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Inside the war for ESG talent

It's a good time to be an ESG professional. A very, very good time.

The demand for analysts, strategists and others knowledgeable about environmental, social and governance issues has n

ever been higher — far more than the current supply of qualified humans. And therein lies a challenge to the growth of sustainability and climate solutions.

It’s one of those be-careful-what-you-wish-for moments.

Demand for ESG experts is booming across professional services, including at finance and investment firms, management consultancies, boutique advisory firms and real estate companies as well as NGOs and business associations — not to mention the thousands of companies that are all but required to compile and report their ESG data to any of a broad range of stakeholders, then align their strategies, relationships and operations accordingly.

It’s an all-hands-on-deck situation. The problem is that there simply aren’t enough hands, especially those with the skills needed to meet the moment.

Or, in the words of Robert Bischof, "There is a war for talent."

It's a good time to be an ESG professional. A very, very good time.

Bischof should know. As senior partner, managing director and European ESG leader at Strategy&, PwC's strategy consulting group, he’s on the frontline of this battle. Last month, PwC announced a head-turning $12 billion plan to create 100,000 net new jobs in ESG by 2026, a 36 percent bump over the firm’s current employee base of 284,000. PwC’s largest competitors — Deloitte, EY, KPMG, McKinsey, Boston Consulting Group and others — are also ramping up their ESG hiring, albeit with less-ambitious goals.

"At the moment, there's probably not enough talent out there that all these firms could recruit," Bischof told me last week. "So, it will be a mixture of recruiting talent but also then developing the talent further for what is needed by our clients.

"The dynamics around ESG — how the topic has accelerated over the past 1.5 years — this is something that caught us a little by surprise, to be honest."

As Bischof notes, the world of ESG grew up much faster than most observers would have imagined, as it became a front-burner issue across many sectors globally. And the field has gotten increasingly sophisticated: In a relatively short time, ESG jobs have expanded from data collection and dissemination to the need for business strategy in which ESG considerations are front and center.

The term ESG has also become conflated with "sustainability" in some circles, particularly in Europe, where ESG no longer refers primarily to meeting the data and reporting needs of financial markets and other stakeholders. (In the United States, the term remains largely distinct from sustainability, referring primarily to finance-related activities, although that is starting to change.) This blurring of terminology makes data about the growth of ESG-labeled jobs difficult to compile and assess.

Data aside, there’s no question that the field of ESG is maturing and that finding qualified personnel is becoming harder.

"We've traveled a journey from mid-ranking individuals who can coordinate data to someone who can lead a whole team and who needs to be sophisticated enough to be able to deal with multiple different types of stakeholders and really understand the world of business, the world of strategy, the world of finance and the world of regulation," Richard Mattison, chief product officer for ESG at S&P Global, explained. "And those people are rare."

The dearth of ESG talent already is having an impact in some sectors. "A skills shortage is preventing real assets investors from achieving their environmental, social and governance goals, according to a survey by Macquarie Infrastructure and Real Assets," reported the website Infrastructure Investor. That was about 18 months ago. Given the skyrocketing interest in ESG, that gap has likely grown.

Another survey, conducted in 2020 by the CFA Institute, found a clear mismatch in supply and demand for ESG professionals within the finance sector. An analysis of the LinkedIn profiles of 1 million investment professionals found that only 1 percent listed sustainability-related skills. Meanwhile, about 6 percent of more than 10,000 LinkedIn investment-related job postings sought candidates with those very skills.

Higher-order tasks

The battle for ESG talent is taking place at all levels. There are the entry-level positions, of course — a small army of mostly young professionals able to mine and crunch numbers and other information about companies’ ESG commitments, practices and performance.

But those jobs are quickly taking on higher-order tasks and responsibilities, as S&P’s Mattison explained: "We're looking for people who understand metrics and data and can do analysis and can build products around analytics and data for sustainability with intellectual rigor, analytical rigor and high ethics and credentials."

But that’s just a start, he told me. "What's happening is that it's gradually progressed from that position to someone who's actually starting to lead efforts within a company to coalesce and coordinate; to someone who's moving the company from spreadsheets to systems; to someone who's now leading the company from the perspective of, for example, understanding what your investors want and how you need to position your reporting and your strategy; to someone who is driving capital allocation within a company, who also knows about ESG and investors, and who can drive sustainable outcomes and is senior enough to get the attention of the board."

ERM, which provides environmental, health, safety, risk and social consulting services, is similarly ramping up its ESG services. It will add around 160 jobs this year in North America across its ESG and climate-specific advisory, which includes such things as scenario analysis, greenhouse gas inventories, net-zero roadmaps and compliance with the Task Force on Climate-Related Financial Disclosures. According to Cora Lee Mooney, the firm’s North America service lead, attracting talent at senior levels has been relatively easy. "It's more about retaining talent where I've got the battle wounds," she explained.

Those wounds come from the poaching of talent that seems to be prevalent in ESG and sustainability these days. "Everybody wants someone with experience and the average number of years of experience with ESG is so low," she said. "Less-mature industries are trying to get junior people for very senior roles."

Meanwhile, those with a modicum of ESG experience "are getting 40 percent pay increases dangled in front of them," she noted.

Aron Cramer knows this well. BSR, the "just and sustainable" business group he runs, is on its own growth spurt, with 30 new hires in the first half of 2021, and has had its staffers poached by others, including its own member companies. "There's a land grab on for good people right now, because the day we all hoped would be here is here: Everyone and their brother and sister is interested in sustainability and ESG."

There's a land grab on for good people right now, because the day we all hoped would be here is here: Everyone and their brother and sister is interested in sustainability and ESG.

