Expanding ESG markets are fueling an asset manager talent war in Europe, according to a Cerulli Edge report Wednesday.
There is more demand than supply for ESG expertise, primarily related to integrating sustainability and expertise into portfolio management and improved expertise in sales teams, the report said.
Cerulli estimates that European ESG assets under management increased €6.9 billion ($7.58 billion) in 2021 from €4.08 billion in 2018. ESG assets declined in December 2022 when there were negative net new flows, but did pick up in the first two months of 2023, and ESG assets are expected to keep growing, the report said.
In 2022 surveys of European asset managers, Cerulli found that 61% agreed there is a talent war.
"Several asset managers have commented that their products are less salable if they do not have the appropriate level of expertise, because investors now have a higher base level of expectation around ESG," said Justina Deveikyte, director of European institutional asset management research for Cerulli, in a release on the report.
And 82% of respondents expect institutional investors to demand greater transparency on ESG activity over the next one to two years. For 63% of asset manager respondents in the U.K. and 59% in Germany, ESG capability was considered important for fund sales.
According to the report, regulators and investors are demanding greater transparency and requiring expertise from asset managers, who are having to upskill existing employees or recruit talent. Fund selectors also increasingly want to see sustainability integrated into all areas of asset managers' business and processes.
For 29% of the European asset managers surveyed, improving their leadership positions on ESG will be a strategic priority for the next 12 to 24 months across asset classes, and 59% agreed that their sale teams' ESG expertise will also need to improve due to increasing investor sophistication and complex regulatory environments, Cerulli found.
"The ideal ESG recruit will also have a strong investment background," Ms. Deveikyte said in the release.
The Cerulli report, which is based on its research, says the typical ESG team consists of senior directors and ESG analysts, with directors managing the ESG analysts and working across portfolio management and sales to bridge any gap between investors and investment teams. When an ESG or thematic fund is launched, investors want to engage with individuals who are experts in that specific theme or strategy, Cerulli found.