The ESG Update Episode 22: What's Up with the CSRIC™?
Transcript
This transcript has been edited for clarity.
Dan Carreno, Change Finance:
Welcome to The ESG Update presented by Change Finance. I'm Dan Carreno.
Brittany Damico, Change Finance:
And I'm Brittany Damico.
Dan Carreno, Change Finance:
Brittany and I manage the business development efforts here at Change Finance. We are an ETF provider dedicated to environmental, social, and governance investing. And our mission is to help investors align their portfolios with their values without sacrificing returns. Brittany, what's happening?
Brittany Damico, Change Finance:
Oh, not much. It is a very rainy day here in Seattle. So, waiting for summer.
Dan Carreno, Change Finance:
Gotcha. Question for you. Can you tell me what a sis-ric is, Brittany?
Brittany Damico, Change Finance:
Um, do you mean the CSRIC?
Dan Carreno, Change Finance:
Yes. That's exactly what I meant. It's the Chartered Sustainable and Responsible Investing Counselor designation provided by the College for Financial Planning. Do you know anybody that happens to have that designation, Brittany?
Brittany Damico, Change Finance:
I do. I know quite a few advisors who have it, and I've heard really great things.
Dan Carreno, Change Finance:
That makes total sense to me because I am in the process of getting the designation, and I've been really enjoying it. I've been geeking out on all of the ESG data. So much so that I have asked the creator, lead author, and lead instructor for the CSRIC designation from the College for Financial Planning to join us today. And that is Jenny Coombs. Jenny, welcome to The ESG Update. How are you today?
Jenny Coombs, College for Financial Planning:
I'm well, thanks, Dan. How are you? Hi Brittany.
Dan Carreno, Change Finance:
I have spoken to quite a few financial professionals that are interested in getting more involved in the sustainable investment industry or getting started on it. A lot of folks have asked me about a good starting place. Where do I get some general information and some background so that I can start working this into my practice? Now that I'm going through the designation process, this is my number one recommendation. So, I was hoping, Jenny, that you could tell us a little bit more about the curriculum and the value for financial advisors. So, we have a number of questions for you, but before we got into that, I was hoping that we could get your feedback on a new study from Cerulli. The study from Cerulli is summarized well in an article from InvestmentNews, which is titled, “Advisors are Missing the Boat on ESG.” Cerulli surveyed a number of advisors last year in 2020. And what they found is that 72% of the advisors surveyed said that lack of demand from clients was either a significant or a moderate factor in why they are not embracing sustainable investing and why they're not really recommending it to clients. Many said that just a handful of clients ever ask about it. And if they do, they're typically the wealthiest clients that have the luxury to think about that. Cerulli also surveyed a number of retail investors, and the response there was quite different. They found that 44% of the investors surveyed would prefer to invest in an environmentally and socially responsible way. In households that make up to $250,000 a year, so not necessarily the ultra high net worth individuals, they found an even higher level of interest. And I'll close the summary of the article with a quote here from Matt Belknap, a senior analyst at Cerulli. He says, “based on our research, advisors generally underestimate the demand that their clients have for ESG and should not interpret lack of proactive questions as a lack of client interest.” Jenny, I’m curious to hear kind of how that jives with your experience in the industry.
Jenny Coombs, College for Financial Planning:
That quote sums it up perfectly. If clients don't know about it, how can they demand it? How can they demand it? When the first ETFs ever came out, who would go out of their way demanding it when they have no clue what it is? Investors rely heavily on the knowledge and information provided to them by financial advisors. So, if you don't have financial advisors providing that information to clients, they're just not going to know. And certainly, those high net worth clients have a little bit more knowledge in this area because they've done their research. They read articles. They're much more active in what's new, and they’re up to date on the investment world. Naturally, they'll have a propensity to lean towards this. Do I think that gap will close? Of course it will. Just about every investor out there today knows what an ETF is. I equate it to that. But it has to be understood in order to be presented to clients and have them understand it.
Dan Carreno, Change Finance:
I would imagine then that you feel as though the CSRIC designation is a solid foundation of knowledge and expertise that an advisor can obtain in order to have the confidence to go out and start bringing this topic up with their clientele more often. With that in mind, could you tell us a little bit more about your background and how you came to create this designation?
