asset-management firms.

MANSKE: John challenged my team to measure diversity over time. Here’s where our managers were last year and here’s where they are this year. Did they make progress? If yes, great. If no, we’re going to talk to them.

How are you executing this shift, especially because so many oil and gas companies are embedded in index funds?

PALFREY: It’s a multistep process.

A couple of years ago, we stopped making direct investments in oil and gas exploration. This fall, we created indices that pull out domestic oil and gas stocks. Now we’re working on the international portion of our portfolio.

What is the timetable?

MANSKE: We finished the U.S. side. The non-U.S. side is more complicated. We’re trying to get index providers to provide the international indices the way we want them. We hope to have it done in the next couple of months.

Besides divestiture, are you seeking out clean energy investments?

MANSKE: We’re looking for sustainable investments in the (private-equity) space, where there are a lot of great technologies developing. On the public side, it’s more about divesting fossil fuel companies.

PALFREY: Divesting from Exxon Mobil is not going to solve climate change. There are a whole lot of things we have to do.

Speaking of Exxon Mobil, are you joining with investors who are trying to influence Big Oil through engagement and proxy voting?

PALFREY: We’ve been down that

P013-P019_CCB_20220131.indd 16

MacArthur Foundation President John Palfrey, left, and Chief Investment Officer Susan Manske.

You’re attempting to standardize this process?

PALFREY: We invited other foundations to do this. For an asset manager, filling out a diversity survey takes a huge amount of time. Let’s come up with a standardized process that everyone can use. Managers can see how they rank relative to other firms.

How’s it going so far?

PALFREY: We did a first survey last year. Of our more than 100 asset managers worldwide (70% are in the U.S.), 79% chose to participate. A second one is scheduled for early this year.

Any metrics you can share?

PALFREY: We have surveys that were conducted by the Knight Foundation, where I was board chair (between 2013 and 2019; he remains on the board). Our percentage of assets managed by women-, minority- and diverse-owned firms rose to 18% in the 2020-21 survey, up from 9.9% in the survey conducted two years earlier. We’ve set a goal that we’ll have no fewer than 20% on an ongoing basis by 2024. We think that’s a floor, not a ceiling.

CAPITALISM Foundation aims to diversify its asset managers, looking beyond ownership to the portfolio managers and overall workforce. It teamed with an Austin, Texas, financial technology consultant to assess the racial and gender diversity of its asset managers, of which there are more than 100 worldwide.

Based on earlier studies by the Knight Foundation, where Palfrey serves on the board, the percentage of assets managed by women-, minority- and diverseowned firms has climbed to 18% from 9.9% two years earlier.

Can ESG investing save the planet? Not all investors have the same goals. Some embrace ESG for moral clarity, to reflect values or simply sleep better at night.

And excluding a company from an investment portfolio doesn’t punish it like a boycott, and opportunistic investors could make a windfall with a timely buy of an undervalued stock.

Investor engagement is a worthy approach, but it’s insufficient, Palfrey says, adding, “It’s too late for that. There’s a sense of urgency. If companies had made a faster shift to cleaner energy, we would not be in the danger we are right now.”

Fancy, the ESG advocate turned critic, writes that the private sector can’t do the job 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

Continued from Page 15

Sheri Hawkins is executive vice president and global head of product management at Northern Trust Asset Management.

HOT TOPICS FOR SHAREHOLDERS

MAJORITY-SUPPORTED ENVIRONMENTAL AND SOCIAL RESOLUTIONS 2015

Climate change and diversity are subjects of increasing focus.

2016 2017 2018 2019 2020 2021 0

5

10

Climate change, environment Opioid crisis, gun safety

15

20

25

Workplace diversity, pay equity Political spending and lobbying

30

35

40

Human rights Employment-related

Source: Morningstar’s proxy voting database on July 30, 2021 Note: Average support calculations based on vote results as reported.

1/28/22 2:38 PM

wou Th ingst inter gove too w Glas that mus oper chan W ill-su spon worl can’ and a rec shar ed c and to in ior. A also polic “Th use pres scien mitm emis com ize t as in taina align emp hold direc Ev valu pens and can p

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e

40

orted.

CRAIN’S CHICAGO BUSINESS • JANUARY 31, 2022 17

Northern Trust puts ‘stewardship’ to the test Asset management firm used direct engagement to prod a Swiss mining company to reduce its gas emissions

PHOTOS BY GEOFFREY BLACK

BY JUDITH CROWN Can actively engaging with big corporate emitters of greenhouse gases stem climate change? Advocates of environmental, social and governance investing, including Northern Trust Asset Management, say it’s worth the effort.

Old-line energy companies are not easily excluded from conventional index funds, and ESG advocates say it’s useful to prod these companies toward cleaner practices. Northern Trust classifies these engagements as “stewardship,” distinct from fashioning portfolios for environmentally minded investors.

Northern works with Climate Action 100+, a coalition of more than 600 institutional investors with $55 trillion in assets under management that presses the largest contributors of greenhouse gases to move to net-zero emissions no later than 2050.

In 2020, Northern teamed with U.K. asset managers Royal London Asset Management and LGPS Central to engage Glencore, a Switzerland-based diversified mining company that produces thermal coal. This commodity is a major contributor to greenhouse gas emissions and global warming when burned to produce electricity.

Glencore had established a goal of a 30% reduction in emissions by 2035, but there wasn’t enough information disclosed, says Sheri Hawkins, executive vice president and global head of product management at Northern Trust Asset Management. “The team dug under the hood and asked if Glencore could move a little bit faster,” she says.

Following a letter and meetings, Glencore agreed not to expand thermal coal operations. By the end of the year, the company had disclosed a climate transition plan with an improved target of

a 40% emissions reduction by that seek to reduce climate risk, 2035 from 2019 levels and a com- according to the company’s 2020 mitment to net-zero greenhouse Stewardship Report. Northern’s 2021 voting record will be disemissions by 2050.

Indeed, Glencore in its 2020 closed in its next report, to be Sustainability Report announced released in the first quarter, a the target of an “absolute 40% spokesman says.

