Transcript

Meeyeon (00:13)
Hi everyone and welcome back to yet another episode of our FinPod podcast. Today, we’re talking about What’s New at CFI and we are going to talk about the second piece of our ESG mini module series.

So, we’re to talk all about the S today, so social issues and materiality. The environmental piece seems to always be a little bit more tangible for people. I think because it’s maybe the most talked about, it’s kind of been around and publicized the longest.

But I’d love to hear from the one and only Noah Miller about what the S is all about.

Noah Miller (00:50)
Yeah, I mean, such a great question. And that’s a question we discuss frequently at Roe Impact or with our clients around. All right, we get the climate risks and opportunities, but the social stuff always feels a little squishy. It always feels a little soft. So I’m going to call out a few examples that are going to hopefully fortify the squishiness here around social issues.

We have had some historic labor strikes that have cost the US economy billions of dollars from UPS to the United Auto Workers, etc. That is a perfect example of the financial implications for poor social management performance. So that’s one kind of stark example on one end. Another, going back to the green skills gap is

that study by LinkedIn demonstrated that we have a skills gap that is preventing us from essentially transitioning to a net zero economy. So, back to that stat, demand is about eight to one on supply. And that is, you can imagine if you start to unpack that a bit, we’re missing a lot of workforce for this climate transition. So that’s another element on that human capital management front from a social issue.

And then, you know, when you take a couple of steps back, that social license to operate, especially as companies become larger and enter new markets and geographically are physically present in new areas, that local community’s acceptance of an organization is becoming increasingly critical to essentially being able to operate in that market.

Coca-Cola, over the years, has been essentially striked out of certain towns and markets because of their use of local scarce water resources,

how they’re treating local employees from the community, and they’ve been boycotted. So those are some examples of what are these social issues and how are they actually a representation of commercial risks and opportunities. Those, I think, speak pretty loud around the financial implications for the S in ESG.

Meeyeon (03:06)
So that’s been an eye-opening and informative piece for me. And I guess like my next question is then kind of an extension of that point. So with the S of ESG, does it create jobs in the same way that the E does? So for example, for any finance professional, let’s say someone at a pension fund or general investment manager, they always have a fiduciary duty, of course,

in their role, especially if you’re a portfolio manager. But does the S kind of play into the role of portfolio manager in a way that it does create, it actually creates jobs?

Noah Miller (03:52)
Yeah, great question. So when you’re thinking about all the jobs created by the climate side, by the E side, there’s this notion, it’s referred to as the just transition, which is essentially the social implications for the global transition to a net zero economy. So that right there is a pretty, I think, good indicator of if you’re working on climate, you’re working on stakeholder issues. Because at the end of the day,

We have solutions to a lot of these challenges, but we have stakeholder challenges in building consensus, aligning collective action, kind of balancing priorities. So any sort of environmental issue engagement inherently is gonna involve quite a bit of stakeholder engagement. At the end of the day, know stakeholders are just people and collections of people that we depend on for our business and vice versa. So anything in this space is gonna have some sort of social result, whether it’s direct or

indirect. So, short answer, any environmental climate job will have an S, maybe lowercase in certain roles, but it will definitely be there.

Meeyeon (05:03)
And then one last fun question is like, you think there’s any particularly kind of hot topic as an issue today that our learners might be interested in?

Noah Miller (05:14)
Yeah, well, you know, just taking one step back, know, 2020, 2019, 2020, you know, DEI was huge because of, you know, the tragic death of George Floyd and the global reckoning on systemic racism. Then, you know, a few years later here, we’ve had some historic labor strikes. So labor and, you know, managing the labor force has become a big hot topic issue. And then, you know, I’d say now it’s these social issues are being embedded into ESG,

SG regulations globally. So you’re having this sort of emergence of social issues being recognized as part of the climate discussion and now being increasingly incorporated into more and more regulatory disclosures around human rights adherence, supply chain management, and just being able to essentially take care of the stakeholders that we depend on across all the nodes of the value chain that we’re in.

Meeyeon (06:10)
So, now we are more than halfway there. We are two-thirds of the way to talking fully about our ESG mini-module series. We’re going to move on to our G discussion next. Depends on which order you’re listening to this, but regardless, it has been great chatting with Noah today. I hope you’ve enjoyed the time as much as I have, and we will see you all,

or you will hear us in the next episode very soon. Bye.