According to a meme doing the rounds among sustainable finance professionals, the fastest thing on earth at the moment – ahead of a cheetah, an aeroplane and the speed of light – is “people becoming ‘specialists’ in ESG”.
This may be a joke, but its popularity reflects rising concerns in the industry about a new phenomenon some have dubbed “competence greenwashing”.
Old environmental, social and governance (ESG) hands are appalled to find that bankers, fund managers and corporate executives with no experience of the field are being appointed to senior sustainability roles, and that having completed an introductory online course now qualifies as expertise.
How can such instant experts possibly be competent to grapple with complex topics such as climate change or biodiversity, they ask? Is it all just another ploy to pay lip service to sustainability while continuing business as usual?
As frustrating as this may be for those who have devoted decades to what was often a thankless cause to find their space suddenly overrun with noisy newcomers, their outrage is misplaced.
As sustainability has shot up the agenda, the number of people in every industry required to cover it has increased rapidly. This has quickly created an imbalance between supply and demand, and in many cases, firms have resolved the issue by moving existing staff into ESG roles.
ESG veterans should curb their irritation and be thankful that their industry is finally front and centre
There are several reasons why this may not be such a disaster. Firstly, at risk of stating the obvious, everyone has to start somewhere. Unless they hold degrees in climate science, today’s sustainability experts will have learned on the job. Others can, too.
What is more, unlike their predecessors, this generation of ESG newcomers has access to a vast array of resources to get them up to speed.
It is easy to scoff at online courses, and inevitably some will be little more than window-dressing, but the CFA’s Certificate in ESG Investing, for example, was developed with the UN Principles for Responsible Investment. Cambridge University’s courses are also highly regarded.
Senior executives – whether in banks, asset managers or corporates – are by and large smart, hard-working people. They are capable of assimilating new information quickly – and, with remuneration now being linked to sustainability key performance indicators (KPIs) – highly motivated to do so.
If banks or corporations need additional expertise, they can bring in sustainability consultants, of which there is no shortage. Indeed, even with established experts on board, they would likely need to do so, given the broad array of complex topics that come under the ESG umbrella.
Works both ways
Finally, it should be remembered that the competence gap can work both ways.
A climate-change scientist may add a useful perspective to any corporate board or management team, but there is no guarantee that they will know how to apply their expertise to a specific industry.
Banking, for example, requires highly specialist and technical knowledge. Is an expert on biodiversity more likely to be able to get to grips with the complexities of regulation than a risk officer is to grasp the concept of ecosystem services?
Some degree of scepticism from old sustainability hands with long-standing activist credentials is inevitable, given the amount of money currently flowing into the sector, but that is a reflection of the emphasis being put on the topic.
ESG veterans should curb their irritation and be thankful that their industry is finally front and centre.