Hawkins says Northern continreduction of total emissions by 2035” and last year went further, ues to monitor Glencore’s progwith a 50% reduction by 2035. “I ress. Meanwhile, it’s intensifying look forward to continuing en- its work with the oil and gas, auto gagement with our stakeholders as we continue to “WE BELIEVE WE WILL MAKE THE implement our strategy and as it evolves over the MOST PROGRESS TOWARD CLIMATE coming years to respond to the global challenge of GOALS THROUGH ENGAGEMENT climate change,” CEO Gary AND COLLABORATION.” Nagle wrote in the 2021 report.

Northern Trust 2020 Stewardship Report Northern also uses its transportation proxy voting to influence corpo- manufacturing, rate policy. In 2020, it withheld and electronics sectors.

Based on the progress of convotes for sitting directors at Glencore because it didn’t see suffi- versations with companies, “we cient progress at the time, as well believe we will make the most as at Exxon Mobil and Chevron. progress toward climate goals Both U.S. oil giants have been through engagement and collabconsidered laggards in develop- oration,” the stewardship report says. “Therefore we expect fewer ing clean energy agendas.

That year, it voted 58% in fa- shareholder resolutions on this vor of 79 shareholder resolutions issue going forward.”

Investors push for more social responsibility would level the playing field.

That may be true, Morningstar’s Hale said in a recent interview. But in an era where government is not working too well, what do you do? The Glasgow summit underscored that nations aren’t able to muster a coordinated and cooperative response to climate change, he added.

While investors may seem ill-suited to take on the responsibility of saving the world, they are realizing they can’t afford to wait around and do nothing, Hale wrote in a recent essay. As the largest shareholders of publicly traded companies, asset owners and managers have the tools to influence corporate behavior. As bondholders, they can also influence government policymakers.

“These large investors can use their enormous pull to pressure companies to make science-based net-zero commitments on greenhouse gas emissions,” Hale wrote. “Many companies are coming to realize they are on the same page as investors in the new sustainability era. With investors aligned with customers and employees, corporate stakeholders are rowing in the same direction.”

Everyone in the investment value chain—asset managers, pension funds, universities and foundations—he added, can play a role.

P013-P019_CCB_20220131.indd 17

Organizations are encouraged to strengthen their environmental, social and governance focus

SEEKING POSITIVE IMPACTS The survey asked: “How much do you agree with each of the following statements?”

BY WILLIAM JOHNSON What is a company’s primary responsibility? A decade ago, you’d hear “maximizing profits.” Today’s answer is more complex, and port computer science education and teacher professional develseemingly more altruistic. opment at Title I schools. WalBeyond profits, today’s investors prefer companies that support the greens is expanding renewable energy initiatives and installing greater social good. A recent study conducted by the Harris Poll shows solar panels on stores and distrithat Chicago investors want their bution centers. Boeing is likewise dedicated to improving dollars to have a positive its environmental footimpact beyond boosting print, partnering with personal wealth.

SkyNRG to increase the Over three-quarters production and use of (76%) of Chicagoans sustainable aviation consider themselves fuel worldwide. environmentally conOpportunities remain scious, and even more for Chicagoland busi(84%) consider themnesses looking to boost selves socially contheir ESG profile. While scious. Investors expect William Johnson Chicagoans believe local businesses to share is CEO of the Harbusinesses have effecthese principles. ris Poll, a global tively addressed issues Forty percent of Chi- public opinion, with workforce diversity cago investors actively market research and inclusion (66%) and consider ESG factors, and strategy firm. improved relationships and 37% research a company’s ESG profile before investing. with employees (59%), responses Eighty-one percent of millennials to other social initiatives have fallen flat. Over half of residents think and 65% of baby boomers say they local businesses have ineffectively are more likely to invest in companies whose policies promote posi- addressed climate change (59%) and executive/employee pay distive social change.

Chicago-area companies have parities (58%).

Data from the Harris Poll is taken diverse approaches toward based on responses from 502 strengthening their ESG focus.

Amazon is providing Chicago adults in the Chicago area on bePublic Schools with funds to sup- half of Crain’s Chicago Business.

76%

84%

say they are an environmentally conscious person.

say they are a socially conscious person.

84%

78%

Businesses have a responsibility to protect the environment.

I have a more favorable opinion of businesses that support environmental initiatives.

83%

72%

Business have a responsibility to be a force of social good.

I have a more favorable opinion of businesses that support social causes.

In general, how effective do you think Chicago businesses have been at addressing each of the following: Very effective

Somewhat effective

Diversity and inclusion

Not very effective

16%

Not at all effective 50%

Corporate culture 13%

25% 9%

46%

Executive/employee pay disparity 12%

30%

Climate change 11%

30%

30% 11% 36% 40%

22% 19%

Source: Harris Poll

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18 JANUARY 31, 2022 • CRAIN’S CHICAGO BUSINESS

LEVERS OF INFLUENCE

T

P m fo

Stewards of capital have the power of their proxies GETTY IMAGES

I

in shaping the private sector. ’m a big believer in the idea The widely held belief that that every dollar we spend, voting is a civic responsibility can donate and invest plays a role apply as well to corporate sharein making the kind of society we holders. Citizens and investors want to live in. It’s a relatively need to participate in the voting/ easy concept to grasp. proxy process. DisenfranchiseAs “consumers” we have a ment in either case can have direct economic say in how we’d negative outcomes. like to see companies conduct Many investors don’t realize themselves. that they have a voice—no matter As “philanthropists/donors,” Bill Gee is a the number of shares they own in a similar leverage exists through Chicago-area allocating funds to the organizaphilanthropist who a company. Admittedly, receiving tions whose work we appreciate previously worked a proxy (a ballot of issues being and want to support. in the commercial put to vote by the corporation) can be quite overwhelming, as is Too often, however, we as food sector. the amount of time spent reading “investors” miss the connection between the alignment of our ethos and the through board candidates’ biographies and deciphering rule changes a corporation is construction of our portfolios. considering.

No matter one’s wealth or experience Fortunately, resources exist that provide level, there are ways to make investment services for assisting shareholders who choices that steer businesses to create want to vote their values. Organizations something more than a simple financial such as As You Sow (a nonprofit promotgain or loss. ing environmental and social corporate With 2022 being an election year, there’s responsibility) can offer guidelines on an important call for participating in the proxies being offered in any given year and voting process. And just as citizens use their vote to influence the public sphere, investors provide instructions on how to vote your should recognize they have an important say proxy in a sustainable-minded way during

a company’s annual general meeting.

