ESG & Sustainability teams in Investment Management

 

If you are looking to move into a different ESG role, or transition into ESG within investment management, it can be hard to visualise what a team structure looks like and what roles would be suitable for you.

Reviewing job descriptions and open roles can be useful, but it can be hard to visualise a team structure and what would be expected of each team member to contribute to the overall ESG strategy. Moving into a new role by transitioning your skills, especially soft skills, is certainly achievable but it’s extremely important to know what you would enjoy doing just as much as what you would be good at. This increases the chance of you getting hired, because hiring managers would see it as a logical move for you, so less of a risk in hiring you, and reduces the likelihood of you wanting to leave after 6 months to do something different because you are not happy.

We have deconstructed ESG teams in both asset management and private equity to provide insights and an understanding of what roles typically look like, and what they expectations are to do the role and what skills are usually required.  

 

 

Asset Management/listed assets

An ESG team within asset management focuses on integrating ESG factors into the investment decision-making process across asset classes. The main goal and objectives are to evaluate the environmental, social, and governance performance of companies or specific assets, and assess the potential impacts on financial performance.

An ESG team will look at a variety of ESG themes and metrics to assess companies, such as; climate change, biodiversity loss, human rights and labour issues, and executive pay. ESG teams will work with a variety of external stakeholders, such as working with sustainability consulting firms on specific research projects, and government bodies and policy leaders to influence change on corporates through legislation change.

 

ESG Research

Description of role – what do they do?

• Research listed companies, and define their material risks and threats
• Research ‘ESG’ and sustainability themes, to understand how they might affect listed company’s valuations
• Perform sectoral research, to understand material sustainability risks to that sector
• Advise investment teams on material risks, and value-add ESG research

Who are their stakeholders?

• Portfolio Managers
• Research Analysts

Skills needed:

• Soft skills
  • Analytical
  • Attention to detail.
  • Ability to explain complex ideas, simply.
• Hard skills
  • Understanding of various sustainability themes, and how they affect asset valuation.
  • Data-driven research experience

Examples of candidate backgrounds/companies hiring managers target:

• Equity research at asset managers
• ESG Research at asset managers
• Company rating agencies – MSCI, Moody’s, Sustainalytics

 

Stewardship, Active Ownership, Engagement

Description of role – what do they do?

• Engage with boards of listed, investee companies to change behaviour and structures across E, S, and G
• Research dividend activity and voting rights, and perform proxy voting
• Research sustainability themes to support engagement with investee companies

Who are their stakeholders?

• Investment teams
• Boards at investee companies

Skills needed:

• Soft skills
  • Communication skills
  • Stakeholder management
  • Research
  • Deadlines
• Hard skills
  • Sustainability themes
  • Proxy voting
  • Board engagement

Examples of candidate backgrounds/companies

• Stewardship at other asset managers
• Proxy voting from a service provider – Glass Lewis, ISS, Equinity
• Investor relations from a corporate – Nestle, Danone, Shell

  

ESG Data Analyst

Description of role – what do they do?

• Develop pipelines for internal and external ESG data
• Build a database to house ESG data
• Support investment teams with ESG data queries

Who are their stakeholders?

• Investment teams
• IT developers
• Other ESG teams

Skills needed:

• Soft skills
  • IT savvy
  • Analytical
  • Data savvy
  • Data science (AI/Machine learning)
• Hard skills:
  • Coding in Excel/VBA/Python
  • Database building and management
  • Understanding of sustainability themes and company ratings

Examples of candidate backgrounds/companies

• ESG data teams at other asset managers
• Data science teams at other asset managers
• ESG research people with a high ceiling in terms of data/technology

 

Product Specialist

Description of role – what do they do?

• Manage relationships with institutional and wholesale clients regarding a specific sustainable fund
• Run meetings with external investors, helping to defend and raise assets
• Feed external client demand into internal product development processes
• Help to label and communicate Article 6, 8, and 9 funds

Who are their stakeholders?

