The best and the worst sorts of ESG jobs in finance
Following Stuart Kirk's declamation against climate "nut jobs" at an FT conference last month, it's become apparent that not everyone employed working on environmental social and governance (ESG) issues in finance is a true believer. Kirk is head of responsible investment and head of research and insights at HSBC Asset Management, but he doesn't seem particularly convinced of the worthiness of his cause: too many people are working in ESG, said Kirk; given that humans are adaptive and the consequences of climate risk won't be visible for decades, it makes more sense to "get back to making money out of the transition."
Kirk is on leave after this outburst, but headhunters working in the ESG space say his comments are typical of a particular type of person that's been drawn into the sector. “There are two worlds in sustainable investing: people who see ESG as a performance strategy and people who want to create positive outcomes. The tensions between the two can create a lot of conflict,” said one. The people who want to create positive outcomes tend to be Millennials and younger people, he added; the performance-types tend to have been around the block, like Kirk.
The influx of individuals who see ESG investing as a performance issue is partly a reflection of their realisation that there's money to be made from ESG and to a well-documented shortage of talent in the space. Either way, old dogs are opportunistically learning new tricks: “All over the industry, what has been happening is that portfolio managers or deputy CIOs with no background in ESG or sustainability are suddenly rebranded as heads of ESG, because it’s seen as a performance strategy,” says the headhunter. "People have been moving into it because they think it pays well and because they think they'll have a lot of visibility."
In time, however, this is likely to change as a new generation of ESG investors who've always specialised in the industry emerges. "Right now you have a lot of people who have been standard fund managers and who are re-badging themselves as ESG specialists. In ten years, there will only people who have come up through ESG,” says Tom Strelczak at TWS Search in London.
For this new generation, there are potential career risks in being associated with performance-focused ESG strategies criticised for greenwashing. Asoka Wöhrmann, the chief executive of Deutsche Bank's top asset management firm DWS Group resigned earlier this month over greenwashing claims. Goldman Sachs Asset Management is currently facing its own greenwashing probe as the SEC examines whether some of its ESG investments are consistent with the claims made in its marketing materials.
If you're a young person starting out in an ESG career, headhunters say the best jobs are probably in impact funds. "The true believers are in impact funds, where they are backing funds that are doing good in the world," says one. "These aren’t companies you need to do a lot of extra work with, because their entire purpose is to do good." By comparison, he says that sustainable investing, "is more about companies that can be turned around to do good things, or that are just not actively doing bad things,” and is therefore more nebulous.
However, some of the worst jobs in ESG are the philosophical roles which involve little more than the creation of marketing materials for funds that are overwhelmingly performance-focused. Tariq Fancy's confessional essay about his time at BlackRock outlines the considerable efforts that go into applying lipstick to the pig: "The marketing and sales people at BlackRock were all about ESG — they couldn’t get enough of it. The portfolio managers were often the opposite: many of them wanted to pass the “ESG test” and be left alone," says Fancy.
This doesn't mean that ESG jobs are to be avoided. It does mean that if you're at the start of your career, you should probably do some careful due diligence.
On the plus side, headhunters say ESG jobs offer young people the opportunity to earn good money doing meaningful work: "We are seeing significant pay increases for people in this area. This is combined with a highly competitive talent market (traditional investment management, alternatives, asset owners and consultants all adding talent)," says David Harms, co-head of the ESG practice at search firm Valentine Thomas & Partners. If you're the head of ESG at a big fund, another headhunter says you could be earning £500k+; at a smaller fund £300k is more likely.
Strelczak says ESG offers an opportunity for fast progression: "Compensation has been going up and up. There’s such a fight for people that you’re seeing both pay and title inflation. There are some heads of ESG who have only five or six years’ experience.” Harms agrees: "We notice people getting larger responsibilities earlier in their careers given it is a relatively nascent area for many investment managers," he observes of responsible investing.
The downside, though, is the risk that you find yourself at a fund called out for poor practices. "If you're at a fund that's been investigated, it could adversely impact your career in the future," cautions another headhunter. "Funds are currently free to label sustainable investments however they want, which is why you're getting this domino effect of investigations."
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