Season 2: Episode 04 - Showing Evidence of Impact with Jenny Coombs of Ethos ESG
LISTEN TO THE FULL EPISODE
SUBSCRIBE
Download and subscribe wherever you get your podcasts.
MENTIONED IN THIS EPISODE
Jennifer Coombs on LinkedIN & Twitter
Linda Rogers: [00:00:00] My name is Linda Rogers and this is Investing Forward.
Linda Rogers: [00:00:15] Let's talk about evaluating your portfolio for impact. Right now for clients, I show a current and recommended portfolio that compares asset allocation, fees, risk, and return. What I don't do a great job of is showing a detailed comparison between the current and recommended portfolio when it comes to impact. I use Morningstar ESG metrics on the back-end, which is what most advisors use that look at ESG data, and I really like Morningstar. But there's a growing number of pretty cool solutions that are taking ESG and impact data to a new level. We're talking the ability to quickly and clearly see how your funds compare to peers when it comes to renewable energy, fair labor, health care, racial justice, biodiversity, and more. Ethos ESG is one of those solutions.
Linda Rogers: [00:01:14] Remember, ESG data is just data. You can choose to look at it or not. Many investors come to ESG data initially for risk mitigation. For example, understanding how prepared a company in your portfolio is for an ESG-related risk, such as climate change or climate regulation. But after starting there, they want to go further and understand also how companies they're invested in are impacting the world around them, and they want evidence. This is where Ethos ESG can help. Today, I'm joined by Jenny Coombs of Ethos ESG. I saw Jenny speak at the Ford Foundation over three years ago. She's a fantastic speaker and writer in the impact investing space.
Linda Rogers: [00:01:54] Thank you for joining us. Go ahead and tell us about yourself.
Jennifer N. Coombs, Director of Client Success (Ethos ESG) at ACA Global, Adjunct Professor at The College for Financial Planning
Jennifer Coombs: [00:01:58] Sure. My name is Jennifer Coombs. I've spent about 16 years in the financial services industry. It's mostly been on the equity research side of things - equity, research, and analysis. But I've spent the past six years as an Associate Professor at the College for Financial Planning. They were the developers of the CFP® program - they developed that back in 1972. But during my time there, I developed the Chartered SRI Counselor™, the CSRIC™ designation, which is the first sustainable investing education program for advisors in the US, which is kind of nice. I'm pretty much self-taught in the sustainable investing space over that 16-year time frame. When I left Wall Street back in 2016, I wanted this to be my primary focus going forward, and I've given two TED talks on the subject, so you're welcome to search those up. They're on YouTube somewhere. I've written dozens of articles and was cited in a bunch of media outlets such as The New York Times, The Washington Post, MarketWatch, and you can find those too. I sit on the ESG Advisory Board for Investment News and the Education Committee for US SIF, the Forum for Sustainable Investing. And just a side note, I'm in Vermont, which is my home state, and I'm back here now. I've been here for about two years and I have two cats, Miso and Zuzu. And what free time I do have left, I enjoy painting. I do a lot of art and try to not necessarily sell it, but just for fun. I like to do that.
Linda Rogers: [00:03:44] I love it. That's great. Well, tell us more about Ethos ESG.
Jennifer Coombs: [00:03:49] So Ethos is pretty awesome in my opinion. My humble opinion. They provide values-based investing. So it is a web-based software service. And our goal really is to enable and try to achieve a sustainable future. So we offer ESG data for financial advisors, asset managers, asset owners, investors, corporations, tech platforms. And the idea behind most of the, or really the website in general, is to be as transparent as possible in this space. So we have access to over 2 million data points for ESG, but we focus it really on 280 specific criteria for evaluating companies. To my knowledge, there's about 20,000 securities on the platform and growing. It's getting bigger all the time. And we focus on 45 causes that are both the overarching cause and the sub-cause of the UN Sustainable Development Goals. So those are really like the crux of the impact portion and client reporting and engagement is also a big piece. We enable regulatory compliance by being able to run reports related to scope 1, 2, and 3 emissions. And we can really help investors design portfolios that are going to optimize their impact.
Linda Rogers: [00:05:24] Great. And you've done so much. I mean, how did you find Ethos and decide to work with them?
