Anyone here have an opinion on the CFA ESG exam yet? My manager wants me to take it. I purchased the materials. Seems like a lot of regulation. Not sure how much it will help in the real world yet. Let me know your thoughts!
Never in a million years hahahaha
The whole idea of ESG in its current form, in my opinion, is totally bogus. However, I must separate that from your question, which I think is on the value of the exam. To that, I would say that having a credential like this could offer some short-term benefit, depending on what you were after. For me, I would never want to get caught dead in a place where they would require staff to get this credential; to me that would demonstrate that the shop was more concerned with virtue-signaling than with investment results. But if it provided some incremental foot-in-the-door benefit (i.e., all else equal on two candidates, and one person has this and the other doesn’t type situation), I’d say, “why not” — although I would actively attempt to cover up the fact that I had it later in my career after using it for what it was worth.
Thanks, that is what I thought too. I already have my CFA. Figured I’d put 50-75 hours into this and see what happens. May end up leaving out of my CV going forward.
I’ll offer a contrary opinion, I have a competing ESG designation. I work for one of the largest buyside shops with a clear focus on ESG (including direct engagement with management) and cover some very negatively exposed sectors. There are two lenses to look at this.
The first lens, which every front office individual understands is that this is first and foremost a sales driven business: you have to be able to win assets and everything you do supports that objective, including performance. Being truly differentiated in that space is a substantial benefit and we are continuing to win assets in a major way. That’s real and anyone of any importance in investing gets this.
Secondly, there are the fundamental elements of ESG and they need to be viewed in a few aspects. It’s not simply, x is bad, we don’t buy companies involved with x. It’s more nuanced. The first aspect is in material non-financial disclosures. Engaging with and rewarding companies with better reporting on material ESG risks in standardized, comparable formats. This is not new, materiality has changed over time and reporting of material non-financial items such as production performance, number of stores, sales volumes and other useful metrics have steadily expanded since the launch of standardized accounting standards. It is useful to better track exposures to regulation and be more on the forefront and I can directly recount several instances in my sector coverage where proper disclosure of ESG related metrics has put us a few steps ahead on material moves. You could argue its simply fundamental analysis using more disclosures and that is equally correct, it’s just an expansion. Another aspect of this lies in time horizons and better management. Whether it be Dimon, Buffett, management themselves or a litany of others, there has been a chorus of investors pointing to short-termism and quarterly benchmarking as destroying investor value. Putting quantifiable reporting metrics and focus around better management of mid and long term risks helps rebalance that focus and reward a longer term focus. An additional aspect worth noting is that if two companies have similar financial performance profiles, but you find one of them having more transparent reporting around ESG factors with better performance (few safety infractions, fewer regulatory breeches) it can be a clear indicator of better operating culture and discipline leading to better tail risk mitigation. There are strong linkages between things like minor infractions and data breeches or pipeline failures that are otherwise hidden tail risks.
ESG is definitely still in its early stages and over time it may just roll up into broader fundamental analysis with people wondering what all the fuss was about. Financial reporting standards themselves went through stages of evolution. Personal advice: Those who go furthest don’t lose sight of that fact that everyone in the organization’s overarching job function is to win assets. Be a team player, do what’s asked while filling in the gaps with your own perspective and you’ll go further than digging your heels in.
I agree with this 100%.
I think getting a head start on ESG is a good idea. That is growing so fast right now and virtue signaling or not, ESG is getting more and more headlines which will probably lead to opportunities for those who know what it is all about.
I’m thinking about doing it. I’m up to my eyeballs in that stuff at work right now. A real ESG-regulatory-tsunami in the EU. I find it so boring but something tells me that becoming somewhat of an ESG-specialist might pay off in the long run.
I think the CFA ESG one is more reporting based (but with CFA brand association) and SASB FSA is more broad big picture / industry based. Worth considering which one suits your needs.