Winning the race for ESG talent

More skills development is needed in environmental, social and governance (ESG), and in particular green finance, to meet the expected growth in demand as stakeholder pressure to accelerate green finance programmes intensifies.

Our latest report, Safety in numbers: levelling the playing field for green finance, reveals that one of the top three barriers to wider adoption of green finance is a lack of relevant expertise on the board. More than a third (35%) of senior decision makers in financial services firms call it a “critical” or “significant” barrier. 

Recruiting and developing this expertise is a priority for many firms, with a third (33%) saying they have plans to recruit an experienced, dedicated, C-level or non-executive expert in green finance for the first time. 

Against this backdrop, how should firms approach this recruitment and how do they create the right talent pipeline?

Getting the right skills

Much like the FCA’s expectation that firms treat their customers fairly, and the forthcoming consumer duty, ESG principles should be embedded in a firm’s culture rather than something that is solely the responsibility of an ‘ESG team’. It is important that recruitment plans align with this. Over time, as ESG becomes a core part of the way we do business, we will likely see the concept of an ‘ESG professional’ disappear and become a core role within a firm’s operations.

The fast-growing mosaic of policy and regulation in this area means that there is going to be a lot to do in a short space of time, and it’s important that individuals with responsibility for a firm’s ESG strategy (including senior management) have access to appropriate resources to deliver. But it is clear that demand for expertise in ESG matters is going to far outstrip supply.

The concept of an ESG professional is relatively new, so the seniority, qualifications and experience is likely to vary from firm to firm and across the financial services sector. At entry level, analytical and financial skills are likely to be key given the heightened focus on disclosures, reporting and the data analysis needed to achieve this. Sector expertise is likely to be important too, particularly hands-on experience of relevant ESG initiatives. 

At more senior levels, individuals with the skills and experience to influence senior leaders will be particularly sought after, given the need to build and present the case for ESG initiatives and the wider ESG strategy and gain momentum from the board in this important area.

Developing existing talent

Given the high demand and small talent pool for ESG expertise, developing talent within the financial institution itself will become just as important as external recruitment. Collaboration is likely to be key, and drawing from the expertise of individuals and teams within the professional services sector could be used to support this. Giving staff access to some of the new qualifications beginning to emerge across the industry – for example the CFA Certificate in ESG Investing, the Certificate in Climate Risk and the Green and Sustainable Finance Certificate – may assist too.

To date, training and qualifications in this area remain relatively ‘standalone’, perhaps reflecting that we are still in the early stages of the growth and development of green finance products and services. However, as green finance becomes mainstream, so too should developing knowledge and expertise in ESG matters as part of the core qualifications to become a financial services professional. Public and private sector collaboration to make substantial and targeted investments in training and development will be key to filling the ESG skills gap in financial services.

This was first published by Investment Week.