Jennifer Coombs: [00:05:30] So I'd been familiar with Ethos for about the full duration of the time it had launched. I met Luke Wilcox, the founder, about a year and a half ago because a professor that had been teaching my program at Georgetown had actually introduced me to him and, you know, really loved the software, thought it was amazing, and really loved the transparency element of it for being able to go back and see exactly how the data points were collected. And maybe the end of last year or so. I wanted to work in a space where I could really make a difference, specifically in the ESG world. So for years, I would teach financial advisors and they would start at like a like on a scale of 1 to 10, maybe a zero or a 1 in terms of their knowledge about it. And I could get them to like a 7 or an 8, but I couldn't quite get them to a 10 because I didn't have the resources available. So in this role now as Director of Client success for Ethos, that enables me to do that. It enables me to help with the competence factor, being able to understand and use data related to ESG, but also the confidence factor. So that's something that's really a difficult thing to convey to Advisors, is feeling comfortable enough to discuss and recommend ESG investments and not be so hesitant about it to come across and have that confidence in the investments that you're recommending is really important.
Linda Rogers: [00:07:10] Yeah, and I have heard you speak and you're fabulous. And I have seen I've seen one of your TED talks. I didn't know you had two - an overachiever - so one of the things that you have written about that really resonates with me is the pyramid. You often use this to describe where investors can find a comfortable entry point into ESG investing. So can you share what this is and how Ethos ESG can help with some or all of those levels?
Jennifer Coombs: [00:07:40] Yeah, absolutely. We often think that, you know, and it comes across that all investors are looking for impact right away. And that's usually something that comes last in the grand scheme of things. So the pyramid that you're referencing and this is some way that I help to kind of compartmentalize different investors in the space to recognize that they're not all the same and not necessarily all looking for the same thing. So if you imagine a pyramid, there's three levels of this pyramid. The bottom level is called integration. The middle would be value and then the top would be impact. So the integration portion on the bottom is usually the entry point. For most investors, it probably constitutes the biggest piece of all investors in the space. And the deal with that is that they're looking to seek a few things. They're looking for financial returns, which all of these levels are aiming to do in the first place. There's that element of risk mitigation and using ESG as a quality check and sometimes a tipping point if they're presented with investments that might otherwise be financially equal. So that really is the entry point, is using it as a quality check, if you will, for understanding their securities. Now, if you move up the pyramid into the value level, this is where you're looking for risk mitigation and - sustainable investing is always about an AND never an OR - so we're always adding something as we go up. So we're looking for risk mitigation, but at the same time, we're also ensuring that the investments that we're looking at reflect personal values and convictions about the world and what we ultimately want to achieve. And then if you get to that tippy top of the pyramid where it's we've reached the impact level, it goes for all of the same things that we just talked about, and there's this other level of showing evidence of impact happening in your community. So being able to go back and look and see how your money actually made a difference. I'm very happy that Ethos actually did this backwards and started with the top because the impact investors are really the hardest market to serve effectively, at least historically, because there was a difficult process of being able to demonstrate how impact was actually happening. And through the metrics that we collect, we're able to bring that to them. But really we can service that entire pyramid because it does go back and look at risk as a big piece of why people get involved in that. And then different markets that have needs regarding their values can also be served in there too. So religious investors, those that adhere to a particular lifestyle like veganism, can achieve that too. So it's really an all-encompassing software. But yeah, I do like to use that pyramid as an example just to show that not all investors in the sustainable space are the same.
Linda Rogers: [00:11:02] Yeah, and I did get to get into the software a little bit and check it out. And I have to say, when you talk about showing evidence, it makes me think of those impact stories because data is great, numbers are great, but stories have a different kind of power. So I just love that that does flow through. So can you just tell me a little bit more about that and kind of how you source that information?
Jennifer Coombs: [00:11:27] Absolutely. So the impact stories are largely, they come from third party corporate watchdogs, mostly organizations like 'As you Sow' because they're very actively involved in the shareholder advocacy space. And they will follow different resolutions that are filed with firms and they can give examples of meaningful action that were taken on behalf of shareholders. And I really enjoy reading them, especially if it relates to something that I've watched like a documentary or read about in the past that's been highlighted as a problem. I know many investors probably feel the same way. They like to see that one that I love to cite often was there was this great documentary on Netflix and I can't find it anymore, and I don't remember the name, but it was about it was a human rights documentary about the tomato farmers in the southern states and just the egregious practices that were being, you know, caused to the farmers. Most of them were illegal immigrants. And just, you know, in the fact that they were illegals made them be treated a lot differently and just in horrible ways. Through pay and through just general abuse. And there's there were some great impact stories recently about how advisors had worked together with their investors to talk to the grocery stores that sourced a lot of these this produce to go backwards and actually encourage those farmers where they source their tomatoes to make sure that they were taking care of those workers. So that was one that I kind of liked a lot to see how that was implemented.
