Candidates With Both ESG Knowledge and Investment Experience Are Key to Furthering ESG Integration
It’s no secret that although the environmental, social, and governance (ESG) job market has skyrocketed, investment firms and sell-side research providers have found it hard to recruit professionals with both ESG knowledge and investment experience. ESG teams often lack professionals with investment experience and application, and investment desks largely consist of professionals with limited ESG knowledge and research skills.
This lack of knowledge can cause problems, as the separation of responsibilities for ESG and investment analysis can prohibit the kind of collaborative environment in which ESG issues can be effectively and systematically integrated into the investment process.
There are several reasons for this predicament. Firms with an ESG team or ESG professionals often have used those teams or professionals to examine ESG issues independent of their fundamental impact on an investment. Historically, the focus of ESG roles has been on governance, engagement, and voting. This means investment knowledge hasn’t been needed, and ESG professionals have not needed an investment qualification or background.
ESG professionals typically earn less than their peers with investment experience, making it difficult to entice people with investment experience to become ESG professionals. The investment industry has been trying to rectify this skills gap – for example, by including investment experience and qualifications as a requirement for vacancies within ESG teams.
Culture is a problem
A major cause for this separation of ESG and investment responsibilities is the lack of company culture. This was found to be the third largest barrier to ESG integration globally, according to recent reports on ESG integration published by CFA Institute and the Principles for Responsible Investment (PRI) (figure 1).
Figure 1: Top barriers to ESG integration in equities and fixed income around the globe