Commentary: The dog that caught the ESG freight train

The dog has just caught the ESG freight train, but is now realizing that this poses a whole new set of challenges and possibilities.

Financial institutions and investors in the ESG investment space are scrambling to get talent on board as the rapidly growing base of environmental, social and governance assets is motivating companies to expand their workforce to meet investor demand. Driving the surge is not just traditional assets — equity and fixed income — but a whole range of asset categories from real estate to timber that suddenly have the ESG halo and appear appropriate for an ESG-focused investment approach.

Recent examples of the rapid growth in ESG talent include the private equity and alternative investment firm Blackstone Group Inc. continuing to build out its corporate ESG capabilities with the creation of five managing director positions across the U.S., Europe and Asia. Even more dramatically, in June 2021, PwC announced it would invest $12 billion over five years to create 100,000 new jobs aimed at helping its clients grapple with climate and diversity reporting. The new hires would eventually make up about a quarter of PwC's workforce.

Part and parcel with gathering troves of new assets for ESG investment is hiring and retaining top ESG investment talent to manage those assets. As if that wasn't enough, companies are also striving to increase the gender diversity and ethnic minority representation of their workforce. A large part of the push is coming from generationally more diverse millennials, who are now the largest demographic in the U.S. labor force, and Gen Z looking to work for companies that reflect their demands for diversity and equity. Those that ignore this express train will be swept away like deer caught in the headlights.

Placing environmental sustainability at the center of its investment approach, BlackRock concluded that climate risk is investment risk. This understanding supported BlackRock's decision to reallocate capital towards sustainable companies while investing heavily in technology and people to prove the point. Climate-related risks have become more than an environmental issue. Climate risk takes on new significance as investors increasingly look to accurately measure weather-related and environmental impacts on companies and, whether those companies have adequate preparedness to cope with climate risk. The financial implications of rising seas, intensive drought and extreme weather need to be included as part of the investment decision-making process. Career opportunities at the nexus of climate science, risk management and portfolio management, among others, will certainly emerge.

Public and privately owned companies that successfully embrace ESG are those that embed these considerations into their culture, often for generations. Weaving ESG metrics into a company's DNA means getting buy-in from all levels of the company, from the board to management and employees as well as various federal, state and local policy and community stakeholders.

Until recently, many companies might have considered ESG to be an option, but in today's competitive world where information is disclosed constantly in a 24-hour news cycle, ignoring any part of ESG is not a wise choice. The perception of consumers and clients on how companies are faring in regard to ESG criteria will impact prospective employees' decisions to even consider your company as a place of employment. Companies will need to polish their ESG employment brand to attract and retain top talent.

ESG issues need to be more of a mindset overall in the organization by becoming part of the culture. The financial services sector, including investment management firms, have come to the table; it appears that ESG is here to stay. The best way to ensure this happens is to attract and recruit the right leadership and talent into ESG and chief sustainability officer positions.

Zoe Van Schyndel is a partner at Gaia Human Capital Consultants, an executive search firm specializing in the ESG, investment, clean technology, renewable energy and corporate sustainability markets. She is based in the Seattle area. This content represents the views of the author. It was submitted and edited under P&I guidelines but is not a product of P&I's editorial team.