Linda Rogers: [00:13:18] I'm sad that you can't find it because I would love to watch that, but maybe we can dig it up somehow.
Jennifer Coombs: [00:13:23] I might be able to search for it. I'm sure it's still out there.
Linda Rogers: [00:13:27] Well, tell us about the carbon neutral certification program, because I also read about that recently.
Jennifer Coombs: [00:13:35] So the carbon neutral certification program is pretty new. And one thing that I'll note about Ethos' Platform is that we're very good at sourcing data for scope 1, 2 and 3 carbon emissions. I'll break those down - define them for you just so you know the difference. So scope 1 emissions are direct emissions from a company's core operations. Scope 2 emissions would be indirect emissions from purchased energy and then the scope 3 emissions, which are really the hardest ones to measure overall, are the indirect emissions that come from the broader value chain. So they are produced really by suppliers and by their customers, carbon emissions caused by the market that they serve basically. So it's estimating really, it's a lot of estimating going on for scope 3 emissions and so Ethos offers this carbon-neutral certification program for mutual funds and ETFs. And through the program what we do is we perform an independent analysis of a fund's carbon footprint and to see also if they use carbon credits or some kind of offset to verify whether the fund is going to be carbon neutral over a specific period of time. We verify the scope 1 and 2 emissions of every holding in the fund. And then, you know, carbon credits require proof of some kind of purchase from an approved carbon credit provider, not just, you know, throwing money away to offset that. And then once the fund is certified carbon neutral, we promote it through a little badge that's got our logo on it. And you can put that on the prospectus and everywhere else that you want to for the fund. And we like to advertise that to advisors through our network. So it also grants, you know, the rights as well for the fund advisor to promote that as carbon neutral as well because they can feel comfortable knowing that it's gone through this process of going through a third party. So far there's only two that have met the criteria to be carbon neutral by us. So Change Finance is US Large Cap, fossil fuel free fund or ETF, and CHGX is the ticker. And then VegTechs Plant-based Innovation & Climate ETF and that's EATV. So both of those are out there and exist and, you know, really set a good standard for the industry, which I think is great.
Linda Rogers: [00:16:19] That is great. Thanks for sharing about that. And what is the best way for people to stay in touch with you?
Jennifer Coombs: [00:16:26] So you can find me on LinkedIn. I'm just Jennifer N. Coombs on LinkedIn and my Twitter handle is @JNCOOMBS as well. And yeah, you reach out to me on both of those platforms if you'd like, and if you are so inclined, you can search for those YouTube videos of my TED talks.
Linda Rogers: [00:16:49] I'm going to find them and I'm going to put them on the podcast website so people have that information as well as your contact information. Wonderful. Well, thank you so much for joining me.
Jennifer Coombs: [00:16:59] You're very welcome. Thank you.
Linda Rogers: [00:17:02] I did find both TEDTalks and also Jenny sent me the name of the documentary that she was talking about, which was 'Food Chains'. So I will link all of those on the Investing Forward Podcast website. Thanks for joining us.
Linda Rogers: [00:17:14] Linda Rogers is the owner of Planning Within Reach, a registered investment advisor, Planning Within Reach produces the podcast and makes it available on its website and through other distribution channels. Linda Rogers and any guest on the podcast are providing their own views and opinions and are not necessarily the views and opinions of planning within reach. Nothing on the podcast should be construed as a solicitation or offer or recommendation to buy or sell any security investment. Advisory services are only provided to investors who become Planning Within Reach clients pursuant to a written investment management agreement. Clients of planning within reach may hold positions in securities discussed in this podcast. Past performance is no guarantee of future results. All investments involve risk and may lose money. The Investing Forward podcast is for informational purposes only and should not be relied on for any investment decisions. Consult with a financial advisor, accountant, attorney, or conduct your own due diligence.
Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego County and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.
Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning and ongoing impact-focused investment management services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.