The Rise of ESG: Investing in the Change Clients Want to See in the World.

Your clients are becoming more concerned about environment, social and corporate governance (ESG). At the end of 2020, 33 percent of the $51 trillion in professionally managed investments in the U.S. were managed with ESG issues in mind, according to the Forum for Sustainable and Responsible Investment. And in May, the SEC encouraged more companies to improve their ESG financial disclosures aicpa.org/news/article/esg-reporting-whats-the-value-of-esg).

But the rise of ESG has many steps to climb before it truly arrives. To see how that process is developing, we talked to BPM's ESG practice co-leaders Su Rim, CPA and Kristi Staley, CPA.

From your perspective, what is the interest of clients in ESG accounting?

We have seen a sharp rise in interest, probably better described as curiosity, over the past year as more clients are beginning to understand the impact of ESG on their business in terms of how much they have to gain and to lose. In addition, the pandemic amplified the need for everyone to tackle issues related to climate change and social justice. The growing interest of employees, boards, customers, investors and other key stakeholders has also made ESG a topic that is difficult for companies to ignore.

ESG has become a more prevalent discussion topic at board meetings and strategic planning. Many of our clients are just starting their journey, while others are turning to us for ways to improve their ESG programs.

What would you say to CPAs who think it is still early to be addressing ESG?

Given the recent interest from investors, lenders and supply chain scrutiny, all businesses are likely to be impacted and will need a variety of support from trusted advisers. While these initial needs are likely to be a primary function of advisory including materiality assessments, strategy, road-mapping, IT and HR support given the increasing importance of ESG-related disclosures and the demand for quality information, it's likely that attest and assurance services are going to be needed. As we move toward a world where ESG is commonplace, CPAs are in a position to embrace the opportunity to better serve their clients. ESG-related disclosures are a major consideration in business decisions like investments, mergers and acquisitions, and partner or customer engagement. Investors are noticing the varying quality of those disclosures, largely due to a lack of standardization. As we move toward standardization and mandated disclosures, CPAs should expect to...