Sustainable investing boom and net zero pledges drive ESG talent war
The push for businesses to be run more sustainably is driving a surge in demand for professionals with environmental, social and governance expertise, according to consultants and recruiters.
More than one in five of the world’s largest companies have made some form of commitment to reaching net zero emissions and investors are sharpening their focus on the social impact of companies they back, creating a boom in the market for specialists in corporate sustainability.
“The bottom line is demand far outstrips supply and so there is going to be a real war for talent and that will include compensation,” said Sarah Galloway, co-leader of recruiter Russell Reynolds Associates’ sustainability practice.
Demand for ESG experts is booming across professional services, including at management consultancies, boutique advisory firms and property companies, recruiters and executives said.
But they face rising competition in attracting and retaining ESG-focused staff as more companies and fund managers commit to cutting their carbon footprint and place a greater emphasis on non-financial performance.
AstraZeneca, Aviva, BT, Legal & General and Rolls-Royce are among the companies that have pledged to achieve net zero emissions by 2050.
Experts are also being lured by private equity funds to fill roles as chief sustainability officer and head of ESG with salaries varying widely, recruiters said.
“Private equity has realised you can’t IPO a business unless it’s got a really strong sustainability or ESG story so they are all hiring heads of ESG or sustainability at very senior levels . . . to oversee their portfolios,” said Galloway.
Deliveroo “bombed purely for the ‘S’ of ESG”, she argued, referring to the 26 per cent plunge in the food delivery app’s share price when it floated in March. Some large investors had expressed concerns over the group’s treatment of workers, as well as its dual-class share listing and governance, ahead of the disastrous initial public offering.
Private equity buyers recognise that assessing the ESG credentials of prospective and existing investments is now a requirement, said Julie Hertzberg, who heads a new ESG consulting practice at Alvarez & Marsal that analyses clients’ portfolios and potential acquisitions.
“At some point there’s going to be regulation in a lot of countries that mandates reporting [of ESG information],” Hertzberg said “Everybody knows that’s coming. This is the build-up to that.”
Even ESG sceptics are hiring specialists, those in the industry say. “Much of the market is still in a place where they are seeking the hygiene factor. They want the boxes ticked to be able to say, ‘hey, we’ve got an ESG strategy’,” said Stuart McLachlan, chief executive of environmental consultant Anthesis.
Growing expectations that auditors will scrutinise non-financial metrics as well as companies’ accounts are also driving demand for new expertise at accounting firms, which are recruiting specialists and providing training to auditors.
“ESG metrics and reporting are fast becoming a business imperative, particularly due to increased scrutiny from investors, and we intend to move ahead of regulatory reforms by expanding our capability and capacity in this area,” said Scott Knight, head of audit at BDO, the UK’s fifth-largest accounting firm.
“The appetite wasn’t there when we’ve evaluated this in the past but the market is now rapidly evolving,” he added.