Shareholders can go one step further by working with activist asset managers who enable investors to co-file shareholder resolutions, which provide opportunities to advocate for an issue that may not likely be brought up by management during their annual meeting.

Asset managers with whom I have worked include Boston Trust Walden, Trillium Asset Management and Boston Common. They all create diversified portfolios and not only “walk the walk” on making stock selections that represent opportunities for change, but also engage with corporate leaders on important topics including environment/climate change, board composition and social justice.

Establishing a dialogue with corporate leaders is often more successful than actually filing a shareholder resolution, making these types of interactions a necessary first step in any honest attempt at addressing the issues a company can move the needle on.

Passive investing is one of the easiest

ways to get shares voted with a positive ESG bent while still providing diversification through investing in specific indexes. In my experience, investment advisers such as Aperio and Parametric Portfolio Associates do a solid job in applying negative screens that are customized to the issues important to me while reaping the returns of the chosen index (the S&P 500, for example), rather than trying to outsmart the market.

Of course, these are just a few of the many partners one can engage with when aligning investments with values. Shareholder advocacy is arguably only one tool for creating change. Disinvestment strategies (fossil fuel-free portfolios, anyone?), microlending, green bonds and straight-out private-equity impact investing (shout-out to Chicago’s own Impact Engine) ensure that you’ll have no excuse for not participating.

As stewards of capital, we are being irresponsible if we choose to ignore the role we can play in driving the change needed for making a better society.

LEADERSHIP

Character-based capitalism does right by all stakeholders

C

OVID’s pervasive impact on business cannot be understated. The challenges of higher wages, employee shortages, supply chain disruptions and remote working have shaken business operations to the core. Growth and profitability have suffered, demanding more effective approaches to Ray Benedetto, from left, and Stephen Fallek are co-founders relationships with all stakeof GuideStar, a facilitator of organizational leadership develholders: employees, custom- opment and performance excellence. Nicole Martin is founder ers, suppliers, shareholders and CEO of HRBoost, an HR outsource and consulting firm and communities. Solutions that provides GuideStar’s Character-based Capitalism proto these challenges require grams for use by facilitators and coaches. strong leadership througha culture that serves all stakeholders. out an organization—not just from the top.

GuideStar’s research identified the Having the right culture makes the difbenefits and practices of Character-based ference.

Capitalism, a name we coined for this high-performing culture that combines the The Right Culture. Culture influences entrepreneurial spirit of capitalism with behaviors and defines expectations and character, which fosters the collaboration boundaries. Performance-excellence companies encourage an appreciation for others’ and teamwork that drive innovation, productivity, agility and resilience. Employees perspectives, attract and retain employees with a capitalist mindset are motivated and and customers, ensure employees are innoempowered to think and act like owners. vative and productive, strengthen supplier A Character-based Capitalism culture relationships, and keep employees aligned increases profits by doing what is right for and connected for the work that needs to all stakeholders. It is built on four pillars: be done. Many business leaders are realizing that now is the time for implementing Shared core values. leadership practices that build and reinforce Leaders at all levels.

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Transcendent organizational purpose.

Commitment to performance excellence.

Culture beyond individual businesses.

Can Character-based Capitalism have benefits beyond a company? Could it bridge differences dividing our nation?

Capitalism has lifted numerous countries out of poverty and is the greatest economic system for innovation. Yet many don’t trust capitalism to address societal issues because of greed and cronyism that have become more apparent in recent years. They believe government intervention is the answer. This does not mean these individuals are socialists. A significant proportion of young people would be attracted to a kinder form of capitalism that better meets their needs. Character-based Capitalism may be what they seek.

While acknowledging the issues, others are concerned that governments are not entrepreneurial because they lack mechanisms to drive innovation. They also fear government solutions will raise taxes and the cost of doing business. When influential groups like the Business Roundtable advocate that the purpose of business is to serve all stakeholders, not just shareholders, they are greeted with skepticism. Many business leaders doubt that businesses can act for all stakeholders because this will reduce returns to shareholders.

Dispelling the myth. Company earnings are improved by engaged employees, loyal customers, collaborative supplier relationships and supportive communities. Why should pursuing these objectives by doing what is right for these stakeholders be viewed as reducing returns to shareholders?

Does doing what is right have high costs that come at the expense of shareholders?

Because culture is about behaviors, is there a significant cost to behaving differently? What does it cost to demonstrate trust and caring to employees, customers and suppliers? Or to make work more meaningful through inspiring values, vision and mission? Or empowering employees and teaching them how the business works so they think and act like owners to create innovative solutions? When an employee makes a suggestion, does it cost more to say, “Tell me more” instead of “Do what you’re told”? Positive behaviors and practices can have more impact on relationships with stakeholders than above-market wages and below-market prices.

Over 65 years ago, famed management consultant Peter Drucker stated, “Business exists to serve society” and must be protected to operate in free markets. If company leaders want to create great companies that make the world a better place, they should focus on building Character-based Capitalism cultures.

1/28/22 2:38 PM

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CRAIN’S CHICAGO BUSINESS • JANUARY 31, 2022 19

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ifteen years ago, one of us was applying to business schools from a job in impact investment—though that term, “impact investment,” was not yet widely in use. The other, a professor at the University of Chicago’s Booth School of Business, had recently introduced a course called “Social Entrepreneurship”—itself a newfangled term. Both of us were inspired by a conviction that was gaining influence but still nascent: that for-profit private enterprise—with Robert H. Gertner, left, is the Joel F. its scalability and existential dependence on Gemunder Professor of Strategy and efficiency and addressing customer needs— Finance and John Edwardson faculty can address some of the thorniest problems director of the Rustandy Center for Social facing human well-being.

