- ESG concerns are now higher on the list of priorities for young talent when evaluating prospective employers and taking on board new skills.
- Companies in all sectors may now be challenged on activities and practices that do not fit with the values of existing or potential recruits.
- One recent example is banks’ long involvement in helping to arrange what have come to be known by some as ‘police brutality bonds’.
Early this year, 22-year-old Sarah Smith (not her real name) was thriving as a first year analyst in New York at one of the world’s most prestigious investment banks. Her hard work and sharp mind had caught the attention of not only her immediate managers, but also directors and even partners who would typically not concern themselves with someone of her relatively lowly professional status.
Smith knew, based on feedback she was receiving, that the bank would likely try to convince her to stay on and progress to associate after her two-year stint. The opportunity was compelling, but she had a serious concern.
“One day she told me that she was worried about the bank’s involvement in issuing what have become known [in the wake of the death of George Floyd on May 25 last year] as ‘police brutality bonds’,” says a senior banker who mentored Smith.
Such debt is issued by cities, municipalities or states to cover the cost of settling legal cases brought against police departments. Sometimes these suits stem from allegations of police brutality. Banks, including Smith’s employer, rake in millions from helping to sell these bonds to investors, often with hefty coupons. They might pay 3% these days, or as much as 8% ten years ago.
The issues can be hundreds of millions of dollars in size, with maturities ranging anywhere from a couple of years to several decades. They have been issued for decades to help fight lawsuits, but have gained more scrutiny given the events of the past year.
At the time of the conversation between Smith and her manager, the Black Lives Matter movement was gathering pace after George Floyd’s death at the hands of police officer Derek Chauvin, the banker tells Capital Monitor.
Risk of talent loss
“She knew that our bank, like many others on Wall Street, was probably helping to raise the money that police departments use to pay for settlements,” he adds. “That fact made her uncomfortable. It made her feel like her employer was profiting off something that was tragic and wrong.”
She knew that our bank, like many others on Wall Street, was probably helping to raise the money that police departments use to pay for settlements. A senior executive at a leading investment bank
Despite her junior rank, Smith – who is black – raised the issue with her superiors. They took the time to listen and, even though the bank continues – like others on Wall Street – to help run such deals, she feels she achieved something, she tells Capital Monitor. Smith had alerted the bank’s top management to a dilemma that’s as uncomfortable as it is unavoidable: take ESG seriously or risk losing the best talent.
Encouraged by management’s response, she ultimately decided to stay at the bank. This episode nonetheless shows that corporate practices that have been accepted for years may now be questioned. And given the ubiquity of ESG issues, firms may have to adapt to the unexpected at any time.
Smith is part of a generation that’s educated, discerning, opinionated and principled. The next young banker who voices concerns about an employer’s activities might be less willing to stay put if their worries are not addressed.
Moreover, the desire to do good and do well is registering well beyond finance, across sectors and geographies the world over.
The new baseline
Jonathan Evans, human resources business partner at UK-Swedish healthcare giant AstraZeneca, tells Capital Monitor: “Having a clear and visible approach to [issues such as sustainability and diversity] is now the baseline.”
Over the last few years the company has launched several talent engagement and acquisition initiatives, with a view to ensuring an inclusive approach to recruitment and underscoring its commitment to broader ESG goals, he says.
For instance, it provides interview training to managers to ensure that hiring is as inclusive as possible. And Evans’s team in London uses software from Textio, a Seattle-based startup, to help remove unintentional bias from job descriptions.
AstraZeneca can certainly boast a strong showing on gender equality, a particular hot-button issue these days. It has a male-female employee ratio of 50/50 and aims to hit gender parity in management positions by 2025. As of last year, 47% of those in senior middle management roles or higher identified as women.
Younger employees and consumers now want to know the stance of the companies they work for and purchase from. Bhushan Sethi, PwC
There’s a similarly strong focus on climate issues. The youngest generation of employees and customers is demanding that a company is “not just an investor in the financial community” but also in the planet, said Roberto Marques, chairman and chief executive of Brazilian cosmetics giant Natura, at a conference in May.
The corporate world’s focus on ESG factors has been intensifying for some years. But since the onset of the Covid-19 pandemic in February last year it has quickly accelerated in response to the demands of an expanding, purpose-driven and conscientious talent pool of university graduates.
Young people are increasingly looking for evidence that prospective employers incorporate ESG factors – as much as pursuit of profit – into their operational strategy, numerous surveys show.
Nearly nine in ten (86%) employees prefer to support or work for companies that care about the same issues as they do, according to a poll conducted in March and April this year by PwC (see graph above).
Diversity and inclusion a priority
Another PwC survey carried out back in 2019 found that 62% of job seekers were more likely to apply for a job with a company that is openly committed to improving diversity and inclusion (D&I) in their workforce.
“When you look back to the early 2010s, there seemed to be a D&I snowball effect, likely triggered by a focus on gender equality, then LGBTQ+ rights and milestones driven by legislation, and most recently, societal racial injustice,” says Bhushan Sethi, New York-based global co-leader of PwC’s people and organisation practice.
“Many younger employees have grown up with information at their fingertips and have a global mindset, a curiosity of different cultures, fuelled by greater access to technology and an increase in global travel,” he adds. This means that they are “in tune with societal issues such as systemic racism, carbon footprint and women’s rights”.
“They want to know the stance [of] the companies they work for and purchase from,” Sethi says.
There is ample evidence that workers – and millennials in particular – place great value on the ability of their current or prospective employer to deliver “purpose-driven" work, agrees Stefanie Coleman, a principal in consultancy EY’s people advisory services business. Hence an authentic commitment to ESG issues such as D&I could give a company a competitive advantage in recruiting the best talent, she adds.
Conversely, prospective employees recognise the need to hone their own skills in this area. The CFA Institute says 9,500 people and counting have registered to study for a certificate in ESG investing that the investment association only launched in 2019.
An MBA with more meaning
Indeed, there has been a surge in demand at business schools for subjects related to responsible management, ethical leadership, global challenges and diversity, equality and inclusion, shows a global survey of students published in February. It was conducted by UK education research body Carrington Crisp and Brussels-based non-profit European Foundation for Management Development.
Marissa Guiang, a 28-year-old student at Columbia Business School (CBS) in New York, pursued an MBA to gain exposure to different industries, companies and roles, enabling her to forge a career path that allows her to “have it all”.
By that she means “strong ESG-focused values, a strong culture of DEI [diversity, equity and inclusion]; a salary that matches my skill set and worth; and ample vacation days to allow me to rest and recharge when I need it”.
Guaing – who co-chairs the Student Leadership and Ethics Board at CBS’s Bernstein Center for Leadership and Ethics – admits that holiday allowance and money are important factors evaluating a role. But she stresses that she sets a lot of store by whether a company’s values are aligned with her personal aspirations and the “bigger world issues” she cares about.
AstraZeneca’s Evans sums up the new reality for companies: people will vote with their feet. “Who companies can engage with and attract for roles now and in the future is critical to their future success – and by necessity, companies need to be proactive and pre-emptive,” he says.
And he cautions against trying to game the process: “Measuring who hasn’t joined you because you haven’t got it right is impossible. Not to mention useless, because any such conclusion would likely be too late to act on.”