It is challenging to work in the ESG/sustainability/climate space right now. Wheels are spinning one direction in regulatory requirements, voluntary initiatives and disclosure mandates – overloading practitioners. Yet others spin just as fast in the opposite direction in anti-ESG policy, litigation, greenwashing and misunderstanding of the financial value of ESG. The impact of these countervailing forces falls on the shoulders of ESG leaders and staff. This piece from IP&E explains how this is manifesting for asset managers:
“After a hiring frenzy at the start of the decade, activity in the ESG space has slowed considerably over the past year – partly because of the high-profile clampdown on sustainable investing by politicians and lobby groups in the US, which has made many asset managers nervous about pursuing, or even discussing, their environmental and social ambitions.”
According to Tom Strelczak, founder of TWS Search:
“Some places have hired so much, and now there’s a bit of a downturn in the noise around ESG, team leaders have been left holding one of the largest cost centres their institution has built over the last decade, and they don’t know how to demonstrate its value.”
That last phrase is key – ESG/sustainability has been considered an intangible value, a reputational risk, too difficult to quantify or simply a cost a company must bear. That attitude is a self-fulfilling prophecy that threatens ESG professionals’ jobs. Sure, ESG in an asset management setting is different than that in an operating company but value can still be determined as long as the expectations and parameters are appropriate. It isn’t realistic to expect ESG to save an asset/investment from broad market dynamics, nor should there be expectations of ESG alpha. That is really the trick here – helping investors/asset managers understand how ESG/sustainability creates value to begin with, then tracking appropriate indicators.
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