Sector Innovation at the University of That conviction is no longer nascent, Chicago Booth School of Business. James and those terms have been joined by Carmichael is a writer in Los Angeles and a many others, “ESG” investing being the graduate of the University of Chicago Booth latest headliner. The last two years have School of Business. seen a sea change in public opinion about work for; and, of course, shareholders corporations’ obligations to society at express their values by seeking to optimize large. As Jacqueline Novogratz recently capital growth within a framework that also wrote in Foreign Affairs: “Outside the walls contemplates ethical dos and don’ts. In all of academia, the idea that maximizing of these cases, corporations respond. shareholder wealth should be a company’s It is also a fact that many generally detop priority is no longer sacrosanct, or even sirable outcomes will involve trade-offs. It widely accepted.” can’t all be “win-win.” In these cases, it may We’ve been part of these changes: The fall to the public sector—ratified by public b-school applicant got his MBA—takopinion—to act in the general interest. ing “Social Entrepreneurship” along the Climate change is the archetype of this. No way—and has gone on to write about the industry pledge for “net-zero” emissions in intersection of private markets and human X years could ever have the same uniform, outcomes. The professor has continued to immediate and transformative impact as a integrate social impact into the university’s carbon tax. Not even close. ecosystem through new course offerings We cannot overlook the central role and the Rustandy Center for Social Sector that our public institutions must play in Innovation. addressing our public concerns.

You might think that we’d be delighted.

Throughout the pandemic, we—the We’re not. professor and his former student—have To be clear, we’re not standing athwart been working on a new course for Chicago the movement toward conscious capitalism Booth. Titled “Perspectives in Capitalism,” yelling, “Stop!” Profit-motivated businesses have opportunities to create widespread so- its goal is to guide current MBA candidates to critically examine the relationship becial benefits, and those benefits should not tween markets, the state, the individual and be reserved for their shareholders at other values. The current reassessment of capipeople’s expense. talism offers the opportunity to take these But we are pleading within current “social” questions out of their niche. We trends: “Wait. Let’s think.” still believe that business schools should Markets are geniuses of adaptation; corporations respond to incentives created by consumer preference, MARKETS ARE GENIUSES OF ADAPTATION; employee satisfaction and shareholder pressure. The last few years CORPORATIONS RESPOND TO INCENTIVES offer many examples of this, from CREATED BY CONSUMER PREFERENCE. Major League Baseball’s stance on a Georgia voting law to a number empower those students determined to use of global clothing companies’ recent turn commerce to directly fight social ills. But from Xinjiang cotton over concerns about we also believe there is an opportunity— forced labor. But we have to remember that and, yes, an imperative—to engage broader these are responses. Absent seismic, infeasiquestions with openness, nuance, evidence ble and traumatic changes to the structure and rigor in a way that involves any and of our capitalist economy, the enduring every future business leader. centrality of the profit motive means that The answer is not for every business to incentives work on companies from society. become a “mission-driven social enterIn other words, there’s a limit to how prise.” The answer is to consider how the “good” most companies will be on their complex web that constitutes our society’s own. Change originates with civil society, ambiguous, shifting middle ground— a robust press and public-sector action; it profits, markets and circumstance; social originates with shifts in social mores and values, private action and government legal frameworks. Consumers become leadership—can interrelate to everyone’s more informed, driving supply-chain benefit. To do so, we must all engage each accountability; engineers become choosy of its parts. about which tech firms they will and won’t

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Public, private sectors must work together for the greater good PRINCIPLES AND PURPOSE

Why life sciences developers should employ an ESG filter

A

developers must build spaces s the marketplace enflexible enough to accommodate thusiastically embraces change. environmental, social Given the complex nature of and governance standards, every life sciences real estate, it’s vital organization needs to take ESG for a company to communicate seriously. Recognizing these its policies and plans to shareprinciples quickly and concluholders and stakeholders in sively is even more imperative an authentic and collaborative for businesses as ESG becomes manner—especially large com“a critical element in gaining panies working in underserved market share, engaging employ- Suzet McKinney, communities where there are ees and raising capital,” Bain & who holds master’s often trust gaps to overcome. It’s Co. noted in a recent report. and doctoral degrees common to convene community This directive is particularly in public health, advisory councils at the beginurgent for real estate developers is a principal and in the fast-paced life sciences director of life sciences ning of planning efforts for large developments, as we did at our industry, where tenants—estab- at Sterling Bay. She Lincoln Yards development. We lished businesses and startups is the former CEO of accompanied that with a meticualike—are important drivers of the Illinois Medical lous, three-year site remediation change. These companies’ outDistrict. of some 25,000 tons of contamput directly impacts the health inated soil. It was the right thing to do for all and well-being of millions, if not billions, stakeholders, including us. and the pandemic has upped the stakes for Another way developers must improve everyone in the industry. Now the operations of life sciences companies and their partners their ESG postures is to have diverse, equitable and inclusive teams and consider how are under a microscope from regulators, DEI must be accounted for in the structures activists and the media. they develop.

At the same time, investors have made Finally, an issue for life sciences developtheir wishes known loud and clear. ESG ers that has been accelerated by the paninvesting is booming, proof that investors demic and the deplorable condition of the believe businesses with principled, purbuilt environment in many neighborhoods pose-driven values are better prepared for is consideration of a locale’s social determilong-term growth. As regulators put rules nants of health. This means a neighborhood’s into place that will require companies to access not only to quality health care but also disclose their ESG policies in annual reports to quality housing, schools, transportation, and filings, life sciences developers who fall jobs, grocery stores and other amenities. short in meeting these principles may be Life sciences developers can demonstrate discounted by investors. their commitment to building a healthy, susReal estate developers engaged in the life tainable future by taking tangible, demonsciences category must re-evaluate their strable steps. A checklist we have developed purpose, mission and operations through at Sterling Bay includes: an ESG filter. All must be specific and well-defined, and ingrained throughout their Implement the WELL Health-Safety Rating, company’s culture and actions. Treating ESG a new standard for guaranteeing safe and as merely a corporate-speak check box risks health workspaces in response to COVID reputational and brand damage. that verifies a commercial property’s operOf course, addressing the “E” in ESG ations as it relates to reducing virus transis always top of mind given the state of mission and preparing for a healthy, safe the environment and increase in climate return-to-work experience. change-driven weather events. While the Show a commitment to sustainable built most common issues we face today relate environments with Leadership in Energy to pollution on sites—air, water, noise and & Environmental Design, or LEED, certifisoil pollution—purpose-built life sciences cation, the most prevalent green building facilities have complex and sophisticated certification program worldwide. requirements that include specific design Partner with small local minority- and and engineering parameters: higher ceilings, women-owned businesses to increase ecopressurized chambers, rigorous HVAC nomic impact in an area. specifications, biowaste containment and Many say ESG policies and the associated intensive energy needs. As they grow and controls they require simply delay projects evolve, or move from R&D to manufacturing, and harm a developer’s competitiveness. life sciences companies may need to expand My colleagues and I at Sterling Bay keenly or change the nature of their facilities, and disagree.

