While the high demand for and shortage of environmental, social and governance (ESG) talent has been obvious for a while, the race for the available talent is seriously intensifying early in 2022.
And the wave of announced senior appointments in only the first three weeks of the year is probably just the tip of the iceberg as pension funds, asset managers, corporates and other institutions scramble to beef up their sustainability capabilities in a bid to prepare themselves to meet their ESG commitments following COP26.
In Asia Pacific (APAC), DBS Group Holdings announced the appointment of Helge Muenkel as Chief Sustainability Officer effective today (January 24). He will be succeeding Mikkel Larsen who transitioned into his role as Chief Executive Officer (CEO) at Climate Impact X (CIX), a joint venture of DBS, SGX, Standard Chartered Bank and Temasek, in November 2021.
Other recent movements include Melissa Moi, former head of ESG, APAC, at Bank of America who moved to United Overseas Bank as head of sustainable business and Leong Li Sun, head of corporate responsibility at United Overseas Bank, who moved to AIA as head of ESG in Singapore.
What has become apparent is that the competition for talent is becoming more cut-throat as institutions attempt to attract available talent away from each other. This trend is expected to persist in 2022 and beyond on a long-term basis as sustainability experts, unfortunately, are not developed overnight.
To illustrate, three of the senior hires so far this year represent probably some of the best talents in the sustainability finance arena. And, while they will be excellent additions to their new firms, they will be difficult to replace for their former employers.
Franklin Templeton’s January 20 hire of Anne Simpson away from the California Public Employees Retirement System (CalPERS), where she served as managing investment director for board governance and sustainability, is a case in point.
At CalPERS, Simpson led the development and execution of the pension fund’s award-winning sustainable investment strategy across a global portfolio worth US$500 billion, with 80% of those assets managed internally. To say that Simpson will be hard for CalPERS to replace maybe an overstatement, but, at the very least, it will be a challenge for the pension fund to find a replacement of comparable calibre.
Assuming the fund does, it will mean pirating that person away from his or her existing post, thus creating a new vacancy, and the cycle will repeat. The other option is to divide her responsibilities among a group of less senior or qualified people, a common practice nowadays. But it remains to be seen how effective such a practice will be in the field of sustainability.
Another example is Juliana Hansvedan whose appointment by Ninety-One (formerly Investec Asset Management) as portfolio manager for emerging markets sustainable equity was announced on January 17. Unfortunately, this means that Nordea Asset Management, her previous firm, just lost its own high-performing sustainable fund manager.
At Nordea, one of Sweden’s biggest sustainable fund management houses, Hansvedan was recognized as a AAA-rated fund manager by Citywire and was responsible for managing two sustainable strategies – Emerging Stars Equity and Asian Stars Equity – which together boast €6 billion (US$6.8 billion) of assets under management.
Both strategies were at the forefront of Nordea’s sustainable investment in emerging markets. Hansvedan has also held roles with First Swedish National Pension Fund (AP1) and BlackRock.
It remains to be seen who or how Nordea will replace Hansvedan, but it will not be easy finding a replacement with equal capabilities.
Another example is Julie Townsend, whose appointment by PGIM Real Estate as ESG lead for Europe and Asia-Pacific was announced on January 7. Townsend was previously the head of UK environmental consultancy at CBRE, where she led a team of 55 environmental, sustainability and energy professionals, and worked closely with some of the country’s biggest investors and lenders on managing sustainability risks, opportunities and impacts.
While there are other talented sustainability experts like Simpson, Hansvedan and Townsend out there, there are more employers seeking such talent. The number of institutional investors who say they are impacted by the shortage in ESG talent, according to HSBC’s Sustainable Finance Investing Survey 2021 published on September 25 2021, has increased to 40% last year from 26% in 2020.
This echoes the findings of a similar study, published by Deloitte and Toronto Finance International on January 20 2022, in which approximately 68% of respondents state they have been impacted by sustainable finance skills shortages.
“Of those experiencing skills shortages, 85% indicated the impact was moderate or significant on their organizations,” notes the study, which is based on the experiences of interviewees in Canada where the study was conducted. “There was a general consensus among interview subjects that the skills shortage is felt most acutely in ESG risk management, quantitative and qualitative analysis, and baseline technical knowledge across all business functions.
“For example, internal auditors are increasingly expected to have a basic understanding of sustainability reporting and ESG risks. However, they tend to lack the expertise to be an effective third line of defence for this subject matter.”