The number of senior-level ESG jobs within the UK’s financial services sector has grown by more than 50% in the last year as banks, asset managers and insurers all look to put sustainability at the forefront of their offerings.
Research from New Street Consulting shows that senior ESG roles went from 460 to 690 in the year up to June 2021. There was an even bigger increase for junior roles, which grew by 60% from 118 to 196.
According to New Street, the increase in sustainability appointments is in response to regulatory, customer and investor pressure to create more ESG-related financial products and to integrate ESG into decision-making.
There has also been an increase in ESG regulation in the last 12 months. The most significant step was the introduction of the EU’s Sustainable Finance Disclosures Regulation (SFDR) in March.
Part of the European Commission’s Action Plan on Sustainability, the SFDR is designed to bring more consistency to ESG disclosure for financial products, financial advisers and financial market participants.
For market participants like insurance companies and other large asset owners with investment arms, some of the requirements include the integration of sustainability risk in the investment process and the consideration of principal adverse impacts of investment on sustainability.
Although the UK is no longer within the EU and is working on its own disclosure regime, it is likely to involve similar requirements for financial institutions.
“Financial services businesses realise that if they don’t take ESG more seriously, they will miss out on the boom in sales from ESG-related products and will face more scrutiny from regulators and clients alike. ESG is now simply considered as good corporate strategy, good business and good economics,” said Jack Payne, consultant for asset and wealth management at New Street.
In Europe, the first three months of 2021 saw €120bn of investors’ capital put into ESG funds, which accounted for 51% of total fund flows.
New Street’s research found that nine new ESG-specific roles at board level among financial services firms were filled in the past year, with 33 ESG-specific jobs in total at executive level in the sector.
Investment firms have been prolific hirers of senior ESG staff for their European and UK offices, as have insurers such as Aviva, Allianz, Legal & General and others via their investment businesses.
In June, insurance broker Howden launched Parhelion, a sustainability-focused insurer providing ESG products.
Even the UK’s financial regulator has been expanding its senior ESG staff. In April, the Financial Conduct Authority appointed its first ever director of ESG, Sascha Sadan, who was formerly director of stewardship at Legal & General Investment Management.
However, the rise in ESG-related hiring and the creation of new roles raises an inevitable question about a possible skills shortage.
“Employees with a lengthy track record in ESG, in screening investments or loans or product development, are easily outweighed by demand for analysts and executives who can help launch ESG products and integrate ESG across their businesses,” said Mr Payne.
“ESG metrics and reporting are now becoming business imperatives due to increased scrutiny from investors and regulators,” added Mr Payne. “The need for expertise in this area is growing rapidly, as many firms are now placing greater emphasis on non-financial performance.”