1/28/22 2:38 PM

20 JANUARY 31, 2022 • CRAIN’S CHICAGO BUSINESS

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ComEd’s new CEO is facing big challenges COMED from Page 1 month to spin off the nation’s largest fleet of nuclear power plants and focus on the monopoly business of distributing electricity. If he succeeds, Exelon is far more likely to reach its growth goals, and ComEd’s 4 million customers can expect higher power bills.

Quiniones, 55, started at ComEd in November after a 10-year stint as CEO of the New York Power Authority, the nation’s largest publicly owned power generator. The son of two Filipino American agricultural researchers, Quiniones was born in Iowa but grew up in the Philippines.

After obtaining his mechanical engineering degree there, he worked as an energy-efficiency engineer at Consolidated Edison in New York.

He rose to run Con Edison’s unregulated service businesses before taking an energy-related post in Mayor Michael Bloomberg’s administration. Quiniones went from there to the New York Power Authority, where he became CEO four years after joining. He never has run a distribution company like ComEd, but he has experience dealing with regulators.

“I come from New York. Very intense, just like here in Illinois. Very intense politics,” he says. “I need to discover, to learn the service territory. The communities, the customers we serve. I’m in the process of learning as fast as I can the system and the operations of ComEd. . . .I have to meet our stakeholders, the elected officials, business leaders, labor leaders, our customer groups, other advocates. . . .I’m basically in a listening mode.”

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Quiniones comes to ComEd as a fresh face with no ties to the company’s decadelong bribery campaign aimed at pushing through lucrative state legislation. But perhaps as much of an impediment to his success as ComEd’s disgrace is the growing pressure on consumers, particularly low-income households, to pay utility bills that now are rising again after a decade of stability due to rock-bottom energy prices.

Exelon Chief Operating Officer Calvin Butler, Quiniones’ boss and second in command to CEO Chris Crane, may have made the ComEd CEO’s life more complicated when he appeared to assure Wall Street that future rate hikes would only be modest.

“Our whole goal is to keep any adjustments under the rate of inflation,” Butler said during a Jan. 10 investor presentation on Exelon’s future. “That rate of inflation . . . (is) around a 2% to 2.5% bandwidth, and we are consistently below that.”

But the same investor presentation unveiled a $10.2 billion capital spending budget for ComEd over the next four years that is 8% above even the highest-spending years of the smart-grid era and 20% higher than the last four years. The smartgrid law in 2011—one of ComEd’s legislative triumphs during the period it admitted to currying favor with

Gil Quiniones

JOHN R. BOEHM

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then-House Speaker Michael Madigan by providing no-work lobbying contracts to his political allies and friends—was pitched at the time as an accelerated burst of grid investments that would subside after the program was done.

For utilities, higher capital spending leads directly to rate hikes, as the capital base on which their revenues are set grows.

ComEd in an emailed statement clarified Butler’s comment to emphasize that the 2.5% goal is one the utility has used “historically.” “We’ll continue our careful focus on keeping customers’ bills as low as possible,” the utility says.

It’s “highly unlikely” that rate hikes won’t exceed 2.5% annually if state regulators approve ComEd’s spending plans, says Abe Scarr, executive director of consumer advocate Illinois PIRG. In an analysis last year, when ComEd planned a smaller rise in spending, Crain’s estimated household electric bills would rise about 10%—nearly $8 a month—on average by 2024. That analysis didn’t take into account subsequent increases in wholesale energy prices that will boost bills even more if they persist.

“We’ve seen for a while that utilities kind of gin up this need for investment,” Scarr says.

Indeed, Exelon’s promise to investors that its earnings will rise 6% to 8% annually over the next four years depends primarily on gaining approval for $29 billion in capital investment across all its utilities, which include companies serving Philadelphia, Baltimore and Washington, D.C., in addition to ComEd in Chicago.

Once Exelon is free of its large power-generation unit, called Constellation and based in Baltimore, ComEd will account for about a third of its earnings.

ComEd’s ability to hike rates “is definitely going to be an important factor when you’re looking at the outcome for Exelon,” says Andrew Bischof, utilities analyst with Morningstar in Chicago.

STAYING COMPETITIVE

For his part, Quiniones says he doesn’t feel pressure to deliver on Exelon’s behalf. “We need to keep our bills . . . competitive relative to the states we compete with,” he says.

ComEd also needs to do its part to achieve the goals set forth in the recently enacted Climate & Equitable Jobs Act, which mandates that fossil fuels be eliminated from Illinois’ power industry in a little over two decades, he says.

“What comes out in terms of ratebase growth and earnings growth, that to me is just an output,” he says.

“I’m worried about all the input.”

That’s not exactly the view of top

w BIG SPENDERS Commonwealth Edison plans to invest nearly 20% more over the next four years on capital projects, which will mean higher electricity rates.

COMED CAPITAL SPENDING

2022-25 is budgeted amount $2.65 billion $3.0 billion 2.5 2.0 1.5 1.0 .5 0 ‘18 ‘19 ‘20 ‘21 ‘22 ‘23 ‘24 ‘25 Sources: Investor disclosures; SEC filings

executives at ComEd’s parent. Exelon Chief Financial Officer Joe Nigro told analysts on Jan. 10 that “We’re still very confident in that 6% to 8% (earnings) growth rate over the period under a number of different outcomes in Illinois,” he said.

Those outcomes hinge largely on how the Illinois Commerce Commission treats ComEd’s capital spending plans. For the last nine years, the ICC effectively was sidelined as a regulator after ComEd convinced lawmakers in 2011 to allow it to change rates annually via a formula. Beginning in 2023, the commission, whose members now are perceived as more consumer-friendly than their predecessors appointed by former Gov. Bruce Rauner, will once again decide which investments to allow and set ComEd’s returns.

And, unlike in the formula-rate era when ComEd could rely on Springfield to overturn unfavorable ICC decisions, it’s unlikely to enjoy the same recourse in a Legislature still stung by the bribery scandal that ended Madigan’s career last year.

How toxic has ComEd become in the state capital? When the company tried to resume political campaign contributions last year after its bombshell admissions in July 2020, 24 legislators refused to accept relatively modest sums totaling $12,640, state records show.

