Updates on the CSRIC designation and SEC climate disclosure with Jenny Coombs MSF,CSRIC,CRPC, College for Financial Planning
On this weeks ESG roundtable: More financial professionals sign up for the CSRIC each year. A pragmatic approach to financial advocacy. And what is the SEC proposing in the new climate disclosure rule?
This transcript has been edited for clarity.
Dan Carreno, Ethos ESG
Thank you for joining us for another addition of The Ethos ESG Podcast, where we break down the latest developments in the world of sustainable and responsible investing. I'm Dan Carreno and with me today is the Ethos ESG, Experience Manager, Kevin Jarussi. Kevin, how's everything in Paris?
Kevin Jarussi, Ethos ESG
Everything's pretty good over here, here. Thanks, Dan. How is it in Denver?
Dan Carreno, Ethos ESG
It's good. Also with us today is Associate Professor at the College for Financial Planning and the lead instructor for the Chartered SRI Counselor designation, Jenny Coombs. Jenny is good to be with you again. How are you?
Jennifer N. Coombs, MSF, CSRIC,CRPC, College for Financial Planning
I'm doing well. Thanks Dan.
Kevin Jarussi, Ethos ESG
Vermont's all right. Vermont's a good place. So too
Dan Carreno, Ethos ESG
On the agenda today, our round discussion and then if we have time at the end we'll engage in a little ESG trivia. Before we kick off the round table discussion, I would just like to remind our listeners that this content is being brought to you by Ethos ESG, a financial technology firm that provides values-based investing tools, impact focused marketing and ESG research capabilities. Please go to www.ethosesg.com to learn more, and you can sign up for a free trial there, and you can try out the powerful software for yourself. With that being said, why don't we start with Jenny.
Jennifer N. Coombs, MSF, CSRIC,CRPC, College for Financial Planning
So in the CSRIC program, we're actually entering our fourth year and we will have the fifth version of the program release in about a month from now. So that's what I've been up to recently, taking a look at some of the areas where we can update the program and make things a little bit better. I actually have some enrollment numbers for you if you'd like to hear about those. As of this week, we have 1060 enrollments, total, and 770 graduates. Now that discrepancy there is, there's a few reasons they either take the program and then just don't test to receive the designation. There are certain programs that have been released that are designed to cater to different people in the financial services industry. For instance, the CFA Institute has a certificate program that's designed around financial analysts. This one is primarily geared towards financial advisors and financial planners. Those who would work with client's money. The Sustainable Accounting Standards Board, SASB, has the FSA designation, designed around corporate accounting. So it depends on what area of expertise you are in the financial services industry. Demand itself is, is strong. Canada is one of the countries in the world where they have the highest proportion of dollars under management dedicated to sustainable investing. I believe it's over 60% at this point. Over three quarters of investor there noted that they want to invest in sustainable investing, but less than a third of them were ever asked by their financial advisors if they were interested init. 27% said they've never been asked. Hmm. And that's in Canada. So there's a lot of gaps to fill in the education front. And that's what we're doing.
Dan Carreno, Ethos ESG
Can you comment on how the curriculum has evolved since the, the start of the program?
Jennifer N. Coombs, MSF, CSRIC,CRPC, College for Financial Planning
In the beginning it was geared towards looking at broader trends in this space and, and more definitional kind of things. I've geared a lot of the discussion lately towards impact investing primarily. It's helpful to link things back to the Sustainable Investment Goals. That's not just some nicety that the United Nations created. It can actually be useful in looking at the sub goals for each of those SDGs and then trying to come up with a portfolio that doesn't necessarily address everything, but it's a good start.
Kevin Jarussi, Ethos ESG
Is it something that it's really focused on the coasts with not much in the heartland of America or is it spread out?
Jennifer N. Coombs, MSF, CSRIC,CRPC, College for Financial Planning
You'll be surprised to hear this, but it's literally a hodgepodge of people. I can't give you a broader demographic because there isn't one. I always try to survey students when they come into the initial class and I look at the breakdown by age, by geographic location, by profession, where in financial services they're located, they're all over the place. I've got just as many students in the heartland of America as they do on the west coast and New York and Florida.
