ESG oriented funds appear to have outperformed traditional funds over the last few months. It is a truism now that COVID-19 has not so much re-directed existing market trends - simply that it appears to have accelerated them. I was asked recently by the FT Ignites Europe for my views on ESG from a talent perspective. Hiring in this space continues apace even as other areas of investment hiring have slowed.
Demand for environmental, social and governance-focused expertise has surged during the coronavirus crisis, accounting for up to 50 per cent of mandates at one executive recruitment firm. Overall recruitment levels remain “drastically reduced” since April, when hiring freezes swept the industry, but asset managers continue to bolster ESG teams in line with investor demand driven by market outperformance. Earlier this month BMO Global Asset Management estimated that sales of responsible investment funds to UK advisers will have doubled. “Despite recruitment volume having reduced drastically, ESG remains of ongoing interest to our clients and so is taking up more of our consultants’ time.” Navin Raina AMC Executive Search. Actively run, Europe-domiciled ESG funds proved to be more resilient than their rivals during market turmoil caused by the coronavirus pandemic in March, while analysis of the first four months of the year showed that the S&P 500 ESG index outperformed the normal S&P index by 0.6 per cent. Navin Raina, Managing Director at AMC Executive Search, says: “The market impact of Covid-19 has shone a light on fund performance across the board but appears to also demonstrate that ESG-focused funds have performed better through the crisis than others. “The discipline’s growth means a heightened interest in individuals with such experience over the past few years.” Recruiters say the skills needed for these roles have evolved and become more sophisticated as the sector has grown. “In the past year we have seen a shift from firms simply hiring ESG professionals with a passion in sustainability and a solid grounding in policy and regulation, to an increased demand for professionals who have strong investment acumen,” Ms Penny says. “ESG leaders specifically need to be able to prove themselves as able to think like investors and to be aware of the major drivers of value within a portfolio in order to have impact. “They are able to bring people along by linking an ESG-integrated investment process with investment performance (backed by data), and ultimately with impact on client relationships and their firm’s commercial success.” Candidates also need to be “comfortable” being the face of the firm at industry events on the topic “to shape the conversation around measurements, standardisation and engagement”, according to Ms Penny. Mr Raina says the ability to engage external clients in a firm’s ESG agenda is also key. “This involves articulating not only the existing sustainable funds on offer, but also how ESG is being embedded in long-standing equity and credit research processes,” he says. “Firms who build proprietary ratings systems, or are vocal on ‘say on pay’ and other initiatives, must be communicating this to clients. “As such, strong relationship management, networking and communication skills are critical success factors alongside a data-driven and analytical approach to investment process change.” He says his firm headhunts within the asset management industry but also within the “wider sustainability and regulatory ecosystem to ensure clients get as broad a perspective as possible”.