Still, ComEd continues to collect employee contributions to its political action committee. As of the end of 2021, the PAC had over $423,000 in cash, well above its average in recent years.

“We’ve put in place significant new policies, oversight and rigorous employee training programs to make sure that the prior conduct by former executives can’t happen again and are committed to earning back the trust of our customers, communities and public officials by maintaining the highest standards of integrity and ethical behavior for our business, our leaders and every employee,” ComEd says in an emailed statement.

1/28/22 3:34 PM

CRAIN’S CHICAGO BUSINESS • JANUARY 31, 2022 21

Harrison Street betting big on rental housing: ‘People are changing lifestyles’ housing, and Core Spaces hasn’t built any either, so their new this,” says Merrill, Harrison Street’s partnership comes with some chairman and CEO. “People are execution risk. But the two firms have teamed up on student houschanging lifestyles.”

It’s a new direction for Harri- ing projects for several years, son Street and Merrill, 50, who and Merrill sees strong parallels co-founded the firm with his between the two housing types.

Big investors like Blackstone, mentor, former Motorola Chairman Chris Galvin, in 2005. They Starwood Capital and Colony eschewed apartments and office Capital jumped into the sinand retail buildings and pursued gle-family rental business years what Merrill calls a “demograph- ago, but they focused on sinic” strategy, buying student and gle homes scattered around a senior housing, self-storage and metropolitan area, often buyother recession-resistant prop- ing them out of foreclosure. The popular strategy today is to erties instead.

It has worked out well so far. build large rental subdivisions.

Harrison Street has grown to It’s still a fragmented market, become the largest real estate but it’s becoming increasingly private-equity firm in Chicago, crowded as big, single-family with $45 billion of assets under builders like Lennar and other management and more than 200 deep-pocketed investors jump employees. Its portfolio stretches into the fray. Last year, Invitato Canada and Europe and now tion Homes, a Dallas-based real includes military housing, data estate investment company and centers and even wind and solar the largest single-family homefarms. It also has expanded into owner in the country, formed a the life sciences sector, teaming partnership with PulteGroup, an up with developers like Chicago- Atlanta-based homebuilder, to based Sterling Bay, its partner develop 7,500 single-family renton projects in Lincoln Park and al homes over five years.

Rivals like Lennar and PulteSouthern California.

Merrill and Galvin have made Group have the single-family exout well, too, selling 75% of the perience that Core Spaces and firm in 2018 to Colliers Interna- Harrison Street lack. But Core tional in a deal potentially worth Spaces has hired a single-family veteran to help build the business: $550 million.

Ron Martin, who oversaw the Chicago market for Columbus, OhioSTRATEGIC FIT Though single-family rent- based M/I Homes for 12 years.

Core Spaces also aims to difal homes may seem like a departure, they fit within Harri- ferentiate its projects with better son’s demographic strategy. The design and amenities, says CEO growth of the 35- to 44-year-old Marc Lifshin. The firm has crepopulation—a group that tends ated its own brand—Oxenfree, to ditch their apartments for sin- inspired by the saying “Olly olly gle-family homes as they have oxen free” used during games of children—is forecast to be nearly hide-and-seek or kick the can— double the historic U.S. average for its developments. Lifshin for the next five years, according wants to avoid creating cookieto a report from Green Street, a cutter “Smallville” suburban Newport Beach, Calif.-based real communities by varying the apestate research firm. Rising home pearance of its homes and addprices also are pricing many ing hospitality elements.

“How do you create the killer would-be homebuyers out the for-sale market, pushing them user experience?” says Lifshin, into the single-family rental mar- who was selected to Crain’s 40 Under 40 list in 2017, eight years ket instead.

“As apartment renters age, after Merrill made the list. “We there’s going to be plenty of de- just want to completely change mand coming through the pipe- the game.”

Building homes that are profitline for this kind of property,” says Green Street Senior Analyst able to construct and still affordJohn Pawlowski. “We see more able to rent could be a challenge, especially amid soaring construction costs.

GREEN STREET FORECASTS THAT “Construction reprea massive risk,” THE SINGLE-FAMILY RENTAL SECTOR sents Lifshin says.

The joint venture is WILL GENERATE ANNUAL RETURNS targeting markets with OF 6.8% OVER THE NEXT FEW YEARS. high population and job growth, including opportunities than risks right Austin, Texas; Charlotte, N.C.; now. Eventually, this space will and Tampa, Fla. Its projects will get overbuilt, but we’re several encompass 250 to 600 homes; Lifshin aims to break ground on years away from that.”

Green Street forecasts that the the first by March. In the Chicago single-family rental sector will area, Core Spaces is working on generate annual returns of 6.8% plans for a development in west over the next few years, the third suburban Westmont, Lifshin highest among 17 property sec- says.

Merrill, meanwhile, will have tors it tracks.

Harrison Street and its joint plenty of other businesses to keep venture partner, Chicago-based himself occupied. Harrison Street developer Core Spaces, are has flourished during the corocounting on that. Harrison Street navirus pandemic, even though hasn’t invested in single-family some of its sectors, like student

P021_CCB_20220131.indd 21

JOHN R. BOEHM

HARRISON from Page 3

Although Harrison Street has experience in student housing, such as Woodlawn Residential Commons at the University of Chicago, it’s new to single-family homes. housing and senior housing, looked especially vulnerable in its early days. The firm’s funds raised $6 billion and invested about $15 billion last year.

CAREER PATH

A Winnetka native and graduate of Roanoke College in Salem, Va., Merrill got his start in real estate as an 18-year-old intern at Heitman, a big Chicago real estate investment firm. He rose to become head of Heitman’s overseas investment business, launching its first foreign fund, before leaving to start Harrison Street with Galvin. The company takes its name from the building at 847 W. Harrison St. where Motorola was founded in 1928.

The Galvin family sold its entire stake—50% of the company—to Colliers in the 2018 deal, while Merrill sold half of his 50% share, leaving him with 25%.

Colliers, a Toronto-based real estate services firm, paid them $450 million at the time, but it could be on the hook for an additional $100 million this year if Harrison Street hits certain performance targets.

