Who wants to be an ESG analyst?

Wanted: Environmental, social and governance (ESG) analyst for major asset owner or asset manager

Elements of the role:

1. Lead development of internal policy on ESG that is applicable to a range of groups (portfolio teams, asset gathering team and/or stakeholder engagement)
2. Assist in managing public relations issues related to investments which generate negative publicity and answer questions such as ‘why is asset manager XYZ invested in company ABC which recently fired its CEO for sexual harassment?’
3. Conduct analysis and reporting of ESG metrics for current investments including metrics on climate, diversity, gender, environmental impact, working conditions, supply chain and every other issue that is currently in the news to a range of stakeholders
4. Participate in the plethora of forums, workshops, panels, webinars, hackathons, live streams and every other permutation of event to discuss ESG, impact investing and responsible investing
5. Regularly contribute unique and timely investment research and ideas to portfolio teams that constantly monitor their investments and have access to an enormous amount of primary information and investment research

I came across an article in the FT titled ‘Asset managers engage in ESG ‘war for talent’ which suggested that there are many people applying to ESG positions but few have the skills. My tongue-in-cheek description of what an ESG analyst does shows the breadth of work but it also shows that first four elements are reporting and engagement while the last element is an intensive investment role.

It took my team of three analysts three months of full time work to develop a unique investment idea that combined financial and ESG analytics. It is a labor-intensive process and there is not always success at the end of it. ESG people are asked to do a range of marketing and engagement activities while still turning up to discuss investment ideas with teams that live and breath their investments.

Look at the requirements for ESG in healthcare analyst for leading asset manager, Eaton Vance. There are eight primary responsibilities for this graduate level position.

Responsibilities and requirements include:

• Contribute to and publish original research on healthcare topics
• Build and maintain models which reflect our materiality matrix for the purpose of differentiating companies and securities based on their ESG performance, identifying ESG key performance indicators that have proven to be most impactful on stock prices and integrate into research framework
• Use information from data vendors and our proprietary research to analyze, score, rate and rank companies on their ESG performance
• Seek and evaluate sources of information regarding the environmental, social and governance policies and performance of corporations and other issuers of securities
• Further develop expertise on the energy sector and relevant peer groups of companies, contributing to our team’s proprietary knowledge of ESG factors and materiality
• Use the information that is an output of our models to identify opportunities to engage directly with issuers of securities in order to improve their ESG performance and enhance our returns on the security
• Effectively communicate Calvert’s ESG research framework within the Eaton Vance organization, to clients, and broader investment community
• Assist in creating a productive, collaborative and innovative team culture, including facilitating the team’s professional development

Compare this to a quantitative investment analyst position at State Street.

• Generate ideas for investment process innovation and improvements with key focus in alpha generation and portfolio construction.
• Execute research projects including interpreting, presenting and implementing results.
• Contribute to maintaining and improving the research/production computing platform.
• Explore and evaluate alternative data sources and new modeling techniques to solve investment problems better.

Obviously different companies and objectives but informative in that the quant position is tightly defined while the ESG position is marketing/reporting/investment/presentation. The quant position requires an advanced degree while the ESG position just has a ‘preference’ for an MBA.

Mainstream adoption of ESG should correlate to its impact on investments returns and using ESG to improve returns is about being good at ESG and good at investing.  You can’t expect a senior analysis to do that well, let alone a graduate analysis, while they are also marketing and reporting. Complaints by asset managers about a lack of suitable candidates should look harder at what they are asking for.