"This is really serious," said Ellen Weinreb, whose sustainability-focused recruiting firm, the Weinreb Group, is ground zero for much of this action. "I'm seeing consulting firms losing talent to clients. As a recruiter in this space, our job candidates are getting counteroffers and competing offers. They're talking to multiple employers and interviewing for multiple jobs. Instead of candidates getting one step up, they're getting two steps up — they're getting like a double promotion."

Salaries are getting stepped up, too, as you’d expect with a supply-demand imbalance. Candidates BSR is pursuing often have multiple offers. "When we talk to someone who has two offers, that's an anomaly," Cramer said. "A lot of the time there are people with three and four offers, because there's just so much interest and organizations are working hard to catch up and staff up. So, we're hiring and we're growing. But so is the whole world."

Actual compensation ranges are challenging to come by, given the broad disparity among industries, job levels and geographies. Also frustrating is that almost none of the roughly 8,500 ESG-related jobs listed on LinkedIn — across Europe, the Middle East and Africa; Asia-Pacific; and the United States — lists salary information.

Another challenge: the lack of standardization of what people in ESG jobs actually do and how to assess job candidates against standard criteria. That’s making the recruitment process harder.

"Just like with anything that's new, since there aren't specific qualifications, it is harder and takes longer to evaluate talent," said ERM’s Mooney. "It's not like, ‘Oh, you have a mechanical engineering degree. I know where you went to school, so I know what you know.’ It's harder to judge who's legit and who isn't. It takes longer to hire a partner for ESG because you have to do a lot of digging to find out what they really know and what their experiences are, because it’s really easy for them to find the right buzzwords."

Four winning qualities

So, what are recruiters and HR departments looking for, and how are they assessing candidates’ credentials and experience? There’s no one way, but after my conversations with a half-dozen experts, a picture is emerging.

Here are four qualities that are valued:

Business experience: "We have a lot of candidates who are right out of college, but we are looking for people who have some business experience in order to quickly train them up," said Mooney. "The training time has shortened significantly as well, just because we're growing so quickly."

"We need people who have come up in business without a focus on sustainability to get smarter on sustainability on ESG," said Cramer. "There's an awful lot of people in business who are very good, very smart, understand product development, marketing, supply-chain operations, who need to become ESG experts themselves. So that's a starting point."

Adaptive and critical thinking: "When we assess people with these types of roles, and we look at agility, we look at people who are comfortable not always having the answer and psychologically comfortable holding seemingly paradoxical ideas," said Andrew Lowe, a partner in the Global Corporate Affairs practice for Korn Ferry, the global organizational consulting firm.

"People who are good critical thinkers and understand what rigor is — that's the skill that we look for in somebody who's a junior-level person," said Mooney. "We can’t teach that or facilitate more of that. Because this industry evolves so quickly, so you just need to be somebody who can keep up."

A multidisciplinary and systems perspective: That may be implicit from much of the above, but it bears calling out. Expertise in sustainability, or even in finance, may take a backseat to being able to view the world from multiple perspectives, to connect the dots among disciplines and cultures. "We're asking people to focus on what someone could do, rather than what they've done," said Lowe. "The nature of ESG and sustainability is as much about influence, education, persuasion, resilience and facilitation."

"One of the essential features of someone who can be successful in this work is to see a broad range of perspectives," said Cramer. "And so people who may come from more of a purely environmental background or a [diversity, equity and inclusion] background or corporate governance background, who can bring those skills to bear inside a company, even if they've never been in business before."

S&P's Mattison agrees. "We need people that are going to reflect that it's not just purely the hard-nosed financial analysis that we're looking for, it's also being able to understand the linkages between what is driving value. What we find ourselves doing is hiring people who have adjacent skills, which are not directly sustainability, but maybe they have some experience in other areas that we can train people, or take people from sustainability courses at the entry level and train them up to do analytics and things like that."

Passion: Last, but not least. For all of the tangible financial and performance metrics that undergird most sustainability jobs, it still seems to be a hearts-and-minds profession. "You have to be philosophically in the right place to be interested," Mattison explained. "You still have to have a belief system that a better world is possible."

"ESG is different compared to say, digitalization or your other big waves or topics in that the people themselves care about it," said PwC’s Bischof. "ESG is also about an attitude, about personal conviction, to do good and to contribute in some way. In the war for ESG talent, it is not only about technical skills but also about an attitude; you could call it a passion. This, we believe, is very important."

So, in sum: Ideal candidates are systems-thinking multidisciplinarians comfortable with ambiguity who have business experience, an ability to connect the dots and want to make the world a better place. A tall order in any job market, let alone a competitive one.

Can we win the war?

Everyone I spoke to agreed that this moment is but a bump in the road, that the supply-demand imbalance will work itself out, as it almost always does in a market economy. But it will take time.

"Things go in cycles," said BSR’s Cramer. "And there are peaks and valleys. I think we're at a peak right now. I don't think it will remain as white-hot as it is right now."

Still, he adds, "Assuming that the demand remains strong, this is a five-year thing. You can't flip the switch overnight. We need to see generations of people coming out of business schools make their way not only into business but then advance within business. We need to see that baseline of talent already inside companies get more steeped in ESG. So, these are transitions that take time."

Eventually, of course, the whole notion of ESG professionals will likely fold into company operations, perhaps disappearing as discrete job titles, as Korn Ferry’s Andrew Lowe explained.

"What happens here is that we see all these new jobs, all these new titles, and eventually you're no longer an ESG analyst, you're just an analyst and ESG is not a thing, it's just part of the landscape. This is a journey that we are on over the next five to 10 years, rather than there being a quick fix, because it's as much about culture and operating models and mindsets as it is about the people who actually have the skill sets to do the job. And those are all big, complicated, gnarly beasts to wrestle."

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