It’s unclear if Merrill and the Galvins will receive the payout, but Harrison Street has prospered under the Colliers umbrella. Harrison Street represents the bulk of Colliers’ investment management business, which reported adjusted earnings before interest, taxes, depreciation and amortization of $66.8 million in the first nine months of 2021, up 31% from a year earlier.

“From every aspect, it seems like this has been a great deal,” says Stephen Sheldon, an analyst at William Blair in Chicago.

Merrill hasn’t stopped thinking

about new markets for Harrison Street to enter. Lately, he’s been pondering investments that perform well amid high inflation— properties that “reprice” frequently or have short-term leases, so you can increase rents to account for rising costs. Harrison Street already owns a bunch.

“You can reprice self-storage assets on a monthly basis, you can reprice student and senior housing on an annual basis,” Merrill says. “The build-to-rent sector you can reprice.”

And if Harrison Street can keep raising rents, it should be able to keep raising money, too.

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22 JANUARY 31, 2022 • CRAIN’S CHICAGO BUSINESS

Chicago technology firm Cameo tests returning to office vs. working remotely CAMEO from Page 3 we approach two years of pandemic life in which most employees have been working from home, connected to bosses and co-workers by the thin digital tethers of Zoom, Slack, Teams, text messages and email: Does remote work have a point of diminishing returns? Do companies require employees to come into the office? If so, does the rule apply to everyone?

Many companies reported an initial burst of productivity at the start of the pandemic from workers who no longer were spending time commuting or being distracted by colleagues. Human resources consultant Mercer reported that 94% of companies it surveyed early in the pandemic said productivity

bor productivity in 2020 and early 2021. We saw that during the global financial crisis (in 2008),” she says. “The long-term impact is very uncertain. There are surveys that some people are more productive at home, but it’s hard to measure.

It’s not clear if this is across the economy and whether it will last.

Companies aren’t sure.”

Echo Global Logistics, an online freight broker based in Chicago, saw something similar to Cameo when it began bringing workers back to the office in June. The delta variant sent people back home, but not before CEO Doug Waggoner noticed some of his teams were more productive in the office.

“We really want to get people back into the office at some point,” he says. “We don’t believe that it

“THE DAYS OF EVERYONE COMING TO AN OFFICE FIVE DAYS A WEEK ARE OVER. . . .PEOPLE WILL NEED TO COME TOGETHER MORE FREQUENTLY THAN WE PLANNED.” Steven Galanis, CEO, Cameo

was as good or better than before COVID-19 struck.

It’s unclear whether it will last, says Sara Moreira, an assistant professor of business strategy at Northwestern University’s Kellogg School of Management.

“There was an increase in la-

will look like it did pre-COVID and will have a lot more flexibility. People have grown accustomed to this style of life, and Gen Y and Gen Z really value work-life balance. So there will be a new normal, but we would like for that to include some time in the office.”

Not everyone needs to be in an office. Coders, accountants, analysts and lawyers can easily do their jobs in solitude. So can salespeople, but they also benefit from the camaraderie, as well as competition, that can be found in working together in person.

“There is a feeding effect of having those individuals together, whether it’s cooperation or competition,” says Brad Alge, an associate professor at Purdue University’s Krannert School of Management. “When you’re remote, the social pressure isn’t as front and center.”

Cameo ran into a productivity problem last summer “when the world functionally reopened,” he says. After raising $100 million in March, Cameo tripled its sales staff. Productivity started dropping, with the amount of new talent being signed up per employee sliding by about one-third.

CHALLENGES

As a hyper-growth startup, one of the newly minted Chicago “unicorn” companies valued at $1 billion or more, Cameo no doubt has some unique challenges. The company grew from about 125 employees before the pandemic began to just over 400 now. Many of them are 20-somethings in their first or second job.

“There’s really no playbook

for what we do,” Galanis says of Cameo’s business model, which essentially comes down to hiring celebrities as gig workers on social media. Getting new hires up to speed “used to take 90 days. Now it takes nine months,” he says.

BALANCING ACT

More established companies that don’t have many new employees may not feel the same strain from remote work as a young, fast-growing company. But it’s worth paying attention to Cameo’s experiment.

“Everybody is struggling with this,” Alge says. “There’s a cost savings if you’re working remote. If it’s countered by lost productivity, then it might be worth the expense of having people physically together. From a leadership development standpoint, it’s hard to develop talent without interaction. Most feedback in a remote setting is just based on results: Did you produce? If the answer is yes, remote is fine. If you don’t have good feedback, your performance is likely to go down. That’s a problem.”

Galanis admits he doesn’t have the answers yet.

“Will I force everyone to come sit at a desk every day? Probably not,” he says. “The days of everyone coming to an office five days a week are over. . . .People will need to come together more frequently

than we planned. The tough part is mandating versus not. I’m still wrestling with that.”

The biggest challenge is figuring out the balance between working from anywhere and working somewhere at least some of the time.

“We think some people are fatigued from working from home,” he says. “There are other people who, if we told them they have to come back to the office, they’d quit tomorrow. It’s a delicate dance.”

Galanis has extended his lease at 1871 through the first quarter.

He notes that the in-office experiment has only involved the sales team, and he says he’s still a fan of remote work generally. “My thoughts on being fully distributed haven’t changed. We’ve hired some great people. We’re a more talented team than we’ve ever been.

Cameo now has workers in 34 states, which makes it harder to bring people together. “If there are offices, who needs to move if you’re going to mandate people come into these cities? It’s game of whack-a-mole.”

“I’ve told my senior leadership team: Figuring out how we work this year is more important than what we’re going to work on,” Galanis says. “If we get the first part right, we can figure it out, even if we initially get the second part wrong.”

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Griffin is expanding his influence across the U.S. as a Republican megadonor to approach the rarefied company of such national political megadonors as Miriam Adelson, Michael Bloomberg and Tom Steyer. As his giving increases, so does the attention he commands from elected officials who make policy on matters that interest Griffin.

What does Griffin want for his money?

“I have become more involved in politics over the years because I’m trying to protect the American Dream, the opportunity that everyone in this country should have to have a great life, a great education and a life well lived,” Griffin said during an October appearance at the Economic Club of Chicago.

He tends to back politicians who share his views on taxation and free enterprise. And he has a direct financial interest in some policy matters—federal regulation of capital markets affects the companies he founded, Citadel and Citadel Securities. The latter was embroiled in the national meme stock controversy last year and faces scrutiny and potential new restrictions under consideration by the Biden administration’s Securities & Exchange Commission.

