Chris Joles of Planet Home Lending: ESG– Pay Attention, NOW

Chris Joles is Senior Vice President and Enterprise Risk Officer with Planet Home Lending, Meriden, Conn.

Chris Joles

Conversations about ESG (environmental social governance) and sustainability standards have rippled from investment fund and public company arenas to mortgage banking regulators, investors and consumers. That expansion makes it critical for private companies, especially those in financial services, to consider implementing ESG now rather than later.

ESG methodologies measure risk in three broad areas: environmental, social responsibility and governance. Environmental encompasses carbon footprints and the effects of climate change. Social seeks to measure non-financial factors that can influence a company’s operational efficiency, resilience and reputation. This includes diversity, equity, and inclusion and the way employees are treated. Governance is better known as our good old friend reporting risk.

If managing and tracking ESG seems like an unwieldy task, incrementally tackling the three areas may make it more manageable. In the past few years, Planet Home Lending has moved forward to strengthen its ESG by sharing responsibility and implementing programs across our channels.

Through our social responsibility platform, Planet With a Purpose, we first funded tree planting in National Forests starting three years ago. Our IT division has been implementing eClose, digital mortgage and remote online notary, which all reduce reliance on paper and travel. Meanwhile, our risk professionals were strengthening governance. And, Planet Home Lending’s fulfillment division implemented a training program to develop career paths that grow employees from entry-level through underwriting positions.

This past year the White House declared climate change was a systemic financial risk. FHFA, Treasury, Fannie Mae, Freddie Mac, the Controller and MBA all have discussed the influence of climate change on the mortgage industry. And the recent media firestorm around’s layoffs highlighted the importance of treating employees with respect. It’s clear measuring ESG factors that can influence a company’s results will become more prevalent in 2022.

Plus, proactively measuring and addressing ESG can transform risk into reward by attracting investors, customers and employees, while avoiding regulatory censure.

Why Should I Care About ESG?

While the role of ESG has not been clearly defined in the mortgage industry, the following five forces make it apparent that it’s not a question of if you need to measure ESG, only when:

  • It matters to your borrowers, especially younger consumers.
  • The rest of the world is adopting the standard.
  • Four of the largest investment firms – BlackRock, Vanguard, Fidelity and State Street – consider it when pricing securitizations and making portfolio decisions.
  • The White House and regulators, including the Office of the Comptroller of the Currency, Consumer Financial Protection Bureau and Securities and Exchange Commission are making statements about it.
  • People increasingly want to work for and partner with companies that align with their values.

Consumers and ESG

ESG has been driven in part by young consumers who care about the impact companies have on the environment. This trend is perhaps most apparent in the automotive industry where the eight largest automakers do not have the same stock value as the three electric car companies.

Because young people have driven this movement, we are in the early stages of the ESG trend. All the consumers who are going to have this mindset have not yet come into the homebuying years. And the older cohorts who are less likely to judge companies using climate change, social responsibility or employee diversity as a measuring stick are aging out of the homebuying years.

ESG is a top priority for millennials. This becomes especially important because we are now entering the greatest generational wealth transfer in human history. Over the next 30 years, $59 trillion could be transferred from the Baby Boomer generation to the Millennials.

Global Adoption

You may be just now considering ESG, but the rest of the world has already acknowledged the need for it and has moved on to push for standardization. The Paris Accord, which all 20 of the G20 Summit members have adopted, is ESG.

Multiple governments are looking at how to best measure the carbon output of a company. Because of what is occurring on the government and regulatory landscapes, 12 G20 countries are participating in emission trading systems, including Canada, China and Germany.  

Investor Preference

BlackRock, Vanguard Group, Fidelity Investments, Capital Group and State Street have embedded ESG into their investment and portfolio reviews because they believe it can identify risks and generate excess returns. ESG risks are considered alongside traditional structured investment risks, like credit or liquidity. BlackRock Chairman and CEO Larry Fink accelerated the issue when he made it the topic of his 2021 Letter to CEOs.

The five investors view sustainability considerations (those “non-financial” factors) as a means of gathering important risk information not captured by traditional audited financial reporting.

As BlackRock explains in its approach to investing: “Our hypothesis is that issuers, corporates and projects that are consistently managing business practices aligned with material ESG considerations may be best positioned for anticipated transitions or may be operating in innovation areas with the potential to leverage macro or sector trends.”

Regulator and Agency Statements

Along with the White House, federal agencies and government-sponsored enterprises have delved into ESG primarily through incorporating climate-related financial risk measurement into federal lending and underwriting over the past year.

The Mortgage Bankers Association published a study evaluating climate risk and laid out its recommendations for handling ESG in a letter to FHFA. Treasury’s Fed’s Financial Stability Oversight Council published a report on climate-related financial risk and recommended agencies review climate-related financial risks from weather changes and carbon emission regulations.

Fannie Mae, the Department of Housing and Urban Development, Veterans Administration, U.S. Department of Agriculture and Treasury are evaluating how climate risks affect their loan portfolios and how to incorporate those risks in underwriting guidelines and single-family originations.

Through a White House directive, FEMA is updating their flood zone mapping to reflect the increased frequency of what used to be 50- and 100-year floods.

Acting Comptroller of the Currency Michael J. Hsu spoke about the five questions board directors should ask themselves right now, including: What is our overall exposure to climate change? And, how vulnerable are our data centers and other critical services to extreme weather?

Customers and Employees Care About It

Even before interest rates dropped and the competition for mortgage industry employees overheated, Gen Z and millennials expressed a clear preference for employers with good ESG. Based on surveys going back to 2018, pollster Gallup concluded: “[E]thics, environment, wellbeing and inclusion will soon be the basic social yardsticks by which every organization’s purpose will be measured.”

Many people are no longer comfortable working for a company that does not align with their values. Mortgage companies simply cannot afford to alienate current or prospective employees. Hiring continues to tighten (thanks to COVID) driving women from the workforce and a wave of retirements among Baby Boomers. This has opened the way for a younger demographic.

If you plan to market to millennials and Gen Z, they will want to know that you treat employees well, value diversity and respect the environment. About 40% of today’s shoppers seek products and services aligned with their values, according to an IBM and Retail Federation study. And 57% of consumers will change their purchase habits to reduce a negative environmental impact.

In conclusion, while you may be just diving into the realm of what ESG means to your organization or you may not be aware of what it is, the winds of change are pushing toward a strong ESG focus for organizations around the globe. The government, investors, consumers, employees and the world economy all have a stake in this realm. Companies should implement strategies to consider every aspect of ESG before they find themselves on the wrong side of the wave of change that is coming.

(Views and opinions expressed in this article are those of the author and do not necessarily reflect or represent the views, policy or position of Planet Home Lending, LLC.)

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at; or Michael Tucker, editorial manager, at