Dan Carreno, Ethos ESG
Well, Jenny, thank you so much for the update. I'll keep us moving along here. How about you, Kevin what's on your desk?
Kevin Jarussi, Ethos ESG
I read an interesting article a few days ago from EcoBusiness on how ESG advocates should acknowledge investors' reality instead of fighting it. Little real world progress has been made on the environmental as well as social front. And one of the quotes from this that stuck out with me is ESG advocates should acknowledge investors' reality rather than trying to fight or change it because businesses will be held accountable by their investors. If they do not make more money, ESG proponents must make the business case for such standards. If a company's positive ESG impact will increase its profits, investors will stop at almost nothing to maximize that impact. I'm newer to the ESG space, I'm learning here as I go. And this article, as I keep reading so many struck me as a middle ground between reality and idealism.
Jennifer N. Coombs, MSF, CSRIC,CRPC, College for Financial Planning
There's a theory that was developed by an American sociologist called legitimacy theory. And it kind of feeds into the concept of stakeholders as well. Legitimacy theory is that the onus is on the company not to screw up. They're the ones with the ball in their court. They've entered into a community and all eyes are on them to see whether or not they succeed. It's kind of hard to maximize profits if you're poisoning the water, if you're mistreating the people, if you're cutting down all the trees the. Society will look at that and either legitimize the organization or delegitimize the organization. Its like natural selection for corporations.
Kevin Jarussi, Ethos ESG
There was also a focus on materiality. Obviously something that's material to a tech company is going be different a lumber company. By focusing on what can be changed from a material standpoint, that will increase profits, there's abetter chance of the ESG criteria being recognized or respected.
Dan Carreno, Ethos ESG
The last thing that I was going bring up in the round table discussion is the new SEC proposal regarding climate disclosure. If folks out there have not been tracking this story, the general idea here is that the SEC has been requiring public companies to disclose all kinds of risks that are important for investors to know. Now that that climate change is really starting to impact our daily lives. It is important for companies to disclose those types of risks as well, whether it be credit, risk, supply chain, risk, reputational risks that are all being impacted by climate change. So the SEC has put this proposal forward that those types of closures will be mandated at some point in the future. It's not official yet. There is a 60-day public comment period in effect currently and it is expected that this will pass in that it will go into effect at the end of the year, that would then require public companies to start disclosing these risks starting in 2024. So curious what you guys think about how this will impact the investing landscape.
Jennifer N. Coombs, MSF, CSRIC,CRPC, College for Financial Planning
There's some pretty high percentage of companies in the S&P 500 already that disclose something. What this does is it just allows the SEC to have a way to verify that those numbers are aren't made up, that they make sense, that they're useful, and they give some degree of legitimacy to the data that's being provided.
Kevin Jarussi, Ethos ESG
Do you think this is a consequence of reporting being made more standardized and more transparent within the European Union?
Dan Carreno, Ethos ESG
Most companies do not operate within national borders. It's global markets, global economy's. Similar rules are already in place in many places internationally. So it just makes sense for it to apply across the board. One more thing I'll mention is that many investors are going to attempt to model that information anyway, based upon peer group and industry level data. So, probably better to just be upfront about it and disclose it. We'll move on to a quick round of ESG trivia here. Always my favorite part of the podcast. Can you tell me what three asset managers are responsible for casting 25% of all proxy votes for S and P 500 companies
Jennifer N. Coombs, MSF, CSRIC,CRPC, College for Financial Planning
Is BlackRock, Vanguard, and State Street.
Dan Carreno, Ethos ESG
Next question. Due to the Russian invasion of Ukraine, some ESG focused investors have recently changed their view on companies in what sector?
Kevin Jarussi, Ethos ESG
The defense sector.
Dan Carreno, Ethos ESG
Correct. Final question here. Can you guys tell me what Arizona-based renewable energy company, a solar company, gets the best impact rating for Climate Action on Ethos? ESG?
Jennifer N. Coombs, MSF, CSRIC,CRPC, College for Financial Planning
Is it Sun Run?
Dan Carreno, Ethos ESG
It's actually FirstSolar. Thank you for tuning in today. And we will be back soon with another episode of The Ethos ESG Podcast.
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