“When you’re making very large political contributions, it increases your access to sitting officeholders if they win,” says Peter Quist, deputy research director at OpenSecrets, the nonpartisan research group that tracks political spending nationally. Griffin’s increased spending “seems to indicate that he is being successful at being able to set up those meetings.”

Here’s a breakdown of Griffin’s political giving.

FEDERAL

Griffin has spent $110 million on federal races and causes since 2000, according to Federal Election Commission records, with the vast majority—$86 million—in the last three years. Ninety-nine percent of that sum went to Republican or conservative candidates, PACs and committees, according to the FEC and OpenSecrets.

In 2018, that included $3.5 million to the Congressional Leadership Fund (a super PAC for Republican House candidates). Another $12 million went to PACs that supported Rick Scott’s successful Senate campaign in Florida and former Sen. Martha McSally’s losing race in Arizona. Griffin more than tripled down in 2020, spreading almost $63 million among individual Republican candidates and committees that support GOP House and Senate hopefuls.

In another sign of his growing appetite for political influence, Griffin has donated to a broad range of joint fundraising and hybrid PACs. Quist says those donations put Griffin on GOP watchlists

as a major donor, which draws more requests for money.

In federal election off years 2019 and 2021, he also donated to Republicans who serve on the Financial Services Committee that oversees financial markets. That list includes Reps. Andy Barr of Kentucky, Bill Huizenga of Michigan, French Hill of Arkansas and Ann Wagner of Missouri.

Griffin spent just over $3 million on federal candidates last year—including maximum direct contributions to roughly two dozen members of Congress who voted against certifying the election on Jan. 6. That list includes Reps.

Devin Nunes, Darrell Issa, Stephanie Bice, Rick Scott and Illinois’ Mike Bost.

“Ken firmly believes in the peaceful transfer of power,” his spokesman says. Griffin donated the maximum—$500,000—to Biden’s inaugural committee and donated to members of Congress who voted for impeachment in 2021, including Michigan’s Fred Upton, John Katko of New York and California’s David Valadao.

It’s unclear what role Griffin might play in the 2024 presidential elections, although he has the bankroll to make an impact if he chooses to spend the kind of money White House campaigns require. While he never financially supported former President Donald Trump, he did give to PACs supporting Marco Rubio and Jeb Bush early in the 2016 race. He also gave to George W. Bush in 2004, both Barack Obama and John McCain in 2008, and Mitt Romney in 2012.

He ruled out supporting Trump in 2024, telling the Economic Club audience that it was time to “move on” from the former president’s “completely inappropriate” identity politics. But Griffin said he had a close eye on Florida Gov. Ron DeSantis’ performance as he thought ahead to 2024. Griffin wanted to see how he “traverses the next year before we come to a conclusion,” adding that the governor “did an incredible job of protecting the retirees of Florida from COVID,” but had flopped on administering the state’s mask mandate.

FLORIDA

Griffin has become a political heavyweight in his native state of Florida, where Citadel has a Miami office and Griffin owns luxury residences. Outside Illinois, Griffin’s given more money to state and federal races in Florida over the past two decades than any other state. His biggest beneficiary has been DeSantis. Since 2018, he’s given $10.7 million to the governor’s campaign and an associated PAC. A $5 million donation to DeSantis in April tied as the largest check any donor has ever given to another person’s statewide campaign in Florida.

He also gave $1.5 million to the Florida Republican party and its Senatorial Campaign Committee,

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Ken Griffin

BLOOMBERG

GRIFFIN from Page 1

INCREASING INFLUENCE

GOING NATIONAL Ken Griffin spent a greater share of his election contributions outside of Illinois in the last decade.

SHARE OF ELECTION SPENDING Illinois

Other state and national races

33.8%

66.2% 2001 through 2010

50.3%

Ken Griffin’s election spending, mostly on Replubican candidates and conservative causes, increased both in Illinois and on the national stage in recent years.

Illinois 2001 $1,000 2002 $66,000

$77,000

2003 $29,000

$37,000

2004 $4,000

$80,011

2005 $0

$55,500

2006 $155,000

$6,400

2007 $26,602.05

$60,400

2008 $2,800

$28,600

2009 $10,000

$47,300

2010 $1.4 million

$450,204.44

2011 $177,500

$483,000

2012 $98,000 2013 $424,600 2014

49.7%

Other state and national races $2,000

$2.2 million

Xxxxxxx

$165,050

$14.0 million

$3.8 million

2015 $1.4 million

2011 to 2021

2016

Sources: Federal Elections Commission, state campaign finance records

2018

2017 2019

NEW YORK

Griffin is becoming more active in New York, where Citadel and Citadel Securities have offices.

After giving only $200,000 to the state’s Senate Republican Campaign Committee before 2020, he dipped his toe in the Manhattan district attorney’s race, giving $10,000 that year to Tali Farhadian Weinstein, a losing candidate who took a tougher stand on crime than her challengers. His spending exploded in 2021, when he gave $1.5 million to PACs that supported the mayoral candidacies of Democrats Andrew Yang and Eric Adams, the

$6.9 million

$22.5 million

$1.7 million

$9.4 million

$23.7 million

$2.0 million

2020

state campaign records show.

$7.1 million

$11.3 million

$2.6 million $59.3 million

2021 $29,400

$63.9 million $9.7 million

Sources: Federal Elections Commission, state campaign finance records

eventual winner who also ran on a crime-fighting platform.

ILLINOIS

According to the Illinois State Board of Elections, Griffin has given just under $122 million to political causes across the state. 2020 was a standout year, as Griffin gave $53 million to stop Pritzker’s graduated income tax and $4.5 million to oust Democratic Supreme Court Justice Thomas Kilbride.

Griffin has pledged to go “all in” to defeat Pritzker this year, an

undertaking that could cost more than $100 million, political insiders say. That far outstrips the total $36 million he gave to former Republican Gov. Bruce Rauner’s 2014 and 2018 bids. Griffin is widely believed to back Aurora Mayor Richard Irvin’s recently announced candidacy and a slate of other GOP statewide candidates. Griffin described Irvin as someone who “embodies the American Dream and a real commitment to making communities stronger,” but hasn’t made a formal endorsement yet.

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