McKinsey & Co. has seen the future of banking jobs: it's ESG
If you're looking for a future-proof career in financial services, you might want to take some qualifications in environmental social and governance (ESG) issues. ESG in finance, says McKinsey & Co, is where the growth is.
Today's global annual banking review from McKinsey & Co. suggests 2022 hasn't been a particularly good year for banking jobs and that 2023, 2024 and 2025 might not be great either.
Having increased at a CAGR of 16% between 2019 and 2021, McKinsey says capital markets and investment banking revenues fell 7% in 2021-2022. UK financing revenues in particular are expected to decline in the next few years; China, Asia, and Latin America are a better bet.
If you really want to insulate yourself against future shocks to banking jobs, however, McKinsey suggests migrating to ESG might be better than migrating internationally. Although issuance of sustainable debt instruments fell 17% this year amidst the general malaise, McKinsey thinks it will grow dramatically in future as sustainable debt proliferates, particularly in North America.
What are ESG jobs in finance?
McKinsey & Co identifies a variety of different strands to sustainable finance jobs. By 2030, it thinks banks could be earning $100bn in revenues annually from these various activities.
- The issuance of green bonds/loans which are used to fund climate and environmental projects.
- The issuance of sustainability bonds, which are applied to environmentally sustainable outcomes.
- The issuance of transition bonds, which are used by carbon-intensive organizations with the intention to decarbonize.
- The issuance of social bonds, which are applied to projects promoting social welfare and creating a positive communal impact.
- Sustainability-linked bonds/loans which are linked to sustainability performance targets.
- Clean energy project finance that supports clean energy projects and low emission technologies.
As the chart below shows, the most developed areas of the market so far are for green bonds and sustainability linked loans. In both cases, Europe has been the test bed, but the US is catching on. Developed Asia is still a long way behind.
While ESG related bonds and loans are driving jobs in capital markets and investment banking, McKinsey highlights plenty of other opportunities to work on sustainability across the financial services industry, both in corporate and investment banks (CIB) and retail banking and asset management.
It suggests that funding needs for a net-zero transition could exceed $4.4 trillion annually through 2030 and that green energy financing is still a largely untapped source of revenues for banks.
If you lose your banking job in the shakeout of 2023, it's pretty clear - therefore - how to get back in the game. You need to become sustainable.
Source: McKinsey & Co
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