• Clients
• Investment teams
• Other ESG teams
• Product management and development

Skills needed:

• Soft skills
  • Relationship management, and presentation skills
  • Project management
  • Written communication skills
• Hard skills
  • Understanding of investment funds, and investment processes
  • Sustainability themes
  • Meeting with asset owners and wealth managers

Examples of candidate backgrounds/companies

• Portfolio managers, or sales at other asset managers

  

Private Equity/Private Markets

Private Equity ESG teams are relatively new compared to asset management (listed assets) ESG teams. Generally speaking, the roles currently remain broad. As strategies develop, we expect teams to expand and, in some cases, roles will become more specialist – this has happened in a few of the larger PE firms already.

We have outlined key roles/responsibilities within ESG teams where roles could lean more on the investment due diligence side, or engagement and value creation for portfolio companies.

The primary objective for ESG within Private Equity is to assess and manage ESG risks and opportunities associated with the portfolio companies. An ESG strategy within PE can generally be split into 3 key areas; investment DD, portfolio company sustainable value creation, and internal/firmwide impact – this would cover reporting, compliance and impact measurement for the PE firm and in some firms also CSR.

 

ESG Investment Due Diligence

Description of role – what do they do?

• Analyse the target company's environmental impact, social practices, and governance structure to identify any potential risks or value-creation opportunities
• Create or develop existing ESG due diligence questionnaires for the company
• Write/create reports for investment team

Who are their stakeholders?

• Investment/deal teams
• Sales/fundraising team
• Wider ESG/sustainability team

Skills needed:

• Soft skills
  • Highly analytical, attention to detail
  • Relationship management, and presentation skills
  • Project management
• Hard skills
  • Understanding of investment funds, and investment processes
  • Sustainability themes
  • Technical expertise can be required such as carbon accounting

Examples of candidate backgrounds/companies

• Investment banking such as M&A teams
• Consulting firms who have worked on ESG DD for PE firms

 

ESG/Sustainable Value Creation - Portfolio Companies

Description of the role – what do they do?

• Engage with portfolio companies to promote sustainable business practices and drive value creation
• Collaborate with management teams to develop and implement ESG improvement plans, set targets, and monitor progress towards ESG-related goals

Who are their stakeholders?

• Employees within the portfolio companies
• Wider ESG team
• Operations team within the PE firm
• External sustainability consulting firms
• Investment/deal teams

Skills needed:

• Soft skills:
  • Problem solver
  • Good engagement skills, a credible advisor and being supportive to assist the businesses through change
  • Strategic
  • Project management and prioritising workstreams
• Hard skills:
  • ESG frameworks, reporting and sustainability regulations
  • Conducted Life Cycle Assessments
  • Often GHG Protocol/ Carbon Accounting, Scope 1 2 3
  • Academic expertise within climate change or environmental science

Examples of candidate backgrounds/companies

• Sustainability consulting teams in large or boutique consulting firms
• CSR/sustainability teams within large corporates, ideally within sectors applicable to the portcos e.g. agriculture or food production/manufacturing

  

ESG and Sustainability Reporting

Description of role/responsibilities

• Responsible for tracking, measuring, and reporting the ESG performance of portfolio companies
• They ensure compliance with relevant regulations such as SFDR, and industry standards or commitments such as UNPRI

Who are their stakeholders?

• Across the business; need data from most teams
• LPs; respond to data requests from ESG teams at pension funds etc
• Regulators, and contacts at places such as UNPRI

Skills needed

• Soft skills
  • Attention to detail, highly analytical
  • Very organised, can work to deadlines
  • Project management
  • Almost assertive; may need to push back and request better or further data from internal teams at times to meet deadlines in time

• Hard skills
  • Regulations and reporting frameworks; SFDR, CSRD, EU Taxonomy, CDP, GRI, SASB, TCFD, TNFD
  • Understanding of PE deal cycles/general PE structure

Examples of candidate backgrounds/companies

• Consulting firms who have worked on ESG reporting for PE clients
• Compliance and legal teams, someone who would transition into ESG/sustainability