Jenny Coombs, College for Financial Planning:
Sure. My background is in stock trading and equity research. I spent about eight years in New York City working with a few different Wall Street firms. And during my tenure, I was inspired to learn more about sustainable investing. I had never heard of it until I started working with assets that used these screens. So, for about five or six years, I was self-educating. In 2015, I decided to devote more of my time to educating investors on how to properly evaluate their portfolios. That led to a Ted Talk in 2015 on this very subject for an audience that was really looking for a way forward from all of the distrust that had been brewing around Wall Street firms for a long time. And it really discouraged them from even getting involved with investing. I created this designation when I was relocated to Denver, Colorado, in 2016. In the beginning, I was asked by The College for Financial Planning to develop a designation specifically around sustainable investing. At the time, advisors were asking about it. So, this was a way to bring them on board and get them interested.
Brittany Damico, Change Finance:
That makes, that makes a ton of sense, Jenny. Would you say that the primary goal when you were developing the curriculum was to promote this positive social change? What were the other goals that you were focusing on while you were designing the curriculum?
Jenny Coombs, College for Financial Planning:
There were a few goals. That's obviously one of them: to educate advisors on this and engage social change, but understanding that there are many advisor groups that have found a bit of a gap. They have some clients inquiring about ESG, and no one on their team is knowledgeable in this space. That demand helped to drive the need for this designation in the first place. There are programs out there that you can go through in an hour or two to learn some very basic information. But this is intended to be more intensive and much more focused on how financial advisors can add value in the process. The goal in designing the curriculum was to give them the tools to be able to do that. At the time, there was nothing like this. This is the first and only SRI-focused designation program in the United States actually.
Dan Carreno, Change Finance:
That was going to be one of my questions. Are there any other options? I think this is the only game in town, right?
Jenny Coombs, College for Financial Planning:
In the United States. There are programs in Canada, and the CFA Institute in the UK has a certificate program. I believe that Australia and New Zealand have another program as well. You can find these on an international level, but I developed this one in partnership with USSIF, the Forum for Sustainable and Responsible Investment. They were a group founded in Washington, DC, back in the eighties. They're the lead collector on data within the sustainable investing space. Everything in this program is very US-centric. So, for advisors in the US, this is obviously important for them to know.
Dan Carreno, Change Finance:
I'm going through the curriculum right now, and I see a lot of data from USSIF in there. Could you give us some examples of topics and concepts that folks would expect to grasp if they sign up for this?
Jenny Coombs, College for Financial Planning:
It's broken down into seven modules. The first module tees up the basics of the definitions and provides a little bit of history to understand that this just didn't come out of thin air. This has been around for a really long time in some form or another. In module two, we go into the different strategies that we can use for sustainable investing. Many just think there's one. I just eliminate all oil companies from my portfolio. That's part of it, but there's plenty of other ways that we can incorporate positive things. We also take a look at how we can be good shareholders and use shareholder advocacy to engage with companies. We can't just ignore the stakeholders to benefit the shareholders. In module four, we look at ESG scores, ratings, and rankings. This is obviously a very hot thing now. So this module breaks down the differences and how they are developed. Then we take a look at how they apply those concepts to developing portfolios for clients. How you can apply this across asset classes. It doesn't just have to be in equities. And then, module six takes a look at fiduciary duty and how it relates back to sustainable investing. There’s still legislation getting tossed around related to the US Department of Labor and their feelings about the use of sustainable investing in things like defined contribution plans. I think that this is a huge growth area in the future. Because for all of the defined contribution plans in the United States, less than 3% of all of the assets have an ESG option available. Then finally, module seven is kind of fun. It goes into a little bit of everything. Global trends and understanding that it's not just US-centric. It's used all over the world. So, it's pretty extensive. I hope that gives everybody a good picture.
Brittany Damico, Change Finance:
Thank you, Jenny. I really appreciate that. I must say that after speaking with the advisors that I know in the field who have already achieved it, I have felt inspired. I'm going to begin studying soon. I'm waiting for the new curriculum to come out, which I believe happens this Friday. I will be on team CSIRC soon enough. For advisors who are interested in pursuing the designation, how long does it take, and what does it cost?
Jenny Coombs, College for Financial Planning:
It costs about $1,300, but there are discounts based on your firm. It doesn't have to be that amount, but that is what our stated price is. It’s comparable to all of our designation programs. It takes about maybe eight to ten weeks to complete the whole curriculum. The idea being that one spends about a week per module and a week reviewing. It’s completely up to the individual on how to pace themselves. There is some new curriculum that's going into this current version. I devote a little bit more time to talking about sustainable finance and how it’s used to analyze companies, as well as a little bit more time talking about the United Nations Sustainable Development Goals because that's a hot topic for a lot of advisors. It will review funds and ETFs that will tie back to those goals for clients that have specific impact needs on. There's also a chapter devoted to how companies can measure and then present impact performance. It's obviously not something that's been standardized in the industry yet. So those three topics are kind of new. It’s always going to be my goal to update the course because, obviously this space changes all the time, and it's important to stay up to date.
Brittany Damico, Change Finance:
Looking forward to it. Thank you so much for that. And then lastly, if listeners would like more information about the CSIRC, where should they go?
Jenny Coombs, College for Financial Planning:
They can always go to the College for Financial Planning website. That'll give you a summary of the topics. They can always reach out to me as well. Also, USSIF has information on their website because we do partner with them, and there are a plethora of resources for a variety of sustainable investing-related topics too. So, you can learn from them as well.
Dan Carreno, Change Finance:
Outstanding. Thank you for all the information, Jenny. We'll start wrapping it up there, but before we do, we want to take a minute just to sit around the campfire and share what is inspirational and interesting in our lives for just a couple of minutes. So, uh, Brittany, next time you're sitting around the campfire with friends, family, and colleagues, what do you have?
Brittany Damico, Change Finance:
I've been revisiting a podcast that I listened to years ago. It's called Stuff You Should Know with Josh Clark and Chuck Bryant. They cover a wide array of topics and have great banter between them. Since I started listening again, I have been full of fun, random facts for the campfire. So that'll be me talking about how polar bear fur isn’t white. Things like that.
Dan Carreno, Change Finance:
I have questions, but we don't have time. Jenny, how about you? Next time you're sitting around the campfire with friends and family, what are you going to be chatting about?
Jenny Coombs, College for Financial Planning:
I just had my first Clubhouse meeting a few weeks ago, and it was a book club for a book that a very good friend of mine wrote, Bola Sokunbi. She is the founder of Clever Girl Finance. She works primarily with women, but specifically women of color and how to get started in their financial lives. She published her second book not that long ago, which is How Investing Works. It's one of the featured books at the end of the aisle in Target stores. So if you go into Target and see her book there, you should buy it because she is amazing. I'm always inspired by her. And just a little shameless self-plug, I did contribute a small chapter in that book.
Dan Carreno, Change Finance:
We’ll link to that in the transcript as well. I appreciate you sharing. For my chat this week is I want to applaud Harley Davidson. They announced that they're going to be spinning off a fully owned subsidiary of the company called Livewire to focus on electric motorcycles. Anybody that knows me knows I'm a bit of an enthusiast when it comes to EVs. It's for a variety of reasons. We tend to think about environmental issues and emissions whenever we think about electric vehicles, but I can tell you that noise pollution is a real thing. I used to live on a very busy street here in Denver, Colorado, which had a lot of motorcycle traffic. And it got to a point where it was so bad that we had to move. So, I fantasize about this world where folks are still riding motorcycles and enjoying it but doing it in a way that's a lot quieter and easier on folks that live right next to major roadways. So, kudos to Harley on this one.
Well, Jenny, Brittany, thank you again for your insights and for spending some time on The ESG update today. I want to remind anyone who is listening that wants to find any of the articles or resources that we discussed during the podcast that you can find those on our website, www.change-finance.com. It'll be under the podcast library under the insights tab. And of course, links are going to be provided within the transcript. And if you have questions or feedback for us, you can always get in touch with us through the website. So, thank you to those that are tuning in and we will be back soon with another episode of The ESG Update.