Last week, the Harvard Business Review blog presented some Harvard faculty responses to the newly signed Dodd-Frank financial reform bill. The Business School Professors’ sentiments range from the “cautious optimism” of Robert Steven Kaplan to Robert C. Pozen’s assertion that the act “misses the main cause of the crisis,” which was Fannie Mae/Freddie Mac, in his opinion. And while David A. Moss believes that the bill takes important steps to rein in “too big to fail” banks, Clayton S. Rose says that “little has been done” to defuse the systemic risks of such institutions.

None of the Professors focus on what Joseph Fuller, co-founder of Monitor Group, has called “The Terminator” of modern financial markets: computer-based modeling and trading programs. In a 2009 piece in The American Scholar, Mr. Fuller argues that the work of “quants” worsened the financial crisis. He also describes regulatory steps that could help dampen the volatility produced by automated trading programs.

Neither the Dodd-Frank Act nor Harvard’s Professors assign high importance to quant-driven volatility, but Mr. Fuller’s argument suggests that they should. Automated models drive hair-trigger, lockstep responses to market signals. “The Terminator” has also discouraged the sort of qualitative historical analysis that many investors, including those who consider environmental, social and governance (ESG) factors, believe is the key to long-term value creation.

As BP gets closer, hopefully, to permanently containing the spill at the Macondo well in the Gulf of Mexico, the disaster has raised questions about BP’s future, that of its sector peers, and the prospects for further unconventional oil and gas production.

The Integrated Oil & Gas team of RiskMetrics ESG Analytics, part of MSCI, has considered these issues as part of our recently published annual company and industry reports. (We will present this research in a webcast on September 15th- click here in September to register). This article sums up our perspective on four key questions:

During the 2010 US proxy season, shareholder resolutions seeking enhanced disclosure on climate change and sustainability attracted greater approval than in years past. 2010 also saw increased support for proposals that ask companies to report on their political contributions. Another hopeful sign was the withdrawal of an unprecedented number of environmental and social resolutions, as more companies agreed to address such issues before they came to a vote.

On July 1, US President Obama signed into law the Iran Sanctions, Accountability, and Divestment Act of 2010 (SADA). The President said the new law’s sanctions were intended to punish Iran for its ongoing uranium enrichment program, according to Reuters. Still, White House spokesman Robert Gibbs said that sanctions were not a “silver bullet.” By setting out to weaken Iran’s oil sector, SADA could have perverse consequences, depending on how the Iranian regime responds to potential future energy shortages.

Two days after drafting my post on Jeffrey Immelt’s observations on American industry, I read Tim Duy’s superb piece on the loss of manufacturing jobs.  (Hat tip to Steve Clemons and New America Foundation’s indispensible “Views on the Global Economy: Your Daily Briefing” (July 6, 2010).)

Mr. Duy cites statistics and provides graphs illustrating the problem. His recounting of conventional wisdom on this subject is spot on. His links to a recent exchange between Yves Smith and Rajiv Sethi are also worth following.

But most interestingly, in view of Jeffrey Immelt’s Rome comments, is the three bloggers’ focus on former Intel CEO Andy Grove’s important Bloomberg.com article, “How to Make an American Job Before it's Too Late.”  Mr. Duy quotes Rajiv Sethi: 

The Financial Times has reported provocative remarks made in Rome last week by General Electric CEO Jeffrey Immelt to a group of Italian executives.

The whole article deserves reading, but I want to focus on one FT quotation of Mr. Immelt:  "People are in a really bad mood [in the US].  We are a pathetic exporter . . . we have to become an industrial powerhouse again but you don't do this when government and entrepreneurs are not in synch."

A dispute over oil rigs in Venezuela shows that not all the risks of oil drilling are environmental. On June 24, Reuters reported that the Venezuelan government has seized 11 rigs from Helmerich & Payne, an American drilling services firm. The Texas-based company had stopped production at the rigs and said that Venezuela’s state oil company, PDVSA, owes it about $43 million.

RiskMetrics ESG Analytics Oil & Gas Sector analyst Dana Sasarean says that oil services firms face political and security risks worldwide: