Sustainability recruitment market update - Quarter 2
The headlines.
Private markets
Are private investors now the de facto leader of the sustainable investing movement?
Value creation with portfolio companies is still the next big thing, but it is still being led by Heads of Sustainability, and consultants, rather than operating partners.
Urgent focus still on climate tech and renewable sectors with innovation still steaming ahead.
Feeling that when interest rates come down, private equity in particular will lead a charge towards sustained growth for financial services in general.
Asset owners across the globe are building their in-house teams and knowledge with a view to investing more in external private markets funds.
Asset managers
SDR tailwind yet to materialise.
Inflation increases cost pressures, which affects the size of in-house RI teams. Even mid and junior people are getting made redundant now.
Stewardship hiring has slowed down considerably, most likely due to the 13G and 13D scrutiny from the SEC.
New product and growth still seem a long way off.
Asset owners
Building internal teams to help the investors find value through external managers in private markets and real assets.
Potential risk on the horizon with the Labour governments pension reforms in the UK.
Issues of the availability of data around voting still an issue.
Progressive sentiment around the importance of RI as a driver of growth undiminished.
The Corporate World
Organisations with complex supply chains are still talking about sustainability as key growth driver.
Due to climate change being a serious risk factor to their supply chains.
CSRD slow down has had a profound effect on CEO’s attention towards sustainability and hiring in general.
Regenerative agriculture is one of the main growth areas in sustainability.
Inflation continues to create a challenging backdrop to growth
Consulting
Selling strategy to CEOs has dropped off the agenda since Liberation Day
Challenging times created by Trump’s self-imposed recession.
Standalone consultants, and small boutiques are winning a lot of tactical projects, particularly in private markets.
AI is seen as an existential threat to the current professional services model, with small and agile seen to be the future.
Overview and update:
Private markets is the section of the industry that I hear the most that people want to move to. They assume that there is more impact to be had because the value creation through sustainability is hands on. Added to this, private equity, credit, and real assets firms have always seen sustainability as a risk factor which will create value, rather than outcomes or impact. It is this pragmatism which is now the zeitgeist for sustainability in general. It is about risk, and financial materiality, and that is where the next growth drive will come from.
The sector is seen to be sitting on a lot of dry powder, and when interest rates come down (later this year when everything magically gets better) there will be an investment drive that will carry all other industries into a growth phase. There will be increased competition for investment from asset owners who are looking to diversify anyway, but they will put increasing pressure on values and vision, which should compound this growth.
We just need some wars to stop!
Asset managers still seem to be in the redundancy and cost control mindset, with very little sustainable recruitment happening at any level, but specifically less at the senior level. Due in part to the lack of strategic growth, but also because firms are offsetting their cost base due to high inflation.
We had hoped that there would be an SDR tailwind, but the outlook in the UK has been too bleak with poor performance, structural changes to pensions, and general market malaise. The macro economy is not much better on the continent, but there is almost a contrarian surge to proudly display a continuation of direction towards progress, sustainability policies, although recruitment is currently mostly on hold. Once some of the mergers and acquisitions have taken place, this should ease off, and as market conditions improve, we will see some more hiring, particularly around sustainability themes, and how they can influence value creation.
Asset owners across Europe, the UK, ME, and blue states in the US are undimmed in their passion for sustainability as core to responsible investing. They still put pressure on asset managers to build their stewardship teams, and to take sustainability seriously. This pressure is keeping some momentum going, but is has been slow moving, and not without headwinds.
There is more hiring and recruitment to help build out the frameworks for the due diligence and oversight of external private and real assets managers, as well as direct investments. We have been lucky enough to work on a few of these hires, and it is always fun helping firms who are the first to do something, figure it out.
The Mansion House reforms in the UK sound good in theory, but are not unanimously popular, and seem to put at risk some jobs in the responsible investment space.
In the corporate world, there are a few rays of shining light. Regenerative agriculture is cool, practical, and much more impactful than it seems on the surface, but is also one of the main drivers needed to solve the climate crisis. It is early stages, there isn’t enough money, but this is where there is growth.
Similarly, any industry (mining, farming, industrials) with a complex supply chain might both be a laggard and a leader at the same time. climate, water, human rights are all existential threats to their supply chains, and if they don’t act now, they may well suffer commercially. They have no choice but to have sustainability high on their agenda. Innovative tech and investments are key for their sustained growth and advancements.
Hiring moves inversely to inflation. Over the last 36 months hiring has been off the agenda, and redundancies have been more common. But there has still been a need for advisory work in consulting, and firms have been avoiding fixed hiring costs, instead focusing on shorter term fees with consultants.
Over the last six months, there has been less demand for the senior strategy work, and more of a focus on tactical projects around reporting, data gathering, and regulations. The bigger firms have been hit hard, and there are looming redundancies. Add to that the unlimited growth of AI, and some people are thinking that there will be no need for consultancies to hire juniors. Firms are building their own in-house AI platforms which can do the work of 2-3 juniors in half the time. Profound change on the horizon!