How I found myself outside ESG in 2022

I started in ESG in 2013. In 2022, the global funds under management are now 21.5% of global investments.

I do not work full time in the fastest growing sector of finance and an area that I have worked in for almost a decade.

Why not?

Reasons for working in ESG:

• Average salary for an ESG manager is $160k to $200k for an ESG manager – there are not many Head of ESG positions in Australia
• ESG is as a prominent as it has ever been – 57% of 300 surveyed executives report having implemented a cross-functional ESG working group inside their companies
• The issues that I have worked in for 16 years such as climate change are still core ESG issues

So I am ignoring a market with (a) high salaries (b) growing demand and (c) focused on issues where I am well-qualified.

Again, why would I not be full-time in this market?

There are a number of potential reasons but let’s dig into three that correspond to my previous reasons for working in ESG;

• The work is more difficult than the compensation received
• Demand is not growing in a profitable way
• While I am aligned with the core issues, it is not possible for an ESG person to have a positive impact

Work vs. salary

In 2018, I outlined the ‘ESG’ roles in a presentation to a fund manager. ESG people within fund managers and corporates are at least responsible for:

• ESG strategy, policies and procedures
• Public relations during ESG crises
• Ongoing media and marketing including conference participation
• Ad-hoc ESG advice and guidance

These roles are involved, handling a broad mandate. An ESG manager is an executive in responsibility and breadth but not in power or title. Take Macquarie for example

The ESG person could legitimately be in three of the overlapping white boxes (risk management, legal and governance, and corporate operations) and then have business line specific responsibilities in each of four business lines. Why no overarching ESG responsibility?

In taking an ESG manager role, you are in a number of ESG policy/strategy meetings with key service groups each week, then add your business line specific work, ad hoc ESG advice and public facing/public relations.

It is not that ESG is not paid well. It is that the coordination role of ESG without the explicit white box of overarching responsibility creates a complicated and difficult role that may not be ‘worth the money’.

Unprofitable ESG

ESG is the recognition of how a company or investor interacts with people and planet. Developing an understanding of these interactions costs time and money. There is an additional cost to becoming an ‘aware’ company or investor.

An ESG role brings more costs than just another salary.

If the company or investor implements a process to materially reduce its negative impact (or increase its positive impact), it will incur more costs at least in the short term.

Revenue and return impacts can be positive or negative but costs will increase.

Demand for ESG is growing but so too are recognition and implementation costs. The net impact on profitability is not clear.

It could be a profitless boom in ESG from a financial standpoint.

What good is growing demand for my services if companies and investors struggle to reap financial value.

Issues vs. impact

A deep understanding of ESG issues is not the key to successful alignment of the company or investor with people and planet to generate positive impact.

The needed skill is a negotiation and cultural shift knowledge to push a company or investors to change how it operates or invests. That shift pivots more on the speech of a CEO or the openness of key staff to change. It does not matter if I can explain an issue well, it matters that the organisation is open to change and risk.

So what to do?

The lack of an overlapping position – high salary with clear role/responsibilities, profitable ESG recognition/implementation and ESG issue knowledge as key to success – explains why I am not in ESG full time.

I have chosen to be an advisor because:

• Salary not linked to achievement of corporate change
• Profitable on an hourly basis as an advisor
• Not having to take companies/investors through higher costs/uncertainty revenue or returns

But I am always looking…