ESG experts in high demand are seeing their salaries soar and a proliferation of job opportunities amid an asset management battle for talent in responsible investing.
Salaries have increased as the number of candidates with the right ESG and sustainability skills does not match up to the number needed to meet increasing demand for these professionals. A new role for an ESG specialist might bring in twice as much as the pay for a longstanding, equivalent role, according to Tom Strelczak, founder of independent search firm TWS.
“In the past, it wasn’t seen as something that was worth paying for. But now those that have been sat doing ESG in some capacity for the last 10 to 15 years and never moved, have realised they are probably worth double in the market what they used to be,” says Strelczak.
He has seen this phenomenon in action and says it is sad to see companies losing good staff because they are not paying them enough.
Strelczak explains ESG experts have quite suddenly found there are people and companies willing to bid for them with salaries and bonuses much higher than they were on previously. As a result, some employees are deciding to “cash out.”
ESG salary inflation
The going salary for an ESG expert, says Strelczak, is more of an issue for places that have a pre-existing, growing team of staff working in this area: “The market has gone so sharply upwards in terms of salary expectations and ESG salary inflation [which has gone much further than standard salary inflation.] It’s a struggle for companies because they can’t bring people on that are paid a lot more than those in the existing team.
“So how do they attract them? In most cases, that means paying extraordinarily higher variable elements like cash bonuses in order to get them up to where they need to be.
“It also creates a significant internal benchmarking problem for companies because they need to start paying their existing employees a lot more.”
Starting from scratch
For asset managers new to ESG investing there may not be the problem of longstanding staff members on lower salaries because they may have never had an ESG team. But, Strelczak says, they may well have a task convincing ESG experts to take on the challenge of getting the company’s new direction off the ground.
Apart from the risk the role itself might be a marketing ploy, there is the prospect of an uphill struggle getting buy-in from fund managers and investment teams.
“People that are passionate and purpose-led in sustainable finance don’t want to go in to an environment where they’re constantly knocking their head against a wall where people don’t want to and aren’t willing to listen,” says Strelczak.
Outsourcing
For those companies struggling to attract the right candidates, they have the option to move someone internal, but not qualified, in to the position – which Streczak called competency greenwashing – or to outsource the expertise.
“The big four consulting firms are substantially increasing their sustainable finance, sustainable investing practices or advisory practices.
“That is particularly relevant because, for the past two years, those big four consulting ESG practices or advisory functions have been pillaged by asset managers which have paid a lot more money [and] they’re not just advising. They’re staying there [and] get to really be hands on,” he says.
Obstacle to ambition
In terms of the impact of these recruitment challenges, law firm TLT found they are an obstacle to firms adopting green finance.
In its report Safety In Numbers – Levelling The Playing Field For Green Finance, TLT found 34% of firms were prevented from moving forward in the area of green finance due to a lack of relevant expertise on the board.
TLT partner, Robin Penfold, says firms not being able to bring in the expertise is proving a barrier to their green finance ambitions.
Portfolio Adviser sister title ESG Clarity’s stream of product launches and news on ESG hires provides a good clue, if anyone needed it, about the pace of growth in ESG right now. But a look at the recruitment challenges shows this is a disorderly growth, arguably due to such a quick change in how accurately the industry assesses the value of ESG investing.
It will be interesting to see when and where salaries settle and how quickly asset managers can bring in the skills and experience needed to provide compelling and compliant ESG products across the board.
This article first appeared on Portfolio Adviser sister title ESG Clarity
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