ESG Career Paths in Banking and Finance
No matter the extent of a financial institution’s ESG ambitions – whether it be aiming merely to achieve minimum compliance or, more ambitiously, to championing ESG as a key element of its customer, employee and wider stakeholder commitments – the business and operational impacts are far-reaching. New ESG roles and responsibilities are appearing in a wide range of areas: product and service development, operations and supply chain management, workforce and human capital development, risk management and compliance – to name but a few.
Segmenting these roles into three distinct types can be helpful to those contemplating a career in ESG in banking and finance:
1. Responsible investing and sustainable finance
Individual and institutional investors are increasingly demanding that the flow of the world’s capital be directed towards enhancing ESG outcomes. Global sustainable assets under management are set to grow to a significant share of all assets under management. Asset managers are shifting from merely incorporating ESG criteria as part of investment analysis to focusing on building portfolios that actively promote ESG as their primary objective. Moreover, banks will have to structure and sell vast quantities of green bonds and other sustainable finance instruments to enable companies and governments to achieve their ESG goals in the coming years. A wide range of new ESG specialist asset management and structured finance roles are already appearing, along with specialist roles in mid- and back-office support functions (risk, compliance, data management, etc.)
2. Accomplishing ESG goals within the institution
Financial services institutions themselves are aiming to enhance their own ESG performance: reducing their carbon and waste footprint and increasing their use of renewables, considering the social impacts of their lending activities, undertaking new social value projects, creating ESG transparency throughout their supplier base, promoting diversity and inclusiveness within the workforce, etc. Many have created dedicated “Heads of ESG” who lead small teams that take responsibility for or provide oversight of the full portfolio of ESG initiatives. In time, the different elements are likely to migrate out to the corresponding business units and functions, where ESG specialist roles are emerging in product development, HR, compliance, supplier management, etc.
3. Reporting and disclosure
At the last count there were over 2,000 ESG reporting frameworks and disclosure requirements, with a corresponding proliferation of the ESG performance indicators to be reported1. The number of financial institutions signing up to key disclosure frameworks (such as the Carbon Disclosure Project, the Task Force on Climate-related Financial Disclosures, and the Corporate Sustainability Reporting Directive) is growing fast, creating a surge in new roles for compiling, analysing and reporting ESG information. Many ESG reporting teams currently sit close to the PR function but in time these are likely to move closer to the CFO. Specialisations will develop in the different ESG elements (e.g., in carbon and natural, social and human capital accounting).
As you can see there are some very distinct paths available to fulfil an ambition to work in ESG in banking and finance, with entry points that cater for a wide variety of skill types and experience.
1 See the TSC.ai ESG Playbook