The ESG job market is heating up

The job market for sustainable investment roles has become so overheated that some firms are being priced out of the market for the best talent.
Impact investment funds, however, can still pick and choose. “I’ve got a plethora of candidates that really want to get into impact."

U.S. President Joe Biden's new policies have put climate change and social reform back on the agenda for investors world-wide. Evan Vucci / ANP

Trying to keep up with competition

  • The coronavirus and the arrival of a new U.S. president has put climate change and social reform back on the agenda.
  • A limited number of suitable candidates triggers a bidding war for the best talent in ESG investing, according to rectuiters.
  • Some firms have started to encourage their own staff to obtain CFA or ESG qualifications in order to keep up with competition.

Tom Strelczak has been in the executive search and recruitment industry for 11 years. During that time, the 37-year-old Briton has seen “an increase in appetite in the market for ESG and broader sustainable investment and impact and thematic investing”.

But in the past year, the coronavirus pandemic has created “the perfect storm” in the sector, Strelczak told Impact Investor.

”It has just shone a massive spotlight on a lot of the weakening aspects of society”, highlighting issues ranging from access to health care to racial and income inequality, he said.

In addition, the arrival of U.S. Democratic President Joe Biden in the White House has put climate change and social reform back on the agenda.

Tight ESG labour market

As a result, ESG and sustainable investment are now increasingly being integrated into the investment process of companies across all asset classes.

Large investors surveyed by asset manager BlackRock earlier this year said they planned to double their allocations to sustainable products over the next five years. One-fifth said the pandemic had accelerated their plans.

This development has led to a “huge boom” in demand for jobs in that space, Strelczak said.

He specialises in executive recruitment in the asset management sectors in London and New York, and set up his own independent search firm, TWS, at the start of 2020.

Increasingly, Strelczak is working with hedge funds and private equity businesses, some of whom are looking for their first chief sustainability officer hire.

Strelczak expects the job market for ESG and sustainable investing to be tight for years to come. “There is going to be a tidal wave of companies needing to adopt a lot of these new standards and regulations in the world of ESG and sustainable investing", he said. “ESG will become the norm.”

Pull towards impact investing

While the labour market for ESG talent is hotting up, there is still more talent than jobs when it comes to impact investing. “From my perspective, I’ve got more candidates than I have got jobs”, said Daniel Challinor, CEO and founder of London-based Impact Investment Executive Search.

When Challinor entered the impact investing sector eight years ago “I was pretty much evangelising what impact really was; nobody knew”, he said.

In the last five years “there is serious momentum building”, said Challinor. “Impact previously was an excuse not to return on investment, whereas in the last five years, this has changed."

His firm mainly works with family offices, foundations, development finance institutions (DFIs) and foreign financial institutions (FFIs).

The majority of his hires are in emerging markets, outside of Europe.

“I’ve got a plethora of candidates that really want to get into impact, that are in traditional investment banking roles at the moment.”

Purpose over salary

These candidates accept the job because of the team and the purpose over the salary. “The majority of people still take a significant pay cut to enter the sector”, Challinor said.

“But it isn’t poverty, it’s a good, liveable salary, with inspiring people.” He noted that the gap between traditional investment salaries and impact is getting closer.

“Base salaries in impact are relatively high and close to those in the commercial sector. But the large bonus culture does not sit comfortably within the impact community.”

Challinor’s top candidates would “ideally” have had an Ivy League education, spent time working at a top strategy consultant “such as McKinsey, Boston Consulting Group or Bain”, a venture capital firm or a tier-one investment bank.

“But just as important as financial skills: we really look to work with humble people, with hustle. If you come in with a Wall Street mentality, you won’t get a job in impact investing. It’s just as important as the financial skills.”

ESG professionals in high demand

With a limited number of suitable candidates available, this has triggered a bidding war for the best talent in ESG investing. “Certain companies are just priced out”, Strelczak said.

“They are just not able to compete. You see salary levels much higher than they ordinarily would have been in the past.”

The staff shortage in the industry is such that some of the top candidates are now being paid twice as much as before, industry insiders tell Impact Investor.

“I am absolutely sure the salaries for ESG will go through the roof,” Challinor noted. “The traditional financial institutions are needing ESG, so there will be huge hikes in salaries because there is high demand for not many people.”

Sustainability background wanted

Top ESG candidates who are able to command big bumps in their compensation “usually really have a strong investment or research background”, Strelczak said. They also tend to be highly educated, are often CFA (Certified Financial Analyst) qualified and have “excellent stakeholder engagement skills”.

Candidates going for chief sustainability officer or head of ESG positions will also be assessed on their managerial responsibilities and strategy, Strelczak said.

With companies fighting over candidates from a small pool of talent, some firms have started to encourage their own staff to obtain CFA or ESG qualifications.

“There are two routes”, Strelczak said. “You either come from an investment background and go into ESG. We're going to start seeing more of this because it's no longer considered an area that is a fringe opportunity, and even investment professionals can combine investment and decision-making and experience with ESG.”

“Or you get people that come from a sustainability background. They come from environmental agencies, NGOs, governments, think tanks or ESG data companies, and then they go into financial services.”

What route do most companies prefer?

“Larger businesses that actually have a choice will often like people to come from a sustainability background first because they understand actual core sustainability issues”, said Strelczak